This is part four of an ongoing series we’ve launched on the Insider blog on “Kids and Money.” As you prepare to send your child off to college, you should also be thinking about how to foster in them the skills necessary to build financial independence. In this series, we’re discussing how students can earn, spend, save, borrow, and protect their money in a way that aligns with personal and family values. Type “Kids and Money” into our Search Box to find all installments of the series.
Ever feel like you are becoming a mobile cash machine for your children? Until now in our Kids and Money series, I’ve been talking about helping your kids dream and set SMAAHT financial goals; well, now it’s your turn to dream of what life could look like by helping your kids manage their own money (and leave yours alone!). It’s time to help them put their dreams into action and create a spending plan. And the simplest way to do this is to establish a system following these four rules:
- Keep it simple. Start by working with the money your child has now. Where is it going to go: bills, baubles, savings, or gifts? When it’s time to decide where the next money coming in is going to go, first look back to see if the money actually went where it was supposed to. If not, talk about why and what needs to be adjusted this time.
- Use a system that works. Apps and money programs are great conveniences, but can overwhelm those just beginning to create a spending plan. Don’t struggle to make your family’s finances fit into a particular model just because you think it should; many families get frustrated and abandon this exercise because the system is not meeting their needs. Instead, keep it simple—whether it be a straightforward spreadsheet or a series of envelopes for different goals—and you will develop the system that works best for your family organically.
- Keep sight of what’s important. As your children begin to make decisions as to where the money is going, remind them of their dreams and goals. If there is not enough money to make everything happen now, help them prioritize and develop a plan for the future. It’s not too early to think about next summer’s job options!
- Commit time to make decisions. Becoming financially well requires active attention. Schedule time with your children to review their plan on a regular basis—coordinate with paychecks or allowances—and before any big financial decisions are made.
No matter what age they are now, your children can learn to master the cycle of living financially well where work creates income to spend, spending behaviors are guided by values, and goals help prioritize values. With your guidance, support, and encouragement, your children will be ready for financial independence and the freedom it will bring to all of you!