How to Raise a Financially Responsible Child

Two weeks ago I handed my son his first debit card for his own bank account. Since he’s 15 years old, I figured it was time for him to control his own money. For the past couple of years he’s received a minimal allowance, which he’s never complained about. Most kids would scoff at $20 a week, but not him. Every time I handed him a $20, you’d think he’d just received $100.

But what he didn’t know was that technically he was earning $40 a week for the errands he’s required to do. For the last several years the extra $20 he wasn’t getting was going directly into his account.

As I handed him the card, he looked at it and asked, “What am I going to do with this? I don’t have any money in the account.” I then handed him his bank statement, and his eyes almost popped out of his head. He took his card and slid it into his wallet, next to his library card and state ID. He said he was now “official.”

Official what? I have no idea. But I told him to slow his roll. In the words of Voltaire, “With great power comes great responsibility.” By “power,” I mean handling your own finances.

Raising a financially responsible child isn’t exactly the easiest thing to do. Some kids still believe that money grows on trees or think your name happens to be “ATM” or even “PayPal.” But if you want to ensure that your kid is on the right path, the earlier you start, the better.

According to Tonya Rapley, founder of MyFabFinance.com, strengthening a child’s relationship with money is one of the first steps parents should take.

“Show them … that money doesn’t grow on trees and that life costs money. Allow them to sit with you as you budget,” Rapley says. “I once had a friend whose 7-year-old found out how much his day camp was. He felt guilty for asking for so many things and began to check his requests once he realized that he was expensive. So I think a first step in teaching budgeting is being transparent about household finances with your child when the time is appropriate.”

When exactly is the appropriate time for opening a bank account for your child and discussing budgets? Although I just handed my son his bank card weeks ago, the account was opened when he was 11 years old. Rapley recommends opening an account when a child is between the ages of 10 and 12. But start younger children off with a simple piggy bank.

“Piggy banks are a good way to reinforce saving habits early, and it’s exciting for kids to watch their money add up. When you are ready to head to the bank, I recommend starting small with just a savings account and converting it over to a checking account a few years down the line when they are ready to make regular deposits and purchases,” Rapley suggests. “Banks offer several options … that link their account to yours so you can easily monitor it.”

I didn’t get my son involved in household budgeting until he started asking for more-expensive items. He seemed to go from asking for $10 action figures to requesting $60 video games in the blink of an eye. Most of the time, I looked at him like he was crazy when he asked me to put in money toward a video game. I typically ended up asking him what was the point of my giving him an allowance if I was paying half. That’s when he learned the power not only of budgeting and saving but also of buying items on sale, as well as getting rid of the notion that everything needed to be brand-new.

Just because you want something doesn’t mean you need it. I told my son there are times when I want an extra slice of cake but my thighs tell me otherwise.

When he started diligently saving his allowance for items he wanted, I made sure he realized that he should try to get more bang for his buck. To this day, he’ll wait a month after a game is released to buy it for $20 or more cheaper.

When it comes to clothes, he has no problem joining me at the thrift or consignment shops. And when it comes to the “things” he wants, I’ve made him think twice and a third time about making purchases. Just because you want something doesn’t mean you need it. I told him there are times when I want an extra slice of cake but my thighs tell me otherwise.

Rapley tells parents to question their kids when it comes to the material possessions they think they need. “Ask them why they want things occasionally—‘Because I want it’ isn’t a good answer. Allowing children and teenagers to fall into the habit of buying material possessions can have problematic consequences that appear throughout their life and may even come back to haunt you during your so-called golden years,” Rapley says.

You don’t want to raise an overactive consumer or one who’s constantly competing with the Joneses. With all of this said, the best way to raise financially responsible children is to show them a good example. If your financial situation is in shambles, you can’t expect your child to pick up good habits. Being a good financial role model could quite possibly end up being the greatest lesson you give your child.

Yesha Callahan is editor of The Grapevine and a staff writer at The Root. Follow her on Twitter.