Teaching financial responsibility to children

Raising children requires us to teach them values and responsibility………but how do we teach them to value a good credit rating and to handle their finances responsibly? I’m sharing the method I used on my own children.

When they were 4 years old I put up a sheet of paper on the refrigerator. This paper had a picture of toys in a toy box, a shirt on a hanger, a bed nicely made, and dishes in a dishwasher (for helping to clear the table). On Fridays it was “Pay Day!”. We all gathered around the kitchen table and their daddy and I would pull out a roll of pennies for each of them.

As I unrolled the pennies their eyes would widen with anticipation. We then set aside 5 pennies (10%) for their tithe (I was a Sunday school teacher), 5 pennies for their savings account (10%), and then we would pull the paper off the refrigerator. This is when they knew they might have “bills” to pay………and that money would have to be paid before they could have their “wow, I can have fun” money!

Each time my children had “maid service” I would note it with an “X” in the square for that chore on the day they enjoyed their “maid service”. They may have elected to not make their bed, so they got “maid service” from mom!  They may have simply just not done their chore, but it still had to be done so, again, Mom’s Maid Service to their rescue! Of course, as we all know as adults, maids don’t work for free!

Now, out of that pile of “fun” money, we started deducting! Five pennies here, five pennies there……..oh my, how that does cut their “fun money” down!

It was amazing how my children would almost beg me to LET them do something when they’d forgotten to do it! When they were teenagers we didn’t ever fight over me MAKING them do chores……… if I simply announced that it looked like “Mom’s Maid Service” was needed for something they’d quickly jump and ask me to PLEASE let them do it!

Of course, as they grew older I increased from rolls of pennies to rolls of nickels, then on to a roll of dimes, then quarters, and eventually dollars. Ah, but when the “pay” increases, so does the “work load”.

When they were 10 and 11 years old they wanted new mountain-type bikes. There wasn’t anything wrong with theirs, they just wanted new ones. I told them that if they increased their savings to 15% for one full year, and sold their current bikes, then I’d allow them to withdraw the needed money from their savings to buy new ones right away. We went to the bank and I requested that the teller give them the money in $1 bills. You should have seen their eyes when they saw what a big pile of money they were taking away from their savings!! Yes, they still chose to buy the bikes. I must add that I never had to remind them to put their bikes away or to take good care of them!

We all know that teenagers sometimes have desires for bigger ticket items. My teens would come to “Dad & Mom’s Bank”. We would determine how much they felt they could afford on a weekly basis. A contract would be written up. Terms included the weekly repayment amount, the fact that a missed payment would cause the “collateral” to be taken away from them until they got their account in satisfactory standing, and that “default” on the loan would require that the “collateral” be sold to satisfy their contractual obligation. Ouch!

They are now in their twenties, and the only thing I wish I'd done differently was to teach them how to use a credit card wisely.

When they became a senior in high school I would have opened up a $300 limit credit card, with them as the authorized user. In any month that they couldn’t, or didn’t, pay me the full amount owed on the card they knew the card would be taken away until it was.  Additionally, in any month that they ran up an amount over 30% of the limit I'd have taken it away for a month so they could learn to use it more wisely and prudently.  In this manner they'd have learned a habit of keeping to less than 30% of their limits.

My first grandchild was born in November 2005.  Just about time for her to start, and I hope my son and his wife elect to do this for her.