The Trials, Tribulations and Rewards of Teaching My Kids Good Financial Habits

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When my wife and I had our first child, we, like most parents, wanted to make sure that we taught and reinvented good financial habits in our children through their childhood and into adulthood.

We read many different articles and came to the conclusion that it would be a good idea to start giving our son an allowance at age 5 – at an age that we thought would be appropriate for starting to learn about money. We decided to give him a weekly allowance of an amount that equaled his age. At that time we wanted to teach him two important lessons: the habit of saving some of his money and the joy of spending some (not all) of his money. So, each week $ 2.50 went into his piggy bank and $ 2.50 went into his wallet. Everything went fine and dandy until one week when my son was 6 and I did not have the money ready for him on payday. I said I was sorry and that I'd go to the ATM machine in the morning and when I got some change I would pay him the money. Well, this did not sit well with him and he became rather upset with me for being late with his money.

The next day I did pay him the money like I promised, however, this was the defining moment that made me realize that I was not actually teaching and reinforcing good financial habits; I was actually teaching my son entitlement and to expect something for nothing. Well, I continued to pay my son his weekly allowance, but I was secretly looking for another way to undo the mess that I created while researching on how to really teach him some good financial lessons. Also, by this time, my second child was already two, and we wanted to make sure that we did not repeat the same mistakes with her.

So, three years ago, when my son was 7, I started what I thought was to be an experiment that is still going strong today; I helped my son start his own business. By starting his own business, he was going to learn some real-world lessons, like getting paid for results and not to just expect money for nothing. And, I am happy to say that once my son started making money with his business we eventually phased out the allowance alike. Incidentally, since this experiment went so well for my son, we never even started an allowance for my daughter. When she was 4, I helped her start her own business. And she has now had her business for 2 years and it's still going strong.

With my kids having their own business and making their own money my wife and I have been encouraging our kids over the years (instead of just dividing their money between spending and saving) to divide all of their money into four meaningful categories: Giving, Investing , Spending and Saving. This way we would not be just teaching important financial lessons, but important life lessons as well.

So, last week, I am proud to report, that my 10 year old son made a major milestone in his life – he bought his first laptop computer with his very own money, the money he saved up in his "Saving" category. Now, this may not seem to be a big deal to many; however it is a huge deal to my wife and me, and especially to my son.
I've found that many lessons can be learned, both by adult and child, when you help a child start a business.

Leading up to my son's latest milestone, here are some of the highlights of the many lessons learned, achievements made, habits formed and proud-parenting-moments had over the past three years while my son has been in business:

• He has given a portion of his money generously to many charities including the church and some local families in need. I can tell you that it felt good to him to give to others and I am hopeful that he will continue the habit to keep on giving. I am proud of his compassion for others.
• He has invested a portion of his money into the stock market so as he gets older he will hopefully have one less worry in his life than his parents had when they were growing up. I can tell you that he thought it was neat to start investing at such a young age and I am hopeful that he continues with the habit to keep on investing. I am proud of him for planning ahead for his future.
• He has spent a portion of his money on various items that he wanted because he was responsible enough to budget his money wisely. I was happy to see him spending his own money on things that he enjoyed and making mistakes with his money while he is still young and while the amounts are still small. I can tell you that it felt good for him to have and spend his own money and I am hopeful that he continues the habit to keep on spending in a responsible manner. I am proud of his responsible spending habits.
• He has saved a portion of his money loyally to reach his goal of buying a laptop computer. And after three years of saving and putting off instant gratification, he has finally reached his goal !!!!! I am so proud that he had the patience to wait and save for three years to finally accomplish his goal !! And now that he has accomplished this I hope he realizes that he can accomplish anything, no matter how impossible it might seem at first. I can verify that it felt good to accomplish his big goal and I am hopeful that he fulfills this achievement enough to continue the habit and keep on making and reaching for bigger and bigger goals. I am so proud of all of his dreams, goals and achievements.

I am proud of both of my children for many reasons, but one of those reasons is for their entrepreneurial spirit and for sticking with it over the years. I can tell you that my kids must really feel good about having their own business considering it's been three years and they are still going strong. I hope they continue to keep their business going forward so they can continue the great habits and keep on Giving, Investing, Saving and Spending.

This has been a rewarding experience for both of my kids as well as for my wife and me so far. I do not have a crystal ball and can not see into the future, but I am confident that we have at least started my kids down the right financial path. Obviously, I realize that the same things will not work for everyone, but, the trick is to try different things. Chalk up the things that do not work as learning experiences and praise, make a big deal and reinforce the things that do work. I hope you take the time to try this with someone that you care about and feel free to make changes and corrections along the way. Because they are worth it and I'm sure they will make you proud that you did.

Signed, Proud Parent