Teaching Financial Responsibility to Kids: A Family Affair

It's a tough time to be a parent, with the economic environment reaching its boiling point and many families being more financially strapped than ever before. What makes things worse is the fact that the kids still want to go on summer vacation to Disney World; they still yearn for a game system and the games that go with it, and still clamour for weekly outings. The fact of the matter is we just can’t afford it but don’t know how to tell them no. Ironically, the current economic environment has created the perfect climate in which to teach your kids some valuable financial lessons.

Involving the entire family in financial discussions has many benefits. The financial responsibility your kids learn now will give them the financial foundation they’ll need to act sensibly as adults.
Sheltering them from the financial realities of the world does them more harm than good. Teaching your kids financial responsibility forces them to be conscious about how they handle money and the things they ask for. A good grasp of personal finance is one of the most valuable life skills they can have.

Kids are perceptive…explain to them what's going on in the family's financial world and tell them the truth. Helping them understand what it all means will lessen the anxiety they feel as a result of seeing their parents worrying over money.

• Explain the different types of bills you pay and the importance of meeting payment due dates.

• Explain to them how much things cost. For example, kids might not understand that hot water costs more than cold water, or that turning down the temperature on the air conditioning results in higher electricity bills, or that turning off the television and lights when they leave the room will conserve energy and thus help the family save money.

• Take the kids grocery shopping. Explain how much money you have budgeted for groceries and talk about what you need to buy. Show them how to compare products and prices for the best value. This allows them to experience what it is like to work within a budget.

• Discuss the possible dangers of impulsive shopping. Tell your child to avoid buying items on a whim. Differentiate between items that are needed and those that are merely wanted.

• If your child gets an allowance, teach her how to make a budget. Show what money she has, where she could spend it and how to save it. Open a savings account with your child’s savings. Add a little at a time and teach your child how to keep up with her bank book.

Realize that kids learn what they live and see. Some adults who are extravagant with money and who fail to save for the future may raise a child who becomes an accomplished spender and a poor saver. Be honest with yourself about the type of money messages you're sending your kids. If your financial habits are poor, overhaul them.

By making each family member aware of elements of the family's finances, you can avoid many problems that can arise when just one person handles everything, and contribute to the financial education of your kids at the same time. Handling the family's finances is a responsibility that has a constant influence on every member. Keeping your entire family actively involved in and aware of the family's financial plan not only prevents problems from arising, but it also creates an environment of openness that will improve your children's understanding of financial matters. They will learn valuable lessons that will guide them throughout their lives.