How To Raise Financially Responsible Children

You have a lot on your plate as a parent and teaching them financial responsibility is one of the key duties to do. There are indeed many lessons to impart from an early age to equip your kids with the skills needed to be financially responsible adults. But where do you start? And how do you make sure it sticks?

Thankfully, financial responsibility isn’t an abstract concept that’s difficult to explain—it’s made up of tangible skills that can be cultivated in tandem with everyday life. Read on as we discuss how to take advantage of key teachable moments and raise financially responsible children along the way!

Encourage Children to Save

Financial responsibility starts with a simple, yet incredibly valuable lesson: save for the future. Encourage your children to put away money for any future purchases—even if it's something small like a new toy or game. Not only will this help your children prioritize their spending, but it will also give them an appreciation of the value of money and the importance of saving.

If you want to take it one step further, you can even open a savings account to help provide structure and encourage long-term thinking. You can set up a system that rewards your child with interest each month they deposit money into their account, incentivizing them to keep it up!

Communicate About Finances

A key part of raising financially responsible children is to ensure that they understand the value of money. Communication around money early and often is essential to teaching them good financial decision-making.

Start by talking to your child about the importance of budgeting and saving. Explain why it’s important to not spend beyond their means or take on debt that they can’t handle. An open dialog will give your child the opportunity to better understand why you set spending limits and how you manage your finances.

Establish Financial Goals

Establishing financial goals gives you something to work towards as a family, and having this common goal will motivate you and your children to save more and be savvy with their money. Setting financial goals also gives your children an incentive not to overspend or be reckless with their finances, since it shows them that their decisions today affect the future.

When your child reaches the teenage years, it's important to take a more active role in teaching them about financial responsibility. First and foremost, it's important to be a good role model and practice what you preach. This means sitting down with your teenager and having regular conversations about financial topics such as budgeting, saving, and credit.

It is also beneficial to provide hands-on experience with money by giving them a weekly allowance or offering a part-time job. This can be a great opportunity to teach your teen the basics of budgeting and how to manage their income.

You can also take this opportunity to introduce your teenager to a variety of banking products, such as savings accounts, checking accounts, and even credit cards. It is important to explain the importance of understanding interest rates, fees, and all of the associated costs and benefits of each product.

Types of Financial Goals

You can set any type of financial goal you like, as long as it works for your family and is achievable within the timeframe. Some examples are:

● Taking a vacation in two years

● Saving for college tuition/books in four years

● Having enough savings for retirement in 30 years

● Building an emergency fund by the end of next year

Discuss Money Values and Habits

Talk about the importance of saving

Teaching kids the value of saving is essential. Tell them that saving should be a priority, even if it’s something as small as putting away their allowance or money earned from doing chores each week. Help your child set goals for how much money they want to save, then discuss ways to reach those goals together.

Practice budgeting

Discuss with your child why creating a budget is important and how budgeting will help them become more financially responsible. By teaching them the basics of budgeting, they’ll be able to make smarter financial decisions no matter their age and stage in life.

Introduce rewards and consequences

Introduce rewards such as matching funds into their savings account when they reach a savings goal or helping cover some of the cost if they want something expensive like a new toy or game console. Let them know that there may also be consequences if they don't live up to their responsibilities, like not being able to purchase something they want until they have saved enough.

By incorporating these conversations with your children early on in life, you can help them understand the importance of managing their finances responsibly and teach them how to make sound decisions when it comes to budgeting and saving for retirement.

Give Rewards for Smart Decisions

Another great way to get through to them is by rewarding their responsible decisions. Not only does this set an example for them but it also reinforces the behavior that you'd like to see.

The rewards don't have to be expensive or materialistic—it could be something as simple as giving your child more screen time saving a portion of their allowance or baking them a special treat for getting a good grade. Rewarding your children when they make smart financial decisions is like investing in their future, and eventually, will help establish lifelong money habits that they can carry with them.

When considering rewards, here are some ideas to remember:

● Be sure the reward matches the accomplishment — don't overdo it!

● Make sure you are rewarding the financially responsible behavior, not just the accomplishment itself.

● Adjust rewards according to age — what’s appropriate for a 6-year-old may not be realistic for a 16-year-old.

● Keep in mind what your child values and give them something within that realm of appreciation.

Seek Professional Advice

The expertise of a financial advisor or a tax preparer can be extremely helpful and can save you from making costly mistakes. In addition to the expertise of a financial advisor or tax preparer, it is also important to consider the advice of other parents and mentors who have gone through similar experiences. Through their stories and advice, you will gain invaluable knowledge that will help guide your decisions and help your children learn financial responsibility on an ongoing basis.

When you're looking for professional advice, here are some tips to keep in mind:

1. Make sure that any advisors that you seek out are LICENSED and experienced professionals — even if they offer cheaper services than others

2. Read online reviews of different advisors so that you can get more information about their services

3. Ask questions to make sure that the advisor understands your specific needs

4. Do not commit to anything until you have a clear understanding of the costs involved

Conclusion

Teaching your children basic financial literacy and responsibility can be daunting but is one of the most important things you will ever do. Financial responsibility can be a challenge, but with the right guidance, your children can be ready to take on the economic world with confidence.