Teaching Kids Financial Responsibility

Viswamitra,

These are some really good ideas. Quick question on the education investment: would you mind sharing what made you to invest in CDs for your kid's education and not in 529?

 

@Gauri03 , you are doing a wonderful job!
@Rihana, my kids are almost 4 and 1 so I don't have a lot to add to this discussion but felt compelled.
We started talking about money when my son was 2 and could count. Our general rule is, he can pick only one thing (a favorite character tee or a toy) on our monthly Target trips. Sometimes he picks out 3-4 things and then decides which one he wants most (though depending on how much he wants other little thing, sometimes we do buy extra but won't tell him and surprise some other time). Now, at 3.5, he can do simple math so we give him $5 and let him buy with his own money or if he doesn't have enough, he has to wait.
He has been waiting for his birthday to get a pet and a Paw Patrol toy set. IMO, it is important to learn to wait, delayed gratification.
My husband is great with managing money and I have learned a lot from him. He worked as a paper boy when he was a kid, restaurant and highway worker jobs in middle and high school and graduated with PhD from out of the state university without any student loan. Scholarships made a big difference too.

 

This is one area that scares me completely. Both DH and I were brought up in traditional homes where kids were completely kept out of finances. If I actually write about how finances are managed at my MILs home @Viswamitra will have a panic attack. My parents are no better. So I really do not have any role model .

For now…as a first step we talk about our finances openly with kids. They know how much we make ..how much we spend on an average ..the bills…mortgage -incidentals….the whole enchilada. Bills are often paid while we chat sitting around the kitchen island. So I am pretty sure they absorb the information. They also know about our plans for their undergrad. What we can afford (as in pay completely) and what we might have to take a partial loan for.

What I have tried and failed was with the allowance idea so they can track . Laziest set of kids u can imagine. All the money after a few weeks was promptly returned saying its too much hassle and wanted me to keep track of the allowance and the expenditure. At which point I said too bad no allowance..and they said thats fine. Every thing they have asked for is usually discussed and if we feel its ok we just buy it. There is typically no budget at home(which is another problem I have ). We have the same rule for us too. When I wanted the latest automatic espresso machine which would cost s pretty penny it was opened up for debate and they cast their vote as well…which was “since u are the only one drinking coffee it does seem a bit excessive.” Fair enough. They then researched one which ended up being the benz of espresso makers rather than the rolls royce I was shooting for,

Oldest actually earns a tiny bit once in a while ..his serious hobby actually pays him ..since he is under 16 its usually gift cards or in cash. He promptly hands it over to me or in most cases leaves it on the counter. I have asked him to keep it . He laughs and says u do a better job than me…I will let u know when I want something. His wants are minimal and its usually me and DH forcing him to splurge on a generous gift for special occasions. Cant remember the last time he asked us for anything…May be things will change in a few years ..dont know. Will bookmark this thread for ideas .

 

JAG- You don't have to worry. You are raising a wonderful kid. My parents are sort of like yours. We were never taught of delayed gratification. If they had money , they would buy it. My in-laws, however, are very good with budget. I discuss with them and learn a lot. We don't have a set budget either but we follow "mindful spending". Before spending on unnecessary stuff, we always talk about priorities and see if we can splurge.

 

You remember his talks! Yes, that's the one. Recently, he acquired a guitar and takes it everywhere and plays with the musicians. Other day, a musician performing at the restaurant we were at, gave him his music CD. He feels so proud!

 

I believe my parents were a great examples of how simply they were able to inculcate the financial responsibility in children at our very young growing age.
Contrastingly my H did not have a open family. They were very much orthodox, and hided most of the things from the kids. They kids just followed what their parents did with so little knowledge of what they were doing then.
Due to this my H is still learning to be stable when it comes to his finances.
Therefore, I am keen on teaching my kids about financial responsibilities and resources since their young age. It is a must to do thing, I believe.

When we were kids, my mom would casually talk about dad's salary and how much spending is expected within that month as family. This is discussed since the time I was able to count. So, I would know how much is left as savings, and how much is left for the entertainment like toy shopping.
Then I will think as to how best I could make my shopping plan... Something like 5 cheap toys for $2 or one expensive toy for the same amount. But that will be the limit. I will have to wait till the next month for another toy shopping.
The decision was mine. I was able to make better decisions after a few failed attempts.

Fast forward to my teen times, I was well informed of the college expenses, scholarship needs, pocket money, tuition fees etc, before I joined the college. My parents did tell me their budget and the choice was mine (with their consultation) whether to go ahead with my fav course or not.
Since I wanted to take up an expensive course, I went ahead to apply for scholarships, and succeeded in them.
I was able to manage my 4 year stay in abroad just with the standard pocket money my parents gave. If at all I needed something else, I was well aware that I had to work part time to earn for my spending.
So, I planned my own finances accordingly.
By that time my parents were capable of financing everything that I needed. But they did not just support me blindly. They rather taught me how to support myself rather than depending on them.

That's how I was able to finance my own wedding, and own assets before I entered wedlock. My parents wealth failed to attract me. I also felt cheap to expect my parents to spend on my marriage.

At this young age (5) I teach almost the same to my son. He is well aware of the expenses, and the choices we, as family to make to regulate our finances.