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Involving Children in Household Money Management

This article was written by in Family and Life, Personal Finance. 13 comments.


At the right age, involving children in the household financial planning process can be a good way to teach responsible money management. Children internalize best practices when they not only receive meaningful instruction, but have visible, positive role models as parents. If parents want to impart a lesson of “buy only what you can afford,” but the intended audience sees the parents struggling with debt, buying items obviously in excess of needs, the lesson won’t get through.

Involvement and modeling are the keys to passing on good financial lessons to the next generation (not financial management classes in school, which have been shown to do more harm than good). In a discussion about allowance for kids, Consumerism Commentary reader Kilae offered the following suggestion:

Another system I read about was a couple that gave their child 10% of their household income. While it sounds ludicrous, with that 10% the child had to pay an itemized bill that was 10% of the household bills: a 10% share of the mortgage, a 10% share of the utilities, a 10% share of the grocery bill, a 10% of the long-term savings and college savings, and so on. When all was said and done, the kid had around $15 left per month as play money — not a ludicrous amount, and it showed the child exactly what the parents’ money was being used on and why budgets were important.

http://farm6.static.flickr.com/5259/5437895492_b0e84aaf2b_b.jpgWhile there is something to be said for shielding children from the stresses of household financial management so they can concentrate on their educational priorities, this system could be very effective. With an active role in the family’s finances, a preteen or teenager can build valuable experiences that will translate directly to how he will manage finances when his responsibilities include a household of his own.

There’s a possible social drawback. Parents should try to ensure that children do not take these lessons as admonition of a family that does not, at least outwardly, appear to manage finances with the same skill and dedication. A judgmental attitude or a feeling of financial superiority are potential effects of an intense focus on effective money management. While financial lessons are important, I prioritize teaching children not to be judgmental, particularly based on appearances.

Is requiring involvement and shared responsibility a good way to teach financial lessons to children?

Photo: stevendepolo

Published or updated September 5, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 13 comments… read them below or add one }

avatar Briana @ Prairie EcoThrifter

I think you should involve kids when it comes to things that affect them. Maybe like when you go grocery shopping, and they want something, have them use their portion. If they have extra-curricular activities, maybe have them contribute. I think there’s way too many bills for kids to get involved in, and kids should be kids for as long as they can. Maybe at the age of 16, you can really include them more.

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avatar qixx ♦1,819 (Half-Dollar)

I started college (and somehow got my first credit card) at age 16. By then it might be too late. I think though i am in similar though saying when they start high school they are (should be) mature enough to be included in all the finances. We do review our budget as a family even though our son is only 2 and likely does not understand. We plan to keep doing it and might add more details as he grows.

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avatar SteveDH

We used to involve our kids in saving for (and planning) summer vacations. That way they understood the cost associated with the “Good Times”. Although we didn’t involve them in the day-to-day transactions of running the household we didn’t hide our finances and talked about them freely in front of them. Seemed to work OK as neither of them has had any adult financial problems and still often times ask us about their own savings and budget issues.

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avatar krantcents

Exposing children to what you do financially may be called a teachable moment. More importantly, children learn by observing how you handle things much more. Good financial responsible behavior is more important than what you show your children.

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avatar SB @ One Cent At A Time

As a kid I was taught on money and the importance of saving money. I am reaping benefits till date. I was never in debt and hopefully will not be ever. I want to pass on the lessons to my would be kids as well. Money can be taught in a fun way to children, like asking them to have a lemonade stall at your garage sell. I understand that at time telling them too much would make kids believe that they are in poor family. Which might lead to overspending the moment they are on their own. We have to be smart parents in dealing with money lessons for our kids.

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avatar DonnaFreedman ♦2,496 (Dollar)

I read about one husband and wife whose kids were grousing about the things they couldn’t have. The way they saw it, Mom and Dad made plenty of money — they were just big ol’ cheapskates.
So Mom and Dad cashed their checks and brought it all home in greenbacks, which they tossed on the kitchen table. The kids’ eyes bugged out: Woo hoo, we’re rich!
Then Mom and Dad took a big chunk away: “This is for the mortgage.”
And another: “This is for utilities.”
And another, and another, and another: food, orthodontist, etc.
By the time they were done “paying” for these things, there was a relatively small amount of money left on the table, so to speak.
The kids didn’t like what they saw as their personal privation. But at least they had a clearer idea of WHY they didn’t get whatever they wanted.

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avatar Luke Landes ♦127,380 (Platinum)

That sounds like a great approach for all the “visual learners” out there.

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avatar qixx ♦1,819 (Half-Dollar)

I know some people that might do well to do this with their spouses. Two in mind especially that even as adults and parents don’t seem to understand that money does not grow on trees and has limits. If only there were a way to suggest it to them without being preaching and getting them to think it was their idea.

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avatar wylerassociate ♦906 (Dime)

I think it’s a good idea to get kids involved especially taking them grocery shopping or looking for deals when looking to look a family vacation. Especially with the economy being awful if kids realize where the money their parents make goes it will help them understand what purchases are needs & wants.

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avatar Pam at MoneyTrail

There are ways of allowing children and teens to be involved in budgeting without stressing them over the entire family financial budget. For example, middle school kids can learn to budget their lunch money. If they spend the money before the month is over, they have to take a sack lunch from home. Teens can learn to use a clothing budget or an entertainment budget. Learning to keep track of their own money and make thoughtful decisions takes practice but is the basis of sound money management techniques.

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avatar shellye ♦107 (Cent)

The 10% thing sounds a little extreme to me. However, my own kids have had an allowance since their ‘tween’ years, and they have to manage those allowances for clothes, gas, movies, Chick-Fil-A runs, etc. They also see me using coupons and shopping around for the best deals, so hopefully that concept is sticking with them as they get older.

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avatar tigernicole86 ♦55 (Newbie)

My parents were not the best financial role models. They tried to hide things like 2 impending bankruptcies(they are now on their 3rd) and any financial details. I’ve had a job since I was 10. I delivered papers then babysat, then sold knives and on and on. Luckily, my older brother was there to buy groceries and help out. He showed by example his contribution to the family budget. While my parents dealt with all the financial issues, my older brother held a 30-hour a week job while in high school. He showed his budget sheet that he did every time he got a paycheck.

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avatar lynn ♦155 (Cent)

We were never afraid to talk about money and budgeting around the kids. With that said, our children are now grown. What I see is they are doing what they witnessed, not what they heard. Kind of actions speaking louder than words. All are good with money and 3 of them totally see where priorities lie, the 4th is 1/2 way there. He’s single!

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