While I was growing up it was made very clear to me that when I graduated from high school I was going to have to come up with some money to either go away to college or get my own first apartment. (I don’t know why. I was a lovely child as a teenager.) Either way I was going to have to figure out how to manage my own money, and let me tell you that like many others before me I was ill prepared.
It was very overwhelming. I had to figure out how to set up my own bills (what’s a deposit?), I had to figure out how to pay them on time (you mean I need a checking account?), and the whole while credit card companies kept offering me free cash. (I mean what’s a girl to do? Free cash?! Yes please.) Needless to say I got myself into a little bit of trouble, and thankfully for me it wasn’t too much trouble before my parents gave me the business and helped me fix my mess.
Many, many others, however, don’t have the means to help their loved ones out of the financial messes that they create for themselves when they are out on their own for the first time. So rather than throwing your kids into the pool without a proper pair of water wings, why don’t you teach them how to manage their money now while they’re still living with you?
Here’s the plan.
Have them take responsibility for some of their own bills with their own money.
I know. It seems overly simplistic, but it works. Here’s how.
1. Start Small: Don’t suddenly announce to your child, “OK. Today you’re taking over the bills. Don’t screw up.”That would be silly. Instead think about a bill that you’re paying that is directly related to your child. My son, for example, has a cell phone that is only his. I make paying that bill his responsibility, and because not paying that bill has a direct affect upon whether or not he has a phone to use, he has been quite successful at paying that bill.
2. Provide Choices: My son when we purchased his phone for this birthday knew that he would be responsible for paying his own phone bill from his allowance. So when we were looking at the various payment plans I helped him pick a plan that fit into his budget and that would give him what he wanted. Ultimately the final choice was his, and taking ownership of that choice has eliminated the “it’s not fair I didn’t pick this”argument. Also this power that you give them to make their own choices about where they spend their money can create a sense of pride when they succeed by making smart decisions.
3. Have Them Pay You With Their Own Money: Now if you’re a little bit like my husband and I, you don’t want your kids messing with your credit that you’ve carefully built over the years. And although the idea is great about them paying their own bills, ultimately if they don’t, in many cases parents then become responsible for the payment of the bill. So, have them pay you out of their allowance or their pay check, etc. That way even if they don’t pay on time or at all you can avoid dinging your credit. This doesn’t mean that they won’t have consequences if they don’t pay when they should.
Give them the same consequences that a bill company would enforce. Make them pay heavy fees, nag them the way a credit agency would, and if you like foreclose or repossess. I know it seems kind of silly, but this kind of love is providing them great lessons before the consequences become really harsh and overly real life.
4. Be Ready For Them To Make Mistakes: It’s the rare human in the world who starts something and completes it without stumbling on the way. And really isn’t one of the main reasons you are teaching them now is that you know they will screw up the first time they try to manage their own money? Be patient, be ready for a few tears, and know that at least now their mistakes don’t cause any real financial damage to their future. And in their future when Mom and Dad says, “Time to move out Johnny,”they’ll be prepared.
Though I don’t know why you’ll ever want them to move out. They’re such a joy when they’re teenagers. I know I was.
What are you actively doing to prepare your kids to manage their own money?
Kelly K.
Great article. The first money lesson we give children are through our own example. Besides being a good financial role model for my nephew we have discussions. We talk about what we do to earn money and how we make our money work for us. I also give him to opportunity to experience real life by create his own grocery list. Then he must check sales online and find any coupons available. One of my favorite grocery lessons for him was the power of Raincheck. Be the example,talk and give real life experience.
I completely agree. I’m taking it step further and setting them up to fail. At some point kids are going to be confronted with an insurance bill, rent, and no groceries in the house. My middle schooler has a ‘credit card’ she can use to make purchases (which of course I make) but she pays them back in her ‘wages’ (allowance) including interest. I let her blow up her credit card and when she saw how long and how much it would cost to pay it off she asked me to take some things back to the store for refunds.
DebRay says
Molly, the HS my kids attend have a required Personal Finance course. It’s a great idea, and you’re right on about such courses providing info that teens may not want to hear from ol’ mom and dad.
Deborah
Denver, CO
Jessica says
Great post Kelly! I did not grow up with ANY financial education and I suffered miserably for years trying to learn on my own. The best thing we can do for our children is provide them the foundation to be self-sustaining adults. This is a great way to start!
Great post, Kelly. I didn’t grow up with an allowance but as soon as I got my first job I was being taught about how to save it and spend it wisely - even how to give generously. It’s also important to teach kids how to give within their means: teach them how to buy inexpensive, thoughtful gifts and how to donate money.
