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Six Tips for Raising Financially Responsible Children

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Parenting is about transmitting many lessons that will help your child succeed and build a life that brings them happiness and fulfillment. You might wonder how to set up your child financially to help them make the right decisions and achieve financial stability.

Teaching them important life skills such as responsible financial habits will give them an advantage.

Conveying healthy financial habits will help your children save, invest, and build wealth throughout their lives. Here are some concrete strategies you can use to help your child develop a sense of financial responsibility and make good financial decisions throughout their lives.

Make Financial Management Fun With a Weekly Allowance

An allowance is often the first step on the path to financial responsibility. Receiving a few dollars every week or month is exciting, and it will make learning about financial skills more engaging.

Giving your child an allowance can teach them about a few key personal finance concepts. They’ll learn about the concept of money and its value. Being able to spend their own money will also encourage kids to begin paying attention to prices to determine what they can afford with their allowance.

Your child will discover the basics of budgeting as they learn to stretch their allowance to last an entire week or month, and you can encourage your child to save up their allowance for a large purchase. This good financial habit will have long-term consequences with children who receive a weekly allowance saving on average between 16 and 30% more once they reach adulthood.

Most parents use an allowance as a reward, whether it’s for proper behavior, desired grades, or chores. If you’re wondering how to set up your child financially, we recommend rewarding your child for completing chores with $5 to $15 a week based on their age.

Working for their pocket money is an important lesson that will teach your child about the value of hard work and encourage them to work for the things they want.

Use Real-Life Examples

You can make learning about financial literacy a part of your daily life to make these concepts feel more real. There are plenty of opportunities to incorporate these important skills into your daily routine:
  • Pre-teens and teens can help with meal planning and grocery shopping. It’s an engaging way to teach them to budget and shop for the best deals.
  • Younger children can pick their snacks for the week with a snack budget.
  • Encourage your kids to save up and contribute to major purchases, especially for toys and video games.
  • Gift cards to a favorite store or fast-food restaurant are an enjoyable way to practice budgeting.
  • Make back-to-school shopping fun by giving your child a budget and letting them pick clothes and school supplies.
  • Discuss purchases and emphasize the difference between needs and wants. Your child can use an app or a journal to track their spending and get a better idea of how much money goes toward different categories.
  • Help your child set savings goals so they can purchase gifts for birthdays and holidays.
  • Discuss the importance of helping others and encourage your child to pick a non-profit and donate a small percentage of their earnings.
How to Set Up Your Child Financially With Games

Learning about the right financial habits should be fun and engaging. You can use games to make this process more interesting and appeal to your child’s sense of competition.

You can start early by introducing play money and a cash register set. Pretend play that involves counting money and giving change back can help your child develop important math skills.

As your child gets older, you can introduce a wider range of games and activities:
  • Board games are a great way to bring the family together while exploring important financial concepts. Favorites include Monopoly, Pay Day, Allowance, and the Game of Life.
  • The U.S. Mint also has some educational games that will help your child learn to count money.
  • As your child gets older, you can play Financial Football together. This engaging game will test your child’s financial literacy skills.
  • For teens who are approaching graduation, Payback is an eye-opening experience designed to paint a realistic picture of what their finances will look like based on their career choices.
  • The Stock Market Game remains one of the best ways of introducing investing and the importance of making strategic decisions.
  • Besides being a loved money app and debit card for kids, Greenlight includes Level Up™, a financial literacy game for kids and teen that uses fun games to teach money skills in bite-sized challenges.
Encourage Your Child to Get a Job

If you’re wondering how to teach your child financial responsibility, one of the best things you can do is encourage your child to get a part-time job.

A job will help your child become more independent and self-reliant. They will learn about the value of money, and having some work experience can be a plus when applying for college. Your child will also get a few references they can use to apply for a full-time job later in life.

There are approximately 5.5 million teens with jobs, with retail and fast food jobs leading the way. If your child has a hard time finding a business that hires teens or isn’t ready to commit to a part-time job, there are other opportunities to earn money, including:
  • Tutoring
  • Babysitting
  • Dog walking
  • Lawn care
  • Power washing
  • House cleaning
  • Selling baking goods or crafts
Some of these gigs can even turn into profitable business ventures. Due to the current labor shortage, some teens are earning as much as $70 an hour with gigs like babysitting or basketball coaching.

Besides helping your child learn about the value of hard work, getting a part-time or seasonal job can be a valuable experience for creating professional connections and taking a strategic approach to career development.

Encourage your teen to explore different opportunities, try new things, and set specific financial goals as they receive their first paychecks.

How to Teach Your Child Financial Responsibility: The Save, Spend, and Give Rule

How to teach your child financial responsibility is about more than teaching them the value of money. You should also show them how they can make a difference by giving back.

The save, spend, and give rule is a simple but effective way to transmit positive values. It’s a rule that will help you raise kind and thankful children.
  • Your child should spend 50% of what they earn on a mix of things they want and obligations. You can, for instance, ask your teen to contribute to their car insurance premiums once they start driving.
  • Encourage your child to save 30% toward specific goals, whether it’s a large purchase, a trip, or contributing to their college fund.
  • Help your child give 20% to make a difference, either by donating to a non-profit or purchasing essentials for a local homeless shelter.
Research shows that Gen Zers are likely to donate to the charities they learn about on social media. Talk to your child about the content they encounter online and the causes they feel connected to. Teens are also more likely to give to small organizations, so encourage your child to do their own research and pick a nonprofit themselves.

Open a Bank Account for Your Child

If you’re wondering how to set up your child financially, one of the best things you can do is introduce banking products early. Your child will learn how to use these products and gain the knowledge and confidence they need to get the most out of additional banking products as their needs change.

You can get started by opening a youth savings or checking account for your child. They’ll learn about the basics of banking, such as checking their balance and avoiding overdrafting their account.

Children are comfortable with digital tools, and navigating a banking app should be easy for them. As your child gets older, you can explore other tools and products:
  • If you’re wondering how to raise financially responsible children, you can teach them about investing with Certificate of Deposits (CDs). These low-risk investments have a fixed rate of return.
  • A savings account is another great tool, and you can set up automated transfers to help your child save 30% of their income.
  • Consider a credit card to help your teen start building a credit history. You can also add your child as an authorized user on your own credit line to have more control over their spending.
  • Paper trading is a great way to introduce your child to the stock market. Once your child understands a few basic concepts, they can graduate to managing a small portfolio on an investment app that supports fractional shares.
How to Teach Your Child Financial Responsibility with Power Financial Credit Union

It’s never too early to teach financial responsibility. At Power Financial Credit Union, we want to help reshape the way children think of savings and money management, while also offering parents an easier way to teach their kids about finances.

Our Youth Accounts are the perfect way to start your kids on the road to financial success. We have also partnered with Greenlight to offer the loved financial education app and debit card for kids and teens to our members for free. Get in touch with us to learn more about how we help families.