With the United States Government’s debt approaching 17 trillion dollars, many homeowners owing more money on their houses than they are worth, and the amount of people owing thousands of dollars in consumer debt, the importance of fiscal responsibility often gets lost in the headlines. If your children look at their government and many otherwise responsible adults, they will think that it is totally normal to spend money that they don’t have and worry about it later. Bad habits are easy to learn and hard to break. As someone who enjoys a debt free lifestyle, I want my future children to be able to do the same. I don’t want them to lie awake at night and worry about how they are going to pay their bills or buy their groceries; therefore, I plan to teach the following principles to them when they are young.
As a child, I never received an allowance, although, I completed my share of household chores. Unfortunately, many kids today demand an allowance and scoff at being asked to do anything around the house. I am a believer in a working allowance. Teaching children the value of completing work satisfactorily will prepare them for life as future hard-working employees. Before beginning an allowance program, sit down and decide a reasonable amount of money to give for each household chore. For example, taking out the trash might earn a child two dollars while vacuuming the floor might earn a child five dollars.
10 10 80 Principle
If you let your kids decide what to do with their money, they may decide to spend it all on video games or something else that they enjoy. This decision could give your child the wrong idea that money should always be spent on pleasure and set him or her up for a life of debt, worry, and heartbreak. A good way to avoid this disaster from occurring is to set up a system of saving, giving, and spending for your child. The 10 10 80 principle requires that 10 percent of money earned should be given to church, 10 percent of money earned should be saved, and the remaining 80 percent of money earned is used at a person’s discretion. If you don’t attend church, your child can donate money to a cause they are passionate about. Helping others with their money will not only instill fiscal responsibility to your child, but also social conviction and social responsibility as well.
Teach your child the value of a dollar earned by making them accountable for something that they need. For example, you might have your kid purchase their school snacks with money from his or her working allowance. Work with your child to prepare a budget with their allowance ensuring that he or she will have enough money to cover these purchases.
Lead By Example
The easiest way to teach your children financial responsibility is to lead by example. If you have ten credit cards in your wallet, your child will think that buying with plastic is the norm. On the other hand, if your child watches you prepare a monthly budget, clip coupons, pay with cash, and only buy things that the family can afford, he or she will learn financial responsibility through your example and hopefully grow up to be a smart money adult.