How to Make Your Kids Financially Independent

Posted by | | financial planning · personal finance

Talking to your kids about money is a somewhat controversial topic. Far too often, parents themselves are having money problems so it seems a little hypocritical to then turn around and try to teach the subject. Others just view the topic as completely taboo. Regardless of where you stand on the topic, almost all of us can agree that we want our kids to be financially independent one day – and the earlier, the better. So here are three ways to help them get there:

# 1 Teach Tradeoffs

How many times has your child asked for something, you tell them “no”, and they eagerly accept the challenge by harassing you for hours until you finally concede? As you already know, this is one of those things that needs to be dealt as early as possible to properly set expectations and avoid years of “please, please, please!”


So what do you do? – The Tradeoff


For example, “Okay, we can go to the arcade today, but that means we won’t have enough money to go buy that amazing toy you asked for the other day.” If you’re feeling uncomfortable by telling your kid you can’t afford something (whether that is a matter of pride or your afraid others will perceive you as being cheap or poor) then that’s an internal red flag that you have to deal with yourself. Anyways, once the tradeoff is presented, your child has a financial decision to make and so the learning begins.

# 2 Instill a Work Ethic

If little Jimmy wants you to buy him a candy bar, then he’s going to have to clean his room. Simple as that. Now, some parents might be thinking – “He should be doing that anyway, I don’t want to have to reward my kid for every little thing he does.” Fair enough, you can limit the reward system however you want. The point is that you may want to put some type of system in place so your child learns the value of hard work and the rewards that come with it.


Most commonly, parents employ an allowance system based on a variety of chores. For older children who don’t want a candy paycheck, you may want to employ a nominal cash allowance with the option to match payments for the bigger items or long-term savings goals. For example. If your 16-year-old wants a car, but simply doesn’t have time to go to school, play a sport, do their homework, and then work 20 hours a week, then you may offer to contribute 2 or 3 dollars for every 1 dollar that he or she puts towards the purchase. So the next time they get a bunch of money from their birthday or another special event, they now have a relatively important financial decision to make – bringing us back to the tradeoff principle that you taught them in their early years.

# 3 Lead by Example

While the first two methods are helpful, nothing is as important as how you handle your own finances. Whether you realize it or not, most kids are constantly watching and learning from their parents’ habits – good and bad.


One great example of this was referenced in a Money article, where the mother was shopping with her daughter and the mother found a pair of earrings she really liked. Rather than buying the earrings on the spot, the mother told her daughter she would wait 24 hours and if she still wanted them then she would buy the earrings at that later point in time. While the mother may not have realized the impact of her daughter seeing this thought process in action, the daughter then began to invoke the 24-hour rule in her own big purchases as she got older.


Another common thing kids pick up on is debt management. If your kid constantly sees you pulling out a piece of plastic every time you purchase something then you may want to make a point that you pay off your credit card every month and never let interest accrue on the balance. In other words, as long as you can show your kids how to live within their means then they are much more likely to do the same as they get older.


For those of you feeling ambitious, you may also want to teach your kids about setting savings goals and managing their investments. If you don’t know where to start you may want to check out our Free Investing Basics Guide – designed to teach you the basics of investing in less than 30 minutes!


If you have any other questions about investing, retirement planning, or wealth management, contact Perennial Trust at 781 202 6368, email or visit our website at

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