This is a guest post by Diane McDougall. Diane is a mom, professional accountant, and financial provider for her family of six. She and her husband made it possible for him to be a stay-at-home dad so that they can be an active, everyday part of their kid’s lives.
Bank of Dad
My dad’s favorite T-shirt, since my first year of college, says “Bank of Dad”. The T-shirt did not lie and my dad gifted and loaned me money on several occasions for big ticket purchases during my early twenties: new car down payment, exercise machine, graduation trip to Europe, and more.
His intentions were in my favor, but the lessons on saving and waiting were not being taught to me as a child or even in my early twenties. Fast forward 10 years. With a stepdaughter in her teens and three boys under the age of 7, I have been experimenting on how to teach them about financial prudence.
Teach Kids about Finance
I enjoy finding new, different, creative and fun ways to manage my household finances for today’s child rearing years, tomorrow’s college years and eventually retirement years. Here are a few ways I teach finances to my kids.
Allowance. My children earn money by completing their household chores, and then they save half and spend half at their discretion. I believe that a dollar earned is a harder dollar to spend. I rarely buy any extras for my kids and tell them to use their allowance. I have a flat rate I pay for each chore and I assign enough chores so that they earn approximately $1 per year of age. This has given my teen a perspective of the value of a $20 movie night with her friends that took her several weeks to save.
Participate in Spending on Budget. I tell my teen that I have $100 to spend today at the grocery store. She helps me keep a tab of the items (rounded up to the nearest dollar to account for sales tax and for simple addition) and keeps me updated on the tally as we shop.
Hobbies. My teen receives a list every other month listing the costs we pay for her swim team and band class activities. The amount adds up fast and gives her a perspective of the cost of extra activities. This list could also include cell phones, texting, trendy clothing (more than the jeans/t-shirt), I-pod music, auto insurance, etc… This list does not include her allowance expenditures as her allowance is her own money.
Credit card. Credit is a very useful tool which is easily disrespected by consumers. Teaching teens to use it wisely may prevent mistakes in their twenties. When my teen is driving age, I plan to start this learning process with a gasoline card.
What are your ideas for raising children to be financially smart?