How to Teach Children Financial Responsibility

Knowing how to teach a child financial responsibility means demonstrating healthy financial behavior and combining that behavior with lessons that allow your child to practice financial responsibility. Below are some tips to use as you try to teach your child financial responsibility.

Give your child an allowance. Children who actually have to earn their money are far more likely to pay attention to how money is spent and to appreciate the things they spend it on. An allowance also gives your child a sense of responsibility and motivation.

Play money games with your child. Most kids love to play Monopoly and it's a great game for children to learn about managing money, though it doesn't teach them much about actually working for their money. Try playing games with your child like pretend grocery shopping, pretend restaurant and other games. Use chips for money and have your child act out going to work before they go "shopping".

Plan a budget. If a child has an allowance, they can learn how to start saving money an also learn the importance of being choosy about where they spend their money. Help them to budget their money by creating a financial plan for them to use to manage their allowance.

Give your children "bills" to pay. Most of us really go to work not just to pay bills, but to pay for entertainment as well. Whether your child has an allowance or just has chores, make those chores have some kind of monetary value that includes responsibilities and fun things. For instance, if your child has a pet and you want to teach them financial responsibility by having them buy the supplies for the pet. You might do this by raising their allowance to include the cost of the pet food so that they are paying for but really aren't sacrificing their allowance or you might have them actually pay for it out of their allowance. If they don't earn an allowance, you might have them do extra chores and give them points for each of the chores. Take off points for responsibilities and entertainment items, such as video game time.

Set financial goals. If you want your child to start saving money, then they need a goal to be saving money for. This gives them something to look forward to as well as giving them a way to learn about setting goals and accomplishing them.

Do weekly reviews. Sit down with your children and have them review their finances on a scheduled basis, such as once a week or once a month. Make sure they can account for all savings and expenditures.

Help children document their spending. If children save the receipts when they spend their money, then going over those receipts during the financial review, they can come to an understanding of how they can improve their spending habits. For instance, my child sometimes wants to buy cheap toys. If I let him spend $10 on cheap toys and they all break by the time we do the financial review, then he will begin to understand that his money was not well spent.

Teach your child about investing. Maybe you want your child to start a collection or invest money in their own business. For example, my nephew makes beaded bracelets and sells them. If he has to invest his money in this business, then he will be better equip to set reasonable prices and make good choices when it comes to materials. Another option is to help your child invest in something like a coin collection that may grow in value as time goes on. Help your child invest money in their collection, then keep track of the going rate so they can see the value of their investment.

It's not easy to teach children about financial responsibility, but it is necessary. Get creative and make these financial lessons fun for your child. Set measurable goals and help them to find ways to meet those goals.