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How to raise children with financial responsibility

How to raise children with financial responsibility

As society ponders present times, people have fond hopes that their children will do well financially and find their way in life unfettered and full of happiness. In fact, most parents expect their children to outdistance them as adults. Yet existing experiences do not always bear this out.

Growing Up Feeling Entitled to Lifestyle of Parents

A far more common scenario involves a middle class family whose children grow up expecting the same lifestyle they were raised in as the automatic trophy for surviving the system of high school and/or college.

A fairly benevolent upbringing is often backfiring on young adults as they discover data about life for which they were wholly unprepared. The economy has put a quietus on the assumption that you wear tennis shoes as a teen, go to college, get offered a job, buy a house. The youth of today are finding they can’t begin to maintain both the lifestyle and the middle class status they were raised with – even as a college graduate with good grades.

Setting Financial Goals Which Allow for Success

When they were young, many current parents were able to glory in each accomplishment on the way to financial security because they were surpassing the educational and social level of the older generation.

Today’s young adults may find themselves unable to easily surpass their own parents. (It can be noted that it is much easier to succeed as the offspring of parents “lower on the rung” than to find oneself trying to feel success in small accomplishments as a child of very successful parents.)

Perhaps it is time to involve children in financial matters enough to make them aware of the concept of earning. Maybe, in addition to helping plan which college to get into, discussion is in order about a career path and the need to achieve some degree of financial security.

Helping Children Understand the Concept of Earning

This need to know about the economy thrusts upon adults the duty of helping to position kids for success. Parents might keep in mind the need for honesty while helping children face the economy.

Parents can point out to children often and early that what they’ve grown accustomed to doesn’t just happen. People make it happen. The more personal investment a child has in this process, the more realistic his or her expectations about the future will be. Consider letting children earn the stuff you otherwise might just give them.

Exposure to family finances, including time lines involved in earning certain items, will help combat the credit card mentality and the sense of entitlement which has brought so much agony to present adults. Children benefit from experiences which involve putting off short term rewards for long-term goals.

Instead of enabling teens to become mall addicts, try sitting them down for regular bill paying so they see where money goes as well as how decisions have to be made. Putting off this lesson in favor of present rewards will only compound pain which is sure to follow.

Paying with Cash to Help Manage Money

One look at the present world-wide financial issues can attest to the need for adults to receive the same training that children need. Making one’s budget transparent within the family may provide an intergenerational learning of the finite nature of money. Spending with cash helps to clarify that concept.

They say when life gives you lemons, make lemonade. Maybe this is a wonderful time to start raising children with financial responsibility by setting realistic goals, developing the concept of earning, and paying with cash. Kids need experience with handling money and practice in long-term gratification. The bonus will be a society which can work for long-term gratification and live within its means.

Piggy Banks Encourage Financial Responsibility

Just a glance through newspapers and business magazines reveals the sad fact that somewhere along the line, parents are failing to teach their children financial responsibility. While distressed adults are turning to financial counseling to learn how to better manage their money, high schools are beefing up their finance education curriculum. But what about young children? With parental guidance and the beloved piggy bank, even toddlers can begin to learn proper money management skills.

Encourage Responsible Money Handling

The cry of many a mom is “A place for everything, and everything in its place.” These words of wisdom should be applied to children’s nickels and dimes as well. When money is scattered about – a few dollars here, some coins there – children fail to understand how to physically handle money in a responsible manner. One of the most basic concepts piggy banks teach is that money should be kept in an appropriate place. Money is to be valued and cared for, and piggy banks help develop a respect of money.

Reduce Impulse Spending

A trip through the grocery or department store with kids can be frustrating for parents who are plagued with an outbreak of the “gimmee, gimmee’s”- those cries from children who have spied something they think they simply must have. However, when children are diligently taught to save their money, parents have a simple cure for the often annoying behavior.

To further discourage impulse buying, parents may institute a “Think About It” rule. Children may not purchase an item until they have thought about it for 24 hours. After 24 hours, the family can return to the store to buy the chosen item. However, if children change their minds during that stroll towards the selected item and suddenly want something different, the “Think About It” rule should be reinstated again. This will help children make wise purchases and develop a sense of control over spending impulses that will benefit them into their future. It gets children to stop and think, “Do I really want this item?”

Foster a Sense of Finance Control and Priority

Even deeper financial principals can be taught through the use of modern, compartmentalized piggy banks. One such bank is the Money Savvy Pig (see photo) which is a bank that features four separate money chambers labeled with “Save, Spend, Donate, Invest.” This type of bank teaches children how money can and should be saved for different purposes.

Parents may opt to allow their child to choose how much money goes into which savings category, or they can begin to relate the 10-10-10-70 savings principal. This financial concept, that every dollar earned should be divided into 10% for charity, 10% for long term investment, 10% for savings, and 70% for daily expenses, is advocated by many financial planners. Instituting this practice will build a foundation of financial responsibility that will last far into their future.

Parents are a tremendous influence on their children’s spending practices, both present and future habits. When parents accept the responsibility of effectively teaching their children to handle money, children will grow into financially responsible adults. Simple piggy banks relate practical cash concepts that have solid, life-long benefits.