Teaching Children to be Responsible with Money
The mismanagement of money is the root cause of many problems such as the student loan crisis, divorce, and personal debt in our society.
In order to prevent children from making the same mistakes, parents need to be the ones to teach children how to handle money and be responsible with it.
Children learn by watching their parents. If parents are reckless spenders and are in debt due to being impulsive shoppers; chances are pretty high that their children will follow in their footsteps.
How can parents teach children to handle money responsibly?
14 Ways to Encourage Financial Responsibility
- Allow them to earn their own money.
- Let them spend their own money.
- Let them make mistakes. They will make mistakes, but don’t always be so quick to stop them from buying something that you know will break or they will eventually lose interest in. By allowing them to spend (within reason) their own money, your children will learn hard lessons from making mistakes. Better to learn lessons young than when they’re older. For example, a child that insists on buying a cheap toy that they ‘just had to have’ from the dollar store with their own money will be sad when it breaks, but will remember to think over purchases next time.
- Have them open up a bank account.
- Teach them how to budget or how to save up for purchases.
- Lead by example and make sure you are practicing what you preach.
- Teach them why we tithe and allow them to tithe their own money.
- Show them how much stuff costs. Show them how to research prices by compare and contrast.
- Teach them the art of thrift store shopping, garage saling, and buying secondhand. Compare and contrast new prices to secondhand prices, look at the savings.
- If your child is showing an interest in college, encourage them to start saving now. And to also keep up the hard work of studying so they can increase their chances of obtaining scholarships.
- Take the no-nonsense, common sense approach that Dave Ramsey and Rachel Cruze teach, in Smart Money Smart Kids: Raising the Next Generation to Win with Money.
- Encourage your children the concept of spend, save, and giving. Toddlers all the way up to teens understand this idea. Label glass jars with spend-save-give and encourage your children to divide money accordingly. The basic premise is to teach your children to handle money responsibly and learn patience in the process.
- Teach them the concept of ‘opportunity cost’. For example, if you buy this pair of jeans than you won’t have money to save up for the car that you want.
- Use cash only. No credit cards. By teaching children to use cash, they learn that once cash leaves their hands, it does not come back. Spending money should be a ‘painful’ experience to some extent because it takes so much hard work to earn it.
If we do not teach our children how to manage their money responsibly somebody else will.
But by encouraging them from a young age to be good stewards of what the Lord has provided, they will have a headstart in this world when it comes to handling their money.