5 Ways to Teach Your Children Financial Self Reliance

It seems as if there never was a time where our financial future were more uncertain. With politicians arguing about the lifespan of social security and consumer debt skyrocketing, it’s scary to think about how our children and future children are going to fare financially. In this post, I have listed five things that my wife and I learned growing up that helped us learn financial self reliance.

Give them an allowance

Before you start, there are two important rules you must follow. Rule number one, they must earn it. My parents stopped giving us an allowance when we were kids because they realized we were collecting the money without doing our chores well (or at all). Paying your children for shoddy work can make things hard on them later when they try the same trick on employers. The second rule is to pay them what they earn. McDonald’s isn’t going to pay your kids $20/hr. to flip burgers, so don’t condition them to expect that by paying them $20 to do similarly simple tasks. Giving your children an allowance can help your children learn that once they leave the protective wings of the nest to spread their own, they will reap what they sow. In contrast, an allowance for the sake of an allowance can lead your children to view you as their personal piggy bank long after they’ve left home.

Teach them to save

In my opinion, my in-laws have the perfect plan for this. Each paycheck or week’s allowance was to be split three ways: 10% to tithing, 50% to savings, and 40% to be spent however the child wanted. The kids didn’t always follow the plan, but they knew it was an expectation and they understood the wisdom behind it. They learned that there are important things in the future–whether it be college, missionary service, or marriage–and that giving up a little today can make those things happen. When doing this, don’t get caught up in the percentages; you can choose your own. It’s the lesson behind it that matters.

Loan them money

One of the greatest financial lessons my dad ever taught me was when gave me a $750 no-interest loan to buy my first computer. He didn’t give me a payment schedule, but he expected me to pay him back and I wanted to show him I was responsible. Every now and then he would decrease the loan amount when I helped with big projects like tiling the bathroom or unloading a truckload of dirt into the garden. When I had finally paid off the last cent, I could just taste the liberating feeling of being debt-free. It has always stuck with me. It taught me not only to be careful about what to go into debt for, but also to get rid of it as quickly as possible.

Don’t create freeloaders

This one is tough. It’s hard to know where the line is between turning your kids into professional moochers and wanting them to enjoy their childhood and teenage years. Just be reasonable. If you give your kids everything they want without fail, they’re going to grow up thinking that is how things go. But if you’re too stingy, they just might hate you. The best way to gauge this is their attitude about it. Do they show their gratitude? Do they expect you to give them things? Again, I want to be careful here. You know your kids best. Just try to be reasonable with them and help them learn to earn things the way you did – with hard work.

Lead by example

Regardless of what you teach your children about finances, if they can tell you aren’t being responsible with your own finances, you and they are fighting an uphill battle. Live by the lessons you strive to teach your children and not only will they learn them more effectively, but you will also be happier and feel more secure.

Financial self reliance isn’t generally a natural trait. How you teach your children about finances can truly define the rest of their lives. Financial problems are a factor in most divorces. Bankruptcy is a heart-wrenching experience. Just scraping by can lead to anxiety and depression. And while money can’t buy you happiness, financial security can keep a lot of worry and pain out of your life. It can also offer you the opportunity to live your life the way you want to. Take the time to teach your kids financial self reliance. Trust me, they’ll thank you later.