???????????????????????????????As children, we learn a great deal from the way our parents handle money.  My parents, for example, never had much money, so there wasn’t a lot to save.  However, my mom was great at stretching meals and groceries and finding bargains.  I learned that from her.  I’m also not a great saver, though I’m working on that.

My husband’s family, on the other hand, had a different financial situation.  Both of his parents worked, so they didn’t have as many financial issues.  Still, they lived a frugal lifestyle and saved, and saved, and saved.

Thanks to our backgrounds, I’m able to find ways to cut expenses, and my husband is able to encourage me to save more.  In both of our families, the wives did the budgets, so we’re both comfortable with me keeping the budget.

My kids are still little, but now that Bookworm is 10, I’m beginning to implement a plan to teach him to be financially responsible.  I’ll teach the girls in the same way when they get older.

1.  Teach that work equals money.

My kids have a chore chart, and they earn money for doing those chores.  If they don’t do them, they don’t get the money.

However, we take that even a step further.  The chores must be done in a timely manner.  Bookworm’s morning chore is to get dressed, do his UberSmart math work, make his bed, and brush his teeth.  He gets up very early, usually by 6 a.m., so we want this morning chore done by 7:30 a.m., when he usually starts school.  For the first month or two, I reminded him, but now I don’t.  When he is older and working in the real world, his boss will never say, “Bookworm, did  you get that done?  Remember, you want to make your money.”  After a few days of being lazy, he usually gets it done by 7:30 because he doesn’t like losing his money.

2.  Teach how to save, spend, give, and invest.

We have Bookworm take the allowance he earns and divide it into 4 categories:  Save, Spend, Give, and Invest.  He takes 70% out for spending and 10% out for each of the other three categories.

3.  Teach how a budget works.

I’ve enjoyed seeing Bookworm struggle a bit as he decides what to do with his money.  Like most kids, he wants to buy everything, but his allowance is limited.  Earlier this year, he would spend his money on Scholastic books.  However, I reminded him that he could find all of those books for free at the library.  After using most of his money to buy books he could read in only a few hours, he decided to stop ordering from Scholastic.

Watching this struggle can be difficult, though, too.  Bookworm has a big heart and likes to give.  He recently chose a tag off our church’s Christmas tree to buy some clothes for a baby girl.  He sat down with me and looked at Kohl’s sales online.  He found a code to use, and we shopped the clearance section.  Still, he used up almost all of his donate money.  Now, he’s found another cause he wants to donate to, but he doesn’t have the money.  I’d love to swoop in and pay for the next person he wants to help, but it doesn’t work that way.  He has to work within the confines of his money, and he’s learning to do so.

4.  Teach the power of investing.

Neither my husband nor I learned much about this when we were young, but I want Bookworm to understand the basics.  There are two ways that we are doing this.

Matching his college savings.  For every dollar that Bookworm puts away in his college fund, we’ll match him.  If he puts in $20, we’ll put in $20.  I want to reward him for being a good saver, and I want to teach him the importance of taking advantage of employer matches when he starts working.

Put money in a Roth IRA.  As soon as Bookworm makes an income, either from a job or helping me with my business at home, I plan to set up a Roth IRA for him and help him invest.  We’ve already had several discussions about the power of compound interest, and he’s excited to start investing in a retirement fund.  Of course, this step is at least 3 years away.

How are  you teaching your kids to be financially responsible?  What would you add to this list?

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