Step Seven: Teach Them to Use Money or Money Will Use Them

Think about the most challenging obstacle you faced when you became an "adult."  It is during childhood that an adult needs to spend time preparing for the potential challenges of adulthood.  If a child lacks the skills necessary to succeed in a specific area of adult responsibility, chances are they will spend the first decade of adulthood paying a heavy consequence.

Since the introduction of credit, one of the most difficult challenges for each generation is financial maturity. After graduating from college, getting a job and receiving a paycheck, a child must know how to resist the temptation to buy the things marketers throw in their face.

A parent wouldn’t think of sending their child off to college without having conquered the skill of driving a car. We can’t even imagine the lunacy of a parent dropping their freshman off on a college campus and saying, "I know you’ve never driven a car before, but now that you are in college we bought you a beautiful Corvette. Here are the keys. Learn how to drive in any way you can."

As ridiculous as that sounds, many parents drop their kids off, give them their first credit card and say, “I know you’ve never handled credit before, but before we leave and drive a thousands miles back home, we want to give you your first credit card. Only use it for emergencies.”  It doesn’t work.  Before the child is even out of college…before he or she even has an income…they have credit card debt.

The discipline of financial maturity starts today. Whether your child is five years old or seventeen years old, decide that you will help him use money so money doesn’t use him.

In the best case scenario, start your five-year-old with an allowance. Years ago my wife and I started our five-year-olds with an allowance of one dollar handed out in dimes. We started them with ten dimes so they could learn the concept of tithing ten percent. On Saturday mornings, when they came to me for their allowances, they knew they needed to have their church giving envelopes with them. That was the first thing we took care of.

After putting aside ten percent, the kids were allowed to spend the remaining ninety cents any way they wished. No, we did not make them save, but we did give them incentives to save. Any money they saved by the time we went on vacation I would match, and that was their vacation spending money. If I had to do it over again, I would also match whatever they saved by first of December, and that would be their Christmas shopping money.

We didn’t make them do chores for an allowance. They did chores anyway…because they lived, ate and slept in this house. They did chores because they were family members. I did not want them to develop the thought that you get paid for being a family member. No one pays me to be a responsible family member. Why should anyone else get paid?

"You mean you just give them money?" one father asked. Actually I figured that being in school for eight hours a day seemed like a work load. But the primary reason I gave them money was because I wanted them to learn how to "handle money". I taught them to drive a car, not because I wanted them to spend more time away from family activities. I taught them to drive because I knew they would need to be able to handle driving after they left home.

From the time the allowance began we told the children to bring their wallets when we went out. When Rosemary went to the grocery store, she told them, "If you want any of those little toys in the machines by the grocery store door, bring your wallet."

For weeks after getting his allowance my son would spend most of his money on toys in the vending machines at the grocery store. Each week he bought three miniature football helmets for twenty-five cents each. Finally, after buying lots of helmets and ending up with no money, he woke up and decided that acquiring helmets wasn’t such a good idea. He learned the hard way; but he began learning at five rather than twenty-five. We made him responsible for his money by allowing him the opportunity to fail.

As your children grow older, expand their financial responsibility. In the latter years of high school make them responsible for the handling of their own credit card and check book. Remember, as long as they are still home, you can still take the credit card away until they can pay the whole balance. Once they are out the door it’s too late.

It's the responsibility of today’s parent to prepare the children for adulthood. Rather than hope the children will succeed, train them up so that they will succeed.

(For more information on teaching your child about finances through childhood and the teenage years get your hands on Bob’s book Ready for Responsibility. If you order it on line from www.sheridanhouse.org the children’s homes benefit from all the proceeds.)