Practical Steps for Raising Financially Responsible Children

About a year and a half ago, my husband and I revamped our budget and savings plan to eliminate all debt outside of our mortgage and to aggressively pursue savings and retirement goals. This affected our children as much as it affected us as the out-to-eat nights and spontaneous purchasing decreased markedly. At first this was tough for the little ankle-biters to swallow, but we decided to seize the opportunity to help our children learn some fiscal responsibility as well.

We have seen it too often - or we have done it ourselves. You enter adulthood and all that goes with it - the workforce and marketplace - without any real planning or budgeting know-how. Before you know it, your week lasts longer than your paycheck. And savings? What is that?

Trying to undo the damage that is reaped by mounting debt and living beyond one's means is much more daunting than learning some budget and investment planning from the get-go. With that in mind, my husband and I decided we would endure the but-why's and the why-can't-I-buy-that-now's from our kids and teach them fiscal responsibility before they left the nest.

A word of warning: some of the things we have implemented with our children may seem quite strict or even harsh. We have seen, however, the grave damage done when a young adult enters the world with no financial preparation. We believe the sacrifices will be worth the dividends.

1. Use allowances to teach the principles of "earn, give, save, and spend".

Once our kids were old enough to begin taking on some household responsibilities (around 6 years old), we began giving them an allowance. In our home, we give them $.50 per year for every year of their age. For example, our 15-year-old receives $7.50 a week; at 16, she will get a raise to $8.00.

We use a chore chart with each child, and they check off their daily responsibilities as they complete them. They show one of us the chart each day, and we initial it. At the end of the week, they turn it in, much like one might turn in a time card. In exchange, they receive their weekly allowance.