Teaching Your Kids to Manage Money

Kids and Money. My parents used to say,” kids are expensive”.  I thought they were exaggerating until I had three of my own. Then I got divorced and living within my means became  difficult.  The basics were sometimes out of reach and extras were frequently out of the question.  The hardest part for me was balancing what I knew was the right thing to do…which was saying say no a lot… and my overwhelming feelings of guilt. I felt so badly for my kids. Their lives were suddenly turned upside down through no fault of their own and they had to grapple with some harsh realities at a young age.

The dramatic drop in our standard of living stirred up bountiful family conflict.  My oldest daughter, ten at the time,  quickly began to test our financial  limits. A daily tug of war over spending , rather the lack of it, began. Each and every day she would ask me to buy her something I couldn’t afford. She wanted to keep up with her friends and have the brand name jeans and  hand bags that they were carrying. Who could blame her. I was strong and stuck to my guns but that did not mean that I wasn’t exasperated and worn out. Our verbal sparing matches heighten my guilt and left me feeling like an utter failure as a parent. She was  angry and seeking the sense of security and stability that had evaporated overnight.

Graduation Day May 2010

Grasping for an end of the conflict that over the years had become a part of our daily routine,  it  occurred to me that this was an opportunity to teach her about the value of money. She was seeking some level of control in her life and that is exactly what I gave her. I  awarded her a large monthly allowance!  She was thrilled even after I explained that this large allowance was to cover all her clothes, school lunches, social outings and toiletries. I bet you can guess what happened the first month. She was broke the first week .  This resulted in begging and pleading for a bail out. As hard as it was I stood my ground .  She packed her lunch each day and stayed close to home for the rest of the month. After only  two months she was on her way to becoming  proficient at managing money. Today she is almost nineteen and you would be hard pressed to find many adults who could manage a budget any better.

One of the surprising outcomes of my experiment was that she learned more than just the value of a dollar and how to live on a budget. She has earned extra spending money since she was fifteen and has developed a strong work ethic.  She realized that additional education, high academic performance and leadership experience would positively impact her career prospects  after she finished college or graduate school. She got a jump start on college by enrolling in AP courses and joint enrollment classes earning 37 hours college credit in an effort to reduce her post-education debt load.

So here are some strategies to help teach money management.

  • Give your children a monthly allowance.
  • Help your children figure out an initial monthly budget.
  • Practice saying no. You likely don’t like the adjustments you are making in your life either
  • Stick to your guns. If you bail your kids out out they will learn that someone is there to rescue them if they make poor choices.
  • Be realistic about what you can afford. Look at your own budget before you set a monthly allowance. Your setting an example.
  • Encourage your children to work. Working  helps develop self esteem , a sense of responsibility and learn that you can take charge of your circumstances and produce positive outcomes.

One of the best gifts you can give your children is an understanding of the value of money and  the tools to become responsible self reliant adults. I hope that I will have done just that for all three of my children when they reach adulthood.  My daughter and I have truly had a few really good laughs about some of the things she thought back in day and how far she has come.

4 Responses to “Teaching Your Kids to Manage Money”  

  1. 1 Pam at MoneyTrail

    Hats off to you for being such a good role model for your children. Giving children guidance with money while at the same time giving them freedom to make choices is a delicate balancing act. As a mother of four, I know that saying “no” and watching them live with the consequences of their choices is so difficult. Thanks for writing such an excellent article and sharing your experience with us.

  2. 2 Allie Young

    What great tips, Nichole! I’ll have to start simple with my 4 year old, but I think the younger you start, the better off you and your child will be.

  3. 3 Shirl

    Excellent job Nicole! Your site looks awesome.

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