How can we help our kids become more responsible with their money? Can you suggest a workable budget plan that we can use to teach them the true value of a dollar?
It's fairly simple to teach your kids good stewardship principles by using what we call the "10-10-10-70" plan. Whether you give your children an allowance or pay them for doing specific chores, show them how to divide up their earnings according to the following system.
- First, they should set aside 10 percent of their money for a tithe. Explain that the Bible tells us that everything we have really belongs to God. Because of this, and because we love Him, we give God the "first fruits" of our earnings. In Old Testament times that meant that a farmer would give the biggest, most delicious fruit from his orchard as an offering in the Temple. In our day, it means that we dedicate the first tenth of our financial resources to the needs of the church and the work of the Lord.
- Next, your kids should be encouraged to set aside a second 10 percent of their money for savings and investment. Take them to a neighborhood bank and open a savings account. Then pick up a kid-friendly book on saving and investing – one that explains in simple language how interest compounds over time. When they're a bit older, you might want to help them open a brokerage account with an online brokerage like Fidelity or E-Trade. This will give them new insight into the various options for investment and the importance of building a diversified portfolio.
- The third "10" in the "10-10-10-70" plan should be dedicated to giving. From a biblical perspective, "giving" is different from "tithing." In "giving" we go beyond our initial tithe by distributing another portion of our financial resources to those who are in need. God clearly tells us that Christians have a responsibility to help the poor, and we should begin instilling this principle in our children's minds from a very early age.
There's no shortage of excellent charities, relief organizations, and Christian ministries to which your kids can direct this third tenth of their income. You might want to contact World Vision and Compassion International for information about sponsoring a needy child in a developing country. This could easily be turned into a family project. Your children may also want to reserve some of their "giving" money for the needs of their own community. Possibilities could include a local rescue mission or a family at church who are experiencing financial difficulties.
- The remaining 70 percent of their money can be used at their own discretion. Naturally, you will want to teach them to spend wisely by purchasing items that have lasting value rather than cheap toys that will end up in the trash after a few weeks. You should also help them learn the critical concept of "delayed gratification." In other words, explain that by resisting the temptation to spend their money quickly on candy or cheap toys, they can eventually save up enough to buy something they really want, like a quality baseball glove or a new bicycle.
For further advice in the area of teaching financial responsibility to children, we suggest you check out a great book titled Your Kids Can Master Their Money, by Ron and Judy Blue and Jeremy White. For more information, give us a call at 1-800-A-FAMILY or visit our Online Store.
The Envelope Method Teaches Kids About Money: Ron and Judy Blue offer practical ways teach your children how to manage money.
Money Matters for Kids
Teaching Your Teen Money Management