The Mommy Homilies

I want my kids to be financially independent when they get of age.  I know I have to start somewhere simple if I want to teach them the baiscs of money management.   So, I surfed the web and came across this article from Inquirer.net which I’d like to share with you.

Question: As my three kids get ready to go back to school, I want to talk to them about managing their allowance and being more responsible with their spending. What some of my friends do is give their children a very small allowance and instead make them bring food to school, but as my eldest enters high school, isn’t it time to give her some financial independence? - Aida V.

Answer: One of the best things parents can do is to teach children the basic skills for financial stability. You cannot guarantee they will be wealthy one day, but you can guide your children so they will know how to navigate their way to financial security.

Financial lessons are not to be learned in school alone; home is the best place to learn such valuable lessons.

To start, give your children a reasonable allowance that can cover their needs plus some extra items.

Give younger children a small daily allowance that will be enough to buy a little snack or treat if they bring baon to school.

Give high school children more cash so they will learn how to budget their money. Even if your daughter in high school will be bringing food to school, give her a reasonable cash amount every day. She will thus be given the opportunity to decide what to do with it: choose to spend it in school that day or save it for an item she may want in the future. This is a good starting lesson for financial independence.

Whether your children are in grade school or high school, sit down with them and share financial lessons you have learned. Here are suggested points to discuss:

1. The importance of budgeting. Tell your kids that no matter how big or small their allowance is, they should budget it. They should allot some of it for spending, some for saving, and some for giving. A good ratio to follow is the 70-20-10 rule: Spend 70 percent on needs (like lunch or recess food), 20 percent on savings, and 10 percent for charity or tithes.

2. The importance of saving. Ants patiently save food during summer so they can have food during the rainy season. The same concept can be used in saving money. When they set aside money consistently, it will come in handy one day at a time they need it most.

3. The importance of investing. Open savings accounts for your children in their names. Tell them that when they deposit their money in the bank, the bank will reward them with interest income. Tell them, too, that when they have a bigger amount of money saved, they can invest it in a time deposit or other investment instrument for even bigger rewards (interest income).

4. The importance of record-keeping. Successful businesses remain successful because they keep track of their sales (money coming in) and expenses (money coming out). The same principle can be applied in our own lives. Give your children a little notebook where they can record their allowance and expenses. Train them to keep an eye on their spending so they will not go beyond their budget. This is a good habit to have for life.

5. The importance of being content. Just because their classmates have the latest mp3 player or pencil case or rubber shoes does not mean they have to have the same new item. Teach them to be content with what they have and to live within or even below their means. This will save them a lot of financial headaches later on in their adult lives.

6. The importance of being good stewards. Tell your children that they should take care of their things well. Encourage them not to be wasteful but to make every effort to make their possessions last long. For instance, if your daughter’s old backpack is still good for another year, then let her use it this school year. Remind your children to always look out for their things so they won’t lose them. A lot of pencils get lost every day in school. Tell your young child that if you have to buy a pencil four times a month because she lost them all, that’s already at least P20 — money that could have been used for her baon tomorrow.

7. The importance of giving. Not every family is as blessed in life as your family. There are people around them who need help. Encourage them to give out of their allowance, maybe to the church or to coin banks for charitable organizations. Their generosity may help save another child’s life or send someone to school. A generous heart will guard them against the perils of greed later on in life.

8. The importance of reward. We all deserve to enjoy the fruits of our labor, and so do the kids. By letting them buy what they want using their allowance (as long as it’s a good item and within budget), you are teaching them to enjoy life and not be a miser.

Tell your children that you’re there to help them be on the right track to financial security, so they can ask you questions anytime. Be your children’s financial advisor now while they’re young, and reap the reward of seeing them grow up to be financially responsible adults someday.