Teaching kids financial responsibility

As a young adult, I learned most of my financial smarts the hard way — by making mistakes. And lots of them.

In my teen years my parents taught me to be responsible by having a good work ethic and always keeping my word, but they neglected to guide me on what to do with that paycheck once I cashed it.

It took awhile, but I recovered from my financial recklessness (mostly diving into debt with those first ‘easy’ department store credit cards at 24 percent interest) and vowed I would never do that again … and I didn’t. I eventually became a parent myself, and when my daughters entered the working world I made sure they had somewhat of an idea on how to handle their personal finances and what pitfalls to avoid.

Some parents might not know when their child is ready to grasp the concept of money management, but the sooner the better, said Joshua Davis, dean of students and personal finance instructor at Ridgeview High School in Redmond.

“High school is a good age and I get all levels here at Ridgeview. It is never too early to start learning about the importance of money and how money can work for you,” he said.

Davis said his goals are to teach students to pay themselves first by putting money in savings and taking care of their futures by learning about the benefits and dangers of credit.

A huge boost to these goals is for students to talk to their parents about finances.

“It is amazing how much we learn and take from our parents when it comes to financial habits,” he said.

Drawing on my own hard-learned lessons, I started talking to my kids about money issues when they were in elementary school.

By the time she was nine, I saw that my oldest daughter was, to put it nicely, a tightwad. After cleaning her messy room one too many times, I told her sternly, “Katie, everytime I clean your room you have to pay me $5!”

She kept her room spotless from then on. That ploy worked so well that I tried it on my second daughter when she was about the same age. “Emily, everytime I clean your room you have to pay me $5!” She jumped up, ran into her room and came back with a $5 bill in her hand. “That’s a great deal!” she said and went back to her video games.

Same good intention, different result. So keep in mind what works for one child may not work for another, but don’t give up and keep the basic message consistent — working equals money and spend your earned money wisely.

One of the earliest lessons a child can learn about money is how to get it. And unless they’re tearing up dollar bills and coloring rainbows on them (like my 2 year-old granddaughter), it’s OK to give them small jobs to earn money of their very own.

Since April, Brenda Powers, of Redmond, has been helping her two grandkids, Hadyn, 6, and Heath, 4, collect bottles and cans to earn spending money for an upcoming trip to Disneyland.

The subject came up during a camping trip and Powers realized it would be a great opportunity to teach her grandchildren a solid life lesson about earning money. She walked her grandkids over to the campground dumpster and pointed out all the discarded bottles and cans.

“See all these bottles and cans people are just throwing away?” she asked the children. “Every one of those is worth five cents. You can start collecting these for spending money in Disneyland.” The threesome made their first trip to the bottle drop center in June and cashed in $90.

But “Grandma” Powers doesn’t do all the work. The lessons here after all, include a work ethic.

At barely 41 inches tall, Heath drags the bags of cans to the edge of the truck bed to unload while his sister Hadyn manages the sorting and machine deposits inside. As of late November, Powers and her grandchildren have collected more than $500.

“They’ve worked so hard and we’re not done. By the time they go to Disneyland in 2018, that will be two years of working and saving,” said Powers.

For my own children, once the basic concept of how to “earn money” was laid out, the next topic was the power of using credit wisely.

In a consumer-driven world with urgent messages like “Hurry! Sale Ends Tomorrow!” and “Last Chance!” that first credit card can be a dangerous temptation for anyone — especially young adults. Do they understand what interest rate means? Do they know what happens if they can’t make the payments on that new laptop? Do they realize if all their paychecks are going toward loan payments they won’t have anything left to save?

“From work ethic to financial decisions, students understand less today than maybe they did before. I only say that because parents want to do everything for students and not let them learn on their own,” said Davis. “Students today are more advanced in technology and social media, but I am not sure they know how to go and set up a budget.”

When my oldest daughter (the tightwad) graduated from high school, my gift to her was co-signing for a Mastercard. Of course this may not be a great idea for every teenager, but she had already shown responsibility and had a good head on her shoulders.

Years of brainwashing from me and loud eye-rolling by her during her teenage years paid off. She, together with her fiance (now husband), bought her first house at age 19 with no outside financial help. Daughter number two is gearing up to buy her first house, and has kept current on her car loan and just paid off her small credit card balance.

Whether you have a teenager who just started their first real “job” or a seven-year-old begging for the latest video game system, it’s never too early or too late to start teaching your kids about financial responsibility.

Give your kids an allowance in return for doing chores. Resist the temptation to give kids extra money or advances on their allowance; it can confuse them about the concept of budgeting.

Encourage your kids to establish a specific money goal. Are they wishing for a new tablet? Fancy shoes? As their piggy bank gets bigger, so will their excitement.

Match your child’s savings dollar for dollar. From a teenager saving for a car or a third grader wanting a hoverboard, kids might be more inspired to save if they know their money will be doubled. No grumbling … this is an investment in your child’s financial future!

Let them make mistakes. Everyone makes mistakes, especially when it comes to money. My mistakes turned into determination to never repeat them and it paid off. Letting kids make financial mistakes now may help them avoid bigger and more costly mistakes down the road.

Teach impulse control. This is a biggie, especially in a “gotta have the latest NOW” era. My rule that I tell my kids is to go home and give it 24 hours. Whatever it is you’re wanting will be there tomorrow.

With my two daughters now officially flying on their own, I am starting to teach money lessons to my 8-year-old son.

He is reluctantly willing to scour the yard for pine cones at $5 a bucket, but as soon as that frog skin hits his chubby fingers, he hands it right back to me wanting to buy a new app on the tablet. Here we go again …

This story originally appeared in the winter 2016 edition of U Magazine. For the complete edition click here.