Identify Your Needs

How do I teach my children financial responsibility?

Although the mere thought of teaching money lessons to children may seem difficult – especially when their friends seem to have everything and advertisements pressure them into wanting, well . . . everything – the benefits of doing so are plentiful. First, by learning good habits now they will grow into adults who are responsible with their money. What’s more, they’re less likely to ask you every Friday night if you can spare five bucks.

If you are concerned with the way your children handle money – both theirs and yours – now is the time to sit them down to discuss the importance of sound money management. Although one of the joys of parenthood is to treat your child to an occasional extravagance, correcting their monetary misfortunes now can reap tremendous financial benefits for them later as they grow into adulthood. The following steps will help you on your way.

Money 101

Discuss money with your children. To them, cash is something found in mom’s purse or dad’s wallet. Explain to them the concept of work and how money is earned. Once they appreciate its value, they may understand its worth.

Hands-on experience

Allow your kids to take an active role in managing their money. Let them open their own bank accounts¹ so they can make deposits and withdrawals, purchase their own items and keep track of their account balances. If children know they only have a set amount of money, they will be less inclined to foolishly spend it on candy or the latest Britney Spears album. And if they do spend on the wrong items, don’t give them any more money until they receive their next allowance. It’s important that they learn from their own mistakes and move on.

The money tree

Help your children set spending limits. You should give them enough money to learn important financial principles, but not so much that they believe their supply is infinite. Again, let them learn to make choices and establish priorities based on their own financial constraints, not your generous nature.

Determine what’s important

Your children need financial structure. Therefore, use our budgeting worksheet to help them establish a budget. Perhaps you can include them when preparing your own monthly budget. First, show them the starting balance and where the money goes each month, being sure to break it down into categories like utilities and groceries, and nonessentials like entertainment expenses. This exercise will help teach children that needs have precedence over wants and that savings is essential to their overall financial well-being. While these concepts may be obvious to adults, children usually aren’t aware of how certain needs are met – to them, the lights work and the water runs automatically.

For more information about teaching your children dollars and sense, please contact your Raymond James financial advisor today. If you’re not already a client, use our Office Locator to find our office(s) nearest you.

¹Raymond James & Associates, Inc. and Raymond James Financial Services, Inc. are affiliated with Raymond James Bank, a federally chartered savings bank. Unless otherwise specified, products purchased from or held at Raymond James & Associates or Raymond James Financial Services are not insured by the FDIC, are not deposits or other obligations of Raymond James Bank, are not guaranteed by Raymond James Bank and are subject to investment risks, including possible loss of principal invested.