PictureThis young man appears to be living beyond his means!
My wife Kathy and I love to travel. Fortunately we have the means to do so because of a couple of reasons. One, we did what we could to be responsible in our choices regarding work, play and investing. Two, we did the best we could to instill that responsibility in our children, thereby insuring they weren’t a burden to us financially or emotionally.

In the beginning, we really didn’t have a plan. We struggled like most young families. However, over the years, we did what we thought was the right way to do things and it became a plan that we used to teach our three kids financial responsibility.

This plan to teach financial responsibility to kids has three major steps.
  1. Get to them while they’re still young
  2. Educate and prepare them to be on their own
  3. Get them off to a good start in their earning years

Step 1:  
Getting to them when they are young means teaching basic responsibility by giving them tasks for which they are responsible. Let them know they are an important part of the family team and that you depend on them. Of course those tasks grow as they grow and they should not be paid for routine tasks.

As I’ve mentioned in previous articles, always support and help your children, but do it in a way that will make them stronger, not weaker. They must pay for or make good their own mistakes. They need support until the point they need to move forward on their own. Encourage them to make money with typical jobs like lawn mowing or babysitting, then watch how they handle it.

Step 2:  

Educate them! Use your leverage, encouragement and funds to get them an education that will result in skills that will translate into a real job. This may be college, a trade school, something else. The money you spend now may save you multiples of that amount if your children cannot support themselves in the future! Prepare them by continuing to make them responsible people.

Step 3

Soon after they get their first job after a higher education, do these things:
  • Take them to see a financial adviser (not a financial stock or fund salesman). This will at least make them aware of their existence, and the ways money can be used, for emergencies, for growth, and how to handle risks by the differing ways to save and invest. I even would give them some money to invest in mutual fund - a nice graduation gift!
  • Set them up with an automatic savings plan where a certain percentage of their income is diverted to a savings account before the ever see the money. People often say they can’t save money because they make too little. You can always save a little, the habit is more important than the money at this point.
  • Your now grown children must understand that they can’t spend all they make on obligations. Not only the 5% or so that I suggest they save for emergencies and the future, but there must be some amount left to enjoy life, to go the movies, or a ballgame, buy some ice cream, or go out to dinner. They should never buy a car or house that’s fancier than they need. It will tie up not only the future, but the present.
  • Teach them to never spend emergency funds for anything but emergencies! Don’t be tempted by instant gratification.
  • Never lend your grown children money without having them pay it back. If they don’t pay it back, then stop lending it to them. Gifts of money from you should be your idea and uncommon.
  • Have them get a credit rating early. Buy something small on credit or get a credit card. We all need a credit rating eventually. BUT IT HAS TO BE A GOOD CREDIT RATING! Pay your bills on time. My son was 28 years old with substantial savings but he couldn’t get a loan for a car because he had always paid cash for everything. He even had a difficult time getting a credit card, but we eventually worked it out.

The whole idea of step 3 is to establish good habits and a good financial attitude!

If, after all of this, your children have financial difficulty, it’s on them! At this point you should be very careful to help them financially because it most likely won’t help and your hard earned savings will be wasted!



05/27/2014 12:27pm

Once again, you are right on! I like the way you think and write about it! Simple logic, enormous gift!

05/27/2014 11:49pm

Thanks PBR! And thanks for sharing my posts and sharing your thoughts about my thoughts. :)

07/16/2014 1:06pm

Great ideas to give your children a good start in life on their own!

11/04/2014 1:44am

I would like to thank you for the great and informative entry.I have to admit that I have never heard about this information I have noticed many new facts for me.


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