Growing a Financially Responsible Child

As parents we want our children to grow up to be financially responsible, to be able to look after themselves, achieve the Canadian dream of homeownership and financial security.  The big question that the parent's have is not what, but HOW? 

We learn best when we actually get to deal with money.  I am a huge supporter of giving children an allowance and teaching them to divide it into five categories:  Financial Freedom, Education, Long Term Savings for Spending, Charity, and Play.  If a child is not given parameters to work within they will spend everything, have nothing to show for it, and learn nothing in the process.

My seven year old daughter gets an allowance of $5 a week.  I have used her her allowance as an opportunity to teach her about money and fractions.  Four quarters = One dollar.  Ten dimes = One dollar.   

Princess likes to ask me about the jars and we spend time discussing their different purposes.  Investing is a bit above her seven year old comprehension right now, but she is curious about the concept.  I have explained to her that each dollar is a money seed and her job is to plant the money seed in such a way that it can grow and produce lots of fruit.  The education jar is used to buy books of her choosing from the Scholastic Flyer she gets at school, but Mommy does make suggestions.  The charity jar is for things like putting money in the Christmas kettle manned by the Salvation Army at Christmas, putting it in the plate at church, or giving to the fundraising drives they have at her school.  For Long Term Savings for Spending she is wanting to buy her very own Webkin and happily drops her money into that jar.  The last jar is her play jar and every month she gets to take her money out, put it in her very own purse, and go shopping with Mommy.  Her last purchase was a small stuffed animal she fell in love with at West Edmonton Mall.  If she wants to buy candy or trinkets at the dollar store I do not interfere.  It is her money to do with however she chooses.

Whenever she is deciding to spend the money in any of her jars, I make her physically count out the money and hand it over.  I ask her questions like, "Do you want to spend all of this money on this one thing or in this one place?"  Kids can be impulsive, so we need to help them slow down a bit and think through their actions.  We are not giving them the answers, but helping them figure out what questions they need to ask themselves.

Children are much smarter than we sometimes give them credit for.  By providing them with the opportunity to make decisions, ask questions, and deal with financial consequences they learn to make better decisions.  The earlier you start teaching them the better, but whatever age they are take the opportunity to help them grow into financially responsible adults.

"The more your kids feel the allowance is fair, the more likely they'll think before they spend.  Giving your child the experience of spending his own money is empowering."

            Jim Gallo