Teaching Kids Financial Responsibility – Answering common question about children and allowances, money management, and teaching kids the value of money.
The relationship of kids and money begins at an early age. I’ve always had questions as to what approach I should take with my children in terms of teaching kids financial responsibility. I had the opportunity to speak with Lori Mackey of Prosperity4Kids Inc. to help clear up some common questions about kids and money. Mackey is a Youth Financial Literacy Expert and award-winning author of Money Mama & The Three Little Pigs.
Lisa LaGrou on FOX2 Teaching Kids Financial Responsibility
Lisa LaGrou Oakland County Moms – Is giving an allowance an appropriate teaching tool? If so, at what age should it begin and how should it be distributed – i.e. how much and for what types of tasks (those that go above and beyond what is expected, or any everyday task?)
Lori Mackey Prosperity4Kids – Allowance is a great learning tool, it can be used to create positive habits, break bad habits and teach your child how to become a wise consumer.
Don’t think of it as – Paying Your Kids- think of it as – Teaching your Kids how money works.
Allowance should be based on your disposable income, not age, ranking or what the neighbor pays. Not be too little so that a child feels penniless, but not too much where they can afford anything they want. The easiest way to implement an allowance is take what you are spending on each child already and transfer the earning power to your child. It won’t cost you anymore than you are already spending, but the financial lessons will be priceless.
Then, decide on chores that your child is not currently doing. Start out small and work up to bigger. Small successes lead will lead to big rewards for both of you.
When my kids were young, it was like pulling teeth to brush their teeth, knowing that it would save me money in the long run, and encourage hygiene I started to reward both my kids for brushing their teeth. It worked wonders and became a habit so I moved on to eating a healthy breakfast and then being ready with backpacks to walk out the door at 8am. This created calm and peaceful mornings, which lead to happier days for all of us.
Lisa LaGrou Oakland County Moms – What words or phrases are detriments when teaching kids financial responsibility?
Lori Mackey Prosperity4Kids – Think back to what your parents may have said about money, do you still carry that with you today? Things like…we don’t have any money, money doesn’t grow on trees, what do you think I’m made of money? These types of statements create fear, and make children feel money is bad. It’s better to say, it’s not in the budget this week, or let’s figure out a way for you to earn the money to buy the items you want.
Lisa LaGrou Oakland County Moms – What is the most important message you can teach kids so they avoid the pitfalls of debt?
Lori Mackey Prosperity4Kids – The most important lesson we can teach is to never spend 100% of what you have. Teaching children the 10/10/10/70 concept, will guarantee a brighter financial future. The best defense against anything is education. Giving a child the education of paying themselves first, and living within their means will benefit them greatly in life and against debt.
Lisa LaGrou Oakland County Moms – At what age do children comprehend teaching kids financial responsibility (what money earned can be spent, but can’t be retrieved; it can be replaced with more that is earned?)
Lori Mackey Prosperity4Kids – I’m not sure teaching kids financial responsibility is an age thing; I think it is more about education; there are adults that don’t comprehend this process! Educating a child on how money is earned will naturally educate them on how items are purchased if they use their own earned money.
Youth Financial Literacy Expert and award-winning author of Money Mama & The Three Little Pigs, Lori Mackey of Prosperity4Kids, INC., has made it her mission to develop fun and engaging ways for parents to teach their kids how to plan for their futures. Lori believes in teaching kids the 70/10/10/10 rule: SPEND 70% for everyday expenses, SAVE 10% for the future, INVEST 10% to build your fortunes, and GIVE 10% to a charity of choice.
This teaching kids financial responsibility article was first posted in 2011.
For more about teaching kids financial responsibility, visit www.prosperity4kids.com.