How to Raise Children to be Financially Independent

Teaching children to not only live, but thrive within their financial means is a golden key to a world of otherwise locked doors. We only get so many chances to learn a lesson the hard way — on our own or through the “school of hard knocks” before we experience financial ruin. Many young adults are finding that out far earlier than previous generations. Bankruptcies are no longer the domain of people who took a risk on a failed business venture. They are increasingly young adults with too many credit cards, too little income and no savings. So how do we break the cycle and raise children to be financially independent? Here are some steps to get started:

1. Get your own financial house in order. How you manage your finances will serve as a template for how your children will manage theirs. Face it, children are experts at mimicking their elders, whether you want to believe it or not. If you instruct your children not to swear yet swear yourself, chances are you’re going to be disappointed when your son is sitting in detention for his colorful language. Finances are no different. If you struggle to live within your means your children are likely to struggle as well.

2. Learn to say “no.” Start training the moment children begin crying and begging in the toy store. Pounce on the opportunity to teach them the difference between needs and wants. Explain that you make a budget for needs and save for wants. This leads into step three.

3. Teach the value of a dollar. Start an age appropriate allowance. If your daughter wants a toy, but doesn’t want to wait for her birthday to get it, find creative ways to have her earn extra money beyond her allowance. Having her complete age appropriate chores will teach her that work equals reward.

4. Never allow your children to spend all they have. Stress the importance of saving. Sometimes having two piggybanks serves as an effective visual for children. Having one jar for long term savings that is seldom touched and another for short term savings that is used for the things they want will teach not to sacrifice long term savings for short term gratification.

5. Avoid using credit cards in front of children. Teaching them to live on a cash only basis is a healthy lesson that could lead to financial independence. Don’t send the message, “Swipe the card when you don’t have cash.” Your children will thank you one day when they are living debt free.

6. Teach children the key to financial prosperity is education. High paying jobs go to people with college degrees. Help them prepare for college by starting a college fund when they are young. Teach them good study habits at home. Utilize test prep sites to practice for the SAT and ACT.

Instructing our children to be financially independent is paramount if we want them to become successful adults. Teaching them simple lessons early will shape their understanding of money and its value and provide firm foundations on which to add more complex concepts as they get older. Learning how to manage finances properly and thrive within one’s means has lifelong value and begins as soon as a child can perceive that they want what they do not have.

What are your tips to raising financially independent children?