Raising Financially Responsible Kids

Unknown

Teaching your children the financial basics at a young age can give them a head start to achieving future financial success. As soon as your children begin to handle money, it’s important to teach them how to manage it wisely. The lessons your kids learn about money today will put them on the right path to financial independence tomorrow. And they’re never too young to learn.

Allowance basics
Teaching youth to track their spending habits and save part of their “income” now will serve as a life-long lesson in good financial management habits.

  • Discuss with your children what they may use the money for and how much should be saved.
  • Make allowance day a routine, like payday. Give the same amount on the same day each week.
  • Consider “raises” for children who manage money well.

Saving, Shopping & Spending
Piggy banks are a great way to start teaching children to save money, but opening a “real” savings account introduces them to the concepts of earning interest and the power of compounded interest.

Help your children become savvy shoppers. Children need guidance when it comes to making good buying decisions. Teach them how to compare items by price and quality.

Don’t be afraid to introduce the concept of monthly bills to your child. Sit down with your child and go over the monthly cell phone bill, for example. Take this opportunity to explain how amount of usage directly affects total cost when it comes to phones, electricity, water, heating/cooling, etc.

Three bucket strategy or 10-10-80 rule
Creating an age-appropriate “budget” with your child can be a good first step on the path to financial responsibility. The three bucket strategy, sometimes referred to as the 10/10/80 rule is simple and easy to follow. It breaks down like this:

  • First 10% — Give Away
  • Second 10% — Put Away
  • Final 80% — Spend Wisely 

Sit down with your child and follow the below steps to get them started with their own 10/10/80 budgeting plan:

  1. Help your child determine what 100% of their NET income or allowance is each month.
  2. Take 10% of their net income or allowance and allocate it for charitable causes or some type of giving (to church, charities, your community, etc.)
  3. Take another 10% of your child’s net income and put it into savings.
  4. Take the remaining 80% of their net income and allocate it for living expenses, this includes all spending that doesn’t fall under “giving” or “saving.”
 Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.

Speak Your Mind

*