Money Smart Kids don’t just happen they take some effort. Teaching your kids to manage their own money is one of the greatest gifts you could ever give them. We’ve created and fine-tuned The Money Smart Kids System to be workable and flexible for you to use with your kids. It’s something that’s worked in our family for more than 19 years and it can work for you too! Watch the video or read the book – you’ll be amazed at how motivated and financially independent your kids can become.
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The MoneySmart Family System
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Parenting Insights from Authors Steve & Annette Economides
on how to raise Money Smart Kids
Why mess with the topic of Money Smart Kids?
We understand that raising money smart kids can feel overwhelming for several reasons. One, many parents don’t feel like they are managing their own money in a great way, so how can they possibly be teaching their kids about it. Two, when you talk about kids and money, it overlaps so many parenting habits that many folks don’t like their parenting messed with. It’s so hard to change the patterns that we ourselves grew up with. And three, the whole smart money smart kids topic messes with my parental idea of loving my kids. Isn’t it loving our kids to give them the things we didn’t have growing up, or to give them the things their friends have, so they won’t feel left out or ostracized by their friends? We answer all these questions in our third book, The MoneySmart Family System: Teaching Financial Independence to Children of Every Age.
What is the 5/50/500 Rule and why is it important?
The 5/50/500 money rule describes the escalating cost of a lesson that goes unlearned. Every age and stage of a child’s growth comes with expectations. If parents don’t learn how to train their children to stand financially independent at the $5 stage of life, they will be destined to fund an unending stream of $5 child demanded items until the price escalates to $50, then $500, and then $5000. The MoneySmart Family System teaches parents how to stop the consequences of the 5/50/500 rule.
What is The MoneySmart Family System?
The MoneySmart Family System is an award winning book describing how we used our MoneySmart Kids Financial Training System to train our five kids to be financially responsible and independent. We start at a young age, teaching them to earn, save, and spend their own money. At age 11 they start buying their own clothes. They buy Christmas gifts for others, pay for their own auto insurance, pay cash for their own cars, and fund much of their own college educations. Initially, they earn money from us and are responsible for managing it so that they can buy the things they need and want. Eventually, they get a part-time job and learn to manage even greater amounts of money. Because of The MoneySmart Family System, when they leave home, they have a practical working knowledge of personal finances and can survive in the real world, debt-free, and without bailouts from us. Smart Money Smart Kids are easier to raise than you think!
Why do you think chores are an important part of childhood?
Chores are the gateway to a productive adulthood. Starting at three years old, children can help with tasks around the house and those tasks can be used to teach them real world working principles of diligence, timeliness, thoroughness and following instructions. Chores prepare a youngster to live independently and to grow to be smart money smart kids.
How do you teach your children to be grateful and generous?
Gratefulness comes as a result of having a desire fulfilled after waiting for it—basically delayed gratification satisfied. When children are indulged with lots of material possessions and never feel a need for anything, or never have the chance to earn their own possession, they are cheated out of learning gratitude and basically become “spoiled brats.” We allowed our kids to wait for good things and helped them express their gratitude through writing thank you notes.
Why allowances don’t work for money smart kids.
Allowances don’t work for the same reason that government entitlement programs don’t work. Paying someone for doing nothing produces . . . nothing. Many parents spend gobs of money on their kids or repeatedly give them a cash allowance to spend. This is not what we would consider “money smart.” It’s so much better and more rewarding to our kids to allow them to earn the money from you and then learn to manage it — that is smart money smart kids. They’ll develop a sense of pride and self-sufficiency, instead of a sense of entitlement and selfishness.
At what age do your kids start buying their own clothes and why?
In The MoneySmart Family System, initially, our kids are responsible for dividing up any money they earn into three categories: Giving, Saving, and Spending. Between the ages of 9 and 11, we give them a raise and the additional responsibility of purchasing all of their own clothing. It’s a real world responsibility and they love shouldering it and wearing it.
How much does it cost to raise Money Smart Kids?
The USDA calculates that it will cost the average parent $261,000 to raise a child from infancy to the age of 17. We calculated that it cost us 77 percent less than the USDA experts predicted. We spent $1 million less raising our 5 Money Smart kids than the USDA predicted.
What miscellaneous expenses should children be responsible for?
As kids grow, their “wanters” are programmed to crave the latest and greatest of everything—things like trendy toys, extreme recreational activities, the latest techno-devices, costly cosmetics, and sporty sunglasses. When our kids use their own money to make discretionary purchases they have a deeper sense of appreciation and take much better care of the item.
Why do you think that every teen ought to work a part time job?
Every adult has to juggle numerous roles; employee, boss, parent, spouse, child, etc. Allowing our teens to think that living at home while going to school is their only job is totally unrealistic. Learning to balance the priorities of work, school, extracurricular activities, and relationships are all things a maturing young adult must be taught to manage. Allowing our kids to start this learning process while they’re still at home is much more beneficial than simply pushing them out of the nest and expecting them to fly.
Why shouldn’t you buy your child a car?
Parents shouldn’t buy their kids cars because it robs them of the opportunity to set, save, and reach a monumental goal on their own. Financial independence is a muscle that needs to be strengthened one dollar and one goal at a time. For our kids, as they matured and grew more capable in their money handling skills, buying a car was a natural outgrowth.
But, if you are determined to give your child a car, read how this dad of 12 kids did it. Every one of his kids received a car, but it was given in a very unusual and money-smart way!
Can kids earn a college education without debt?
Scholarships are plentiful and aren’t only for academic excellence. In the largest chapter of our MoneySmart Family System book, we share how we helped our kids build great high school resumes that enabled them to win lots of scholarship money and opened many university doors.
How should you respond to your adult children when they need help with a financial problem?
When adult children experience financial problems, parents must respond with practical ways to help them grow financially. A cash bailout is like applying a band-aid to a broken leg—it simply doesn’t solve the problem. Families should be a safety net for their grown kids, but not a crutch. We have an entire chapter in our third book devoted to this topic.