How to Teach Your Kids Financial Independence

Teaching kids about money in today’s consumer-driven culture is a big challenge for parents.


You took an interesting approach with your sons and each of them went on salary starting in sixth grade. Can you explain that concept?

Well, our whole idea was we wanted to teach our children how to manage money. I believe that the only way to do that is to allow children to make independent financial decisions and then force them to have to live the consequences of them. Of course you train them and teach them how to make good decisions, and then you actually let them go out and try.

My husband and I weren't blessed with a lot of money, but we wanted to make this real for our kids and so we turned over to them portions of our household income to manage. And it was commensurate with their age and their ability to be able to do that. Instead of doling it out to them a dollar here, five dollars there, through the month, we determined ahead of time how much that would be and let it go through their hands rather than straight from our hands to the retailer.

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They learned how to manage money and we did allow them to make their own independent decisions. They had to give away 10 percent, and they also had to save 10 percent in a real bank, not a piggy bank. So, they learned about banking and those basic principles of finance. They turned out far more frugal than I would ever dreamt to teach them to be.

Given how challenging it is for young adults to pay for college and land a job after graduation, should parents feel obligated to pitch in? At what point should they expect kids to be financially self-sufficient?

That's a huge topic. We faced that with our own kids. People just don't appreciate what they're handed without any obligation at all, so I always suggest to parents, help your kids but you do a matching program. Don't let them sit back on their butts and do nothing while you go and mortgage your whole retirement trying to get them through school. Kids don't appreciate what comes for free.

Some parents are more able than others. I know people who aren't able to help their kids at all through school. I know kids who did it on their own, and so it can be done. I think making it a total gift in a big fat blank check is the biggest mistake ever. Very wealthy families need to be careful because kids need to realize that there really is no free lunch. Once children reach adulthood and have parents who help them, they should see that as a wonderful gift for which they are eternally grateful, something that they didn't deserve but they got anyway.

Raising financially competent kids is a wonderful thing, but I think it's very difficult for parents because we don't want to see our children suffer. It's hard not to want to smooth it out and buy them a new house and buy them a new car and everything. It's harder on the parents than on the kids.

Corrected on 08/02/2012: A previous version of this story misspelled Mary Hunt's name.