How can you teach your chilren about money? Very few parents teach their children about money. This might be because never in their lives have they ever experienced, or even seen true prosperity. In my experience as a Cleveland bankruptcy attorney I have represented three generations in the same family. The cases were within weeks of one another.
- Grandma comes in for a chapter 7 as a new widow with a lower income.
- She refers her daughter who is living with her and can barely make ends meet.
- Mom sends in her son who is severely under employed and had a vehicle repoed that mom co-signed for.
- Did I mention this who process started with a second grandchild who referred grandma?
The whole picture is true. It is great for business, but still sad. Three whole generations of the same family who can’t handle money. Heck, forget money, they cannot handle debt.
I work in a heavily blue collar area that for decades was believed to be recession proof. In my time as a bankruptcy attorney in Lorain County, Ohio I have witnessed tens of thousands of lost jobs and the closing of:
- Fisher Guide plant in Elyria
- United States Steel’s Lorain Works
- Ford Plant in Lorain
- Nissan mini van line in Avon, Ohio
- Republic Steel in Cleveland
- BP Oil. They are still open, but moved to Chicago.
The unfortunate truth is that bankruptcy business was great even when these places were cranking out product. This is because no one ever took time to teach their children about money and debt.
The place to begin is to teach your children about the power of money is at home. I first saw this concept in action at my Church in a workshop taught by John S. Moore. The answer to this question is so simple no one else thought about it. Give you child a weekly allowance. Simple yes. There are ground rules.
- First this money is not yours. Nothing is worse than seeing a parent who takes from their child’s savings due to their own lack of responsibility.
- Pay it weekly. It can be as little as $1.00 if the child is very young.
- Pay it in coins. The more the better. For a child quantity equals wealth.
- Give them a simple chore to earn the money.
- Each birthday give them a raise, and a little more to do to earn the allowance.
No purchase can be more than one half of the total the child has. One quarter is to be saved for some larger purchase they might desire. One quarter goes to long term savings. The savings can go to a sealed container. When the savings is enough, open a no-load mutual fund.
When there is enough money for even a minimal purchase it is important for the child to buy something. Why? Because by the time they are teenagers you have taught them to spend less than they earn, to save for what they want, and to invest for the long term. Don’t you wish one of your parents knew how to teach you about money?
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