Are You Teaching Your Kids Financial Responsibility?

The following is a guest post from Trisha Wagner, discussing how our financial habits impact our children.  I grew up in a family where DIY, frugality, conservation, and making do were virtues.  There was always money available for things that were truly necessary, but that was because my parents did such a good job of not wasting money on things that weren’t really necessary.  My husband and I consider frugality to be a virtue regardless of inccome.  We are  passing that value on to our son by avoiding needless consumerism, buying nearly everything second-hand, and partaking in lots of free entertainment (hiking instead of going to the movies, for example).  I’m grateful to my parents for the frugal nature and desire to save that they instilled in me.  It has helped immensely over the years when money has been tight.  I hope that one day our son will also be grateful for the frugal values that we’re passing on to him.  As you read through Trisha’s article, think about your own children, and what sort of adults you want them to become.  Nobody sets out to deliberately create a spoiled, financially illiterate child.  But sometimes parents with the best of intentions go down that path out of what they think is love.  The rought economic times we’re going through are difficult, no question about that.  But a child raised in a home where money is tight but well managed will have a better start in life than a child who is raised in a home where money is plentiful and no request is ever denied, or one raised in a home where the family lives beyond their means.  Thanks for such a timely article, Trisha!

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Upper to middle class parents may have more issues during the current economic climate than just dealing with tightening the purse-strings to make it through harder times. Talking to your kids about why there is less money for indulgences may be just as large an issue to contend with, especially if finances have never been an issue before. Financial responsibility is something we learn at home long before we take our first class on economy. Many families will learn this the hard way by failing to avoid these common pitfalls in raising your children to be respectful of finances.

• Indulging your children’s every wish and whim. While families with less disposable income teach this lesson early, families that have the means to purchase whatever it is that Johnny or Suzie want sometimes have difficulty in saying no. After all, why deprive your child something that he or she wants when you have the ability to provide it? Stated simply- if you child never wants for anything, they can never truly learn how to appreciate the things they have. Just because you are able to buy whatever it is they want, does not mean you should. You will be doing yourself and your kids a favor by learning when to say no to things they simply do not need. If you don’t start this at a young age, do not expect it to get easier as they grow. As your child matures it is your responsibility as a parent to teach them that it is a big world out there and things will not always happen as they wish.

• Not providing your child guidance on how to manage money. This mistake can have a severe impact on your child when he/she is old enough to obtain credit cards or start living out on their own. If you provide your child with an allowance without making them responsible for contributing to their own expenses you are teaching them that money is for buying fun things only. While it is important to give your teen some freedom in learning how to spend or save, it is recommended you make them financially responsible for some of their own expenses as well. After all, when they get in the real world, they will not get their entire salary to spend on whatever it is they fancy. Money must be budgeted to pay for expenses, purchasing necessities and of course savings for a rainy day. It is much easier to learn these lessons as a teen and young adult BEFORE entering the real world where mistakes can be costly.

• Failing to make kids work for their money. When you child is old enough to need or want an allowance they are certainly old enough to contribute something to earn it. Even small children can learn the value of money by having simple chores such as keeping their room clean or helping mom or dad around the house. It is human nature to take for granted what is received without having to sacrifice or work for the end result. Unless you are able to leave a sizable trust for your children in which they will never have to work for a living, it is best to teach them at a young age that nothing in life is free.

While it is admirable to want to provide for your family’s every need, in some cases you are doing more harm than good by making the high life too easy. By teaching your kids real life lessons about money and money management you are preparing them to deal with the reality of life as an adult and that lesson is priceless.

Trisha Wagner is a freelance writer for DepositAccounts.com, where you can compare rates from dozens of banks in one place. Trisha writes regularly on the topics of personal finance and saving money.