I think one of your best tips was the idea to give options. Not only with the cell phone bill, but giving choices: you can pay for gas or car insurance; you can pay for your new computer or your new gaming system. This way they can learn responsibility for their actions and not be able to blame anyone but themselves.
Molly Gold says
We talk with our kids about money regularly and one added support will be seeing our teens take a Personal Finance class as a key elective during high school. Its a fantastic class with so many great insights and supports everything we have shared but any typical teen just might not choose to hear from Mom and Dad. Gratefully our boys are frugal and have seen first hand all what it means to sacrifice, save, and be resourceful to find what they want at the best price even if they have to wait or pass it by. Great post!
Jackie Walters says
Great post Kelly. I have a 15 and 11 year old who know all too well how money is handled in our family. You earn it, give it, save it and spend it wisely. Early financial education with children is key to their financial success.
I wish I’d have read this post ten years ago. My son is 18 and just got his second job (the first one was only temporary and has ended). He’s already contemplating the million ways to spend what he will earn, and my declaration that he should put half away to save for his own car were met with an ‘Are you nuts, then I wouldn’t have money to play with like I want to’ look. It’s going to be interesting…
Give them financial responsibilities while they are young, folks. It’s harder to instill it when they’re older. It can be done, yes, but it’s a lot, lot harder.
DebRay says
Some things we’ve done:
* Set up individual savings accounts and have the kids participate in the process. (I think we did this when the kids were in early elementary school.)
* Encourage saving through “parental matching.” For every dollar our kids deposit into their savings accounts, we match with a deposit.
* Have the kids do their own deposit slips and in-person banking.
* Have the kids carry their own wallets/money for purchases they will make (from early ages, though I don’t remember exactly when we started this).
* Let consequences be consequences. Did you forget to deposit that birthday check for too long and now the bank won’t accept it? That’s lost money. Didn’t return/renew library books on time? You pay the fines.
* Fine them for chores not done on time. (The “on-time” is the key….)
* Have them manage their own iTunes accounts and other gift cards, including knowing how to check balances.
* Encourage ways to earn money beyond doing chores at home. For Ashleigh’s 12th birthday, part of her “party” was choosing a couple of friends and taking the Babysitting Certification class together through the Red Cross. Alex learned to mow and edge, weed eat, trim hedges, take out bushes, etc., so can earn money keeping neighbors’ yards (though that quickly took a backseat to the next item:) With decent computer skills, a strong interest, and some training, both kids spent last summer running software tests and earned real paychecks.
* Talk, talk, and talk more with the kids about earned money, options for spending/saving, and looking ahead to other wants/needs.
* Talk, talk, talk to the kids individually about their strengths and weaknesses in managing money and how those may affect bigger financial issues as they get older.
Things coming soon:
* Having the kids do family meal planning for a week, giving them a specified dollar amount, dropping them off at the grocery store(s) of their choice, and having them do the grocery shopping within budget.
* Managing their own checking accounts.
* Getting a peek into their college savings accounts and how those accounts work.
* Managing their own Shell/gasoline card (after full driver’s licensing)
* Having the kids do the bill-paying one month by working with our online banking, writing checks, seeing what can auto-pay, seeing how notifications of upcoming payments happen, etc.
One of the best things my parents did for me was have me manage a car payment before I moved out. This was a great lesson in financial responsibility, on-time payments, income vs. outgo, and consequences (though the real fear was not screwing up my parents’ spectacular credit!). I also had a Mervyn’s credit card early on, then later a Texaco card.
Thanks, Kelly! Great topic!
Our kids are still young but we’ve got a piggy bank and a plan where they can earn coins for doing work. And they work towards purchasing items at our local toy store. My daughter knows that if she let’s the dog out for 15 weeks, she’ll have enough money to buy a Cinderella figurine. This may be 1 part bribery and 2 parts savings lesson. But hey, you do what you can.
Melanie says
I was responsible for paying for my own clothes, haircuts, and going out by the time I was 14. My parents still chipped in (and, of course, paid for our family living costs), but the responsibility was largely mine. I never resented it, and, in fact, the early responsibility served me well. I don’t think my husband and I have done the best to instill this same responsibility in our kids. We need to work on that. Thanks for the tips!
Andrew_from_FabulousSavings says
My mom got me started on money management by having me pay my own cell phone bill, too. I’ve never missed a payment on any of my bills since, due to my paranoid belief that all company bill collectors will send my mom after me.
Great article!