Parenting Economics 101

In the book Financial Parenting: Showing Your Kids that Money Matters, authors Larry Burkett and Rick Osborne share seven rules for “Parenting Economics 101.” The following tips will help you develop a game plan for teaching your children about money management and work ethics that will help them in the real world.

Maintain a Community

Begin to think of your family as a community which shares its resources, opportunities, responsibilities and rewards. There are many viewpoints among parenting experts on how to design an allowance. Some think that allowance should be a standard gift, completely unrelated to what the child does. Others think it should be directly tied to the child’s willingness to finish assigned chores.

Burkett and Osborne take a slightly different approach: “The key is to give our children allowances and require them to do their household duties without tying the two together like a work-for-hire agreement.” They encourage parents to teach their children that everyone in a family contributes to the running of the house, and chores should be assigned out of a sense of community involvement within the family. Allowances are a benefit of living within the family, much like shelter, clothing and food. Part of the purpose for an allowance is to use it as a teaching tool for financial responsibility. It is not simply a reward for good behavior. However, as a last resort of discipline, the authors say allowances can be suspended if household duties are consistently neglected.

Establish Opportunities

Train your children about the value of work by providing opportunities around the house, and even outside the home. Separate from an allowance, provide your children opportunities to earn extra money through additional chores around the house. Or once your children are old enough, allow them to work summer jobs.

Keep Allowances Balanced

In determining the amount of money for allowance, the authors explain, “Children’s allowances should be enough to look forward to, enough to enable us to begin teaching budgeting, but not enough that all their wants and desires are met so they have no need for extra jobs.” As a parent, you will not only be teaching your children budgeting skills, but you will also be weaning them off your income and preparing them for financial independence. So as they grow older and have more expensive wants and needs, don’t match their allowance raises with their demands. Give them a little push towards earning extra income around the house or through a part-time job. Teach them the value of working for the things they want.

Be Consistent

Consistency in teaching and disciplining your children in money matters is crucial. Think of your children’s allowances as you would a utility bill or car payment. Add it into your own budget, and faithfully pay your children on time. You will also need to show consistency in the lessons you teach, both in the words you say and in what you model in your own behavior and habits.

Reflect Reality

Try to show your children what the real world is like financially, including its rewards and penalties. If your daughter has agreed to pull the weeds in the garden for extra money, but she either does a sloppy job or she doesn’t finish, then don’t pay her. If she needs training in how to do the job properly, or needs better materials, such as gardening gloves, help her out. But teach her that in the real world, employers do not tolerate half-done or shoddy work. Poor workmanship leads to getting fired.

Encourage Communication

Don’t make money a taboo subject in your home. Many people feel that finances is a personal subject, but try to be more open about it with your own children. How will they learn from your example if they don’t know how you manage your own money?

Treat Children Uniquely

Remember that each of your children is unique. One discipline method that works effectively on your oldest daughter may lead to disaster with your youngest son. Some of your children may naturally love the analytical concepts in budgeting, and will enjoy keeping up with every dime. They may actually need a little encouragement to spend some of their money. Your other children may prove the opposite. They may not grasp the specifics of money management, and may do better with simpler budgets, visual charts and lots of encouragement to stay disciplined.

Know your children and learn how to cater specific teaching methods, job opportunities and discipline to their individual needs. Focus on their unique strengths, weaknesses, personalities, and their developmental stages.

Concluding Thoughts

Teaching your children money management and work ethics will give them essential skills and values that will help them throughout life. Take the time to design a custom teaching plan for each child, and begin working with each one on improving their strengths and weaknesses. Your children will thank you for it later!

This article is based on the book, Financial Parenting: Showing Your Kids that Money Matters by Larry Burkett and Rick Osborne. Click here to order from