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Teaching Children about Finances and Self Reliance

by | 52 tax Tips and Weekly Financial Blog for 2023



Doesn’t the early bird catch the worm? So, starting early, as early as Kindergarten helps in shaping good financial habits overall. When they start finding pennies, nickels and dimes in school, it’s a good time to help them learn their penny’s worth. This week we will discuss how to teach our children good financial habits. Only a few schools instruct children a little about money or finance in their lessons, although if you want your children to pick up good financial habits, you should give them some specific training yourself.


Here are some considerations:

Set a good example. Children follow their parents’ lead and will emulate what they see, so keep your own financial affairs in order.

Don’t give an allowance. Make children earn money to spend. Allowances encourage expectations of getting something for nothing. Paying for performance says no work or no chores completed means no money given or earned. This way the child can only blame him or herself for not being paid. (Work means money, extra pay is ok for extra work.)

Encourage savings. Children need to learn early that waiting for something pays. The longer they wait, the more money they will have. Teach them the secret of compounding. (Piggy banks are ok – for young children try clear ones so they can watch their money grow, and try savings accounts for older children)

Teach money management.
Show how to compare interest rates and teach them money doesn’t take care of itself.

Explain why some money should be saved, some spent, and some given away to charity.
Teaching children how to save, spend, and donate teaches children to become better citizens,
better taxpayers, and better contributors to society (1/3 saved, 1/3 spent, 1/3 donated is one

Go to www.kids.gov to learn ways to teach money to kids, teens and adults.
This website shows you how to teach money uses and management to children (grades K-5),
Teens (grade 6 -8), and grown-ups including teachers and parents. Uses games and videos to
both educate and entertain.

Teaching Self Reliance and Financial Confidence
Helping your children financially by teaching self-reliance is one of the greatest gifts you can
offer your children. Through teaching and setting a good example, you can help your children
become financially responsible and independent adults. However, there is a fine line between
helping your kids get started and enabling them to stay dependent. If your children live at home,
expect them to contribute to the household. Even full-time students can share household chores
and hold down part time jobs to help pay for room and board. If practical, hire your children
through your business and expect them to earn those wages.

Before helping your child buy a car, decide whether the purchase is necessary. Are work and/or
school within walking distance, is public transportation available, is using a bicycle possible? If
none of these alternatives are practical, enlist your child’s aide in finding and buying an
affordable, but reliable car. The child should pay at least part of the purchase price and handle
insurance and operating costs. Or consider replacing your own vehicle and selling your old car to
your child at its trade-in value.

Helping your children be self-reliant is a better choice than buying something for them.
Never give an allowance, instead require certain chores to be performed and pay them to
complete the task. That way, children learn that nothing is free. They also learn if they do not
work, they do not get paid.

Before buying a car for your child, consider replacing your own vehicle.
Sell your used vehicle to your child at trade-in value. You can find the trade-in value online
with Kelly Blue Book (https://www.kbb.com). This helps the child learn nothing is free.
Another technique is to match what the child saves to buy a car. Again, this teaches the child
to work, get paid, and save for the future. Giving a car to a child is not helping them; it’s
teaching them that someone other than themselves will provide for them.

Decide whether the purchase is necessary.
School/work nearby, public transportation. Children will always want more, no matter how
much they have. Teaching them the difference between wants and needs is one of the best
lessons parents can pass on to children. You know what a need is rather than a want; teach
this to your children.

Make sure the child is paying part of the purchase price and all operating expenses.
Before they get the car or other want, make sure they can afford to keep up the item on a regular
basis (gas, oil, tags, insurance, repairs), otherwise, you will find yourself paying for the expenses
of your kids, rather than teaching them to pay for themselves.

Call today, don’t delay! See how this affects you. We can be reached at 602-264-9331 and on all social media under azmoneyguy.

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Mr. Hockensmith has been a guest newscaster for national and local TV stations in Phoenix since 1995, broadcasting financial and tax topics to the general pubic. He has written tax and accounting articles for both national and local newspapers and professional journals. He has been a public speaker nationally and locally on tax, accounting, financial planning and economics since 1992. He was a Disaster Reservist at the Federal Emergency Management Agency, for many years after his military service. He served as a Colonel with the US Army, retiring from military service after 36 years in 2008. Early in his accounting career, he was a Accountant and Consultant with Arthur Andersen CPA’s and Ernst & Young CPA’s.

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