Generation Next

Dollars and Sense When Parents Teach Children Financial Responsibility, It’s Time, and Ultimately Money, Well Spent

By Lori Hutzler Eckert

Grant and Chad Gutierrez have built quite a nest egg through their savings and retirement funds. The brothers, both part-time Sandestin residents, have been managing their savings, investing in stocks and participating in a match program for several years. And while this effort may not be that remarkable in the day and age of corporate 401 (k)s, savings tax incentives and a growing variety of stock-investment options, it is worth noting in this case, as Grant is 12 years old and Chad is 9.

The boys’ parents, Brent and Roianne Gutierrez, have put a premium on teaching their children financial responsibility. They instituted a 401 (k)-like match program for Grant and Chad – not only for the financial benefits, but to help teach the boys some important life skills.

“For children to learn to be leaders in their lives, they have to be able to manage their money,” said Roianne Gutierrez. “They need to have goals and understand expenses.”

A parent’s main focus, of course, is preparing children to become responsible adults. However, between the life lessons on moral values and responsibilities, financial management in the home seems to have lagged. And in our current culture of indulgence, particularly with the teen-and-under set, the imbalance can set a child up for failure.

“It’s just like teaching children good eating habits and manners; money management is simply something they need to know about to become productive adults,” Gutierrez said.

According to America’s Money Skills Report Card, produced in 2003 by Americans for Consumer Education and Competition, financial literacy among children continues to drop. The nationwide survey revealed an 82-percent failure rate among high seniors tested on matters of personal finance.

The watchdog and advocacy group also cites an alarming trend: Young adults represent the fastest growing and largest age demographic in the category of bankruptcies.

And while these facts are worrisome, helping your child develop a healthy attitude about finances that will carry over into adulthood does not have to be. Have open discussions about money, encourage goals and allow for the occasional excessive spending on yet another baseball card, Barbie, movie or video game.

By giving your children the tools to understand the success and even, at times, the failures of managing their personal finances, you will be making a sound investment in their future.


In the BalanceTips for Teaching Kids Financial Responsibility:

• Set an age-appropriate allowance to encourage financial independence. The amount should be fairly consistent, and it can be based on payment for chores or a reward.

• Help your child create a simple monthly budget, including line items for savings and hobby expenses.

• Provide incentives for saving by creating a “bonus” for reaching goals, or offer a monthly interest or 401 (k)-like match program.

• If a child wants a game that cost more than the weekly budget permits, encourage him or her to handle extra chores for additional cash, institute your own layaway program, or create a savings effort specifically for that item.

• For teenagers, consider setting up a checking account with a debit card, which can serve as a good training ground for credit card use.

• Allow for consequences to be realized; if a child spends his entire allowance on Monday and  “payday” doesn’t come around again until the next Saturday, or if he or she  becomes overdrawn with the debit card, the child must manage the situation without a parental bailout.

• Encourage your tween or teen to learn about investing. Ask your stockbroker to participate in a meeting with you and your child and allow him or her to select a stock or two of interest – Disney or Sony, for example. Your child’s personal knowledge of the brand will encourage his or her interest.