Girls Rule! News: Teaching Kids about Financial Responsibility

Teaching Kids Financial Responsibility
By: Ladon Brumfield, Executive Director
Girls Rule!
www.girlz-rule.org

In todays world of "plastic purchases," many kids are growing up with little understanding of the financial realities of life. As parents, our paychecks are directly deposited into our accounts, we pay bills online, and use credit or debit cards to make purchases.

While these methods are certainly convenient, they may be robbing our children of the valuable lessons they will carry into adulthood. What can we do today, to teach our children the value of money? What tools and experiences will they need to become fiscally responsible adults? Most importantly, how do we get started?

There are many ways to teach your kids about money. One place to start is with an allowance. By giving your children an allowance, you are beginning an important conversation that will hopefully continue through to adulthood. It also gives you and your spouse an opportunity to evaluate your own financial habits and goals, changing any bad habits that you may be struggling with.
When determining an allowance, it is necessary to first decide what you are trying to teach your kids. For younger kids, it is a good idea to teach the basics of saving. A young child may be given 10 dimes each week. This makes it easy for her to understand the concepts of saving. One basic breakdown is 10% to long term savings (like a college fund,) 20% to savings (for a special toy, etc.) and 70% to spend.

Use three different jars, each week putting one dime in the college fund, two dimes into savings, leaving seven dimes to spend. The concept is that this equation for saving will become a lifelong habit, continuing as the allowance increases.

When teaching older kids to budget, give them an amount that can cover their needs, but will still require them to make decisions about their purchases. Decide together what purchases they will be responsible to pay for with their money. This is the time to establish expectations.

You may also teach basic budgeting skills to make sure that they understand that the money has to last the whole week, month, or "pay period." A few failures may help to reinforce these lessons, and ensure success later on.
In high school, encourage your child to seek employment, and become even more financially independent. Hopefully, by now your child has established good financial habits. Now is the time to open up their own bank account with a debit card, and a separate savings account. Giving children the opportunity to succeed or fail with a debt card while still at home, can help to prepare them for financial success when they leave home to begin college or their career.

Good luck!

Ladon Brumfield
Executive Director
Girls Rule!
http://www.girlz-rule.org/