Financial Independence
Financial Independence: Cultivating Smart Money Habits Early
As a mom of three young boys, I understand that teaching life skills is a crucial part of their upbringing. Among the many lessons I want to impart, financial literacy stands out as one of the most important yet often overlooked. I know it was overlooked when I was a kid and that did me no favors at all. In a world where money plays a significant role in shaping our choices and opportunities, equipping my sons with a solid understanding of financial responsibility is essential. From learning the basics of budgeting to understanding the value of saving and earning, these lessons will empower them to make informed decisions throughout their lives. Here are practical strategies I’ve implemented in our home to nurture their financial awareness and responsibility, setting the foundation for a lifetime of smart financial habits.
I feel money and what I learned as a kid has changed dramatically so I’ve had to adjust my own habits and thoughts to adhere and adapt to todays’ world. This isn’t a bad thing. This is a good thing and I’m here for it. I want them to have a much better understanding of money and wealth than I ever did.
**The Importance of Financial Literacy**
Financial literacy is one of the most vital life skills you can impart to your son, yet it often receives little attention in parenting discussions. Understanding how money works is crucial for making informed decisions throughout life, from managing expenses to investing wisely. Financial responsibility encompasses a broad range of skills, including budgeting, saving, and making choices that align with one’s values and goals. By teaching these principles early, you empower your son to navigate the complexities of adult life with confidence and clarity.
When we think about money management, we often focus on the mechanics—balancing a checkbook or saving for emergencies. However, it’s essential to delve deeper into the mindset surrounding money. Help your son understand that money is not just a tool for buying things but also a resource that can work for him if managed wisely. By fostering a healthy relationship with money, you encourage him to view financial challenges as opportunities for growth and learning.
As a young girl, I can remember counting my cash and being taught to treat it right. I know that sounds strange but when I was a waitress as a young girl, I’d come home and throw these bills out there on the table and count. My father always said to me you are treating your money like trash. I said what do you mean? He said you must treat your money well and it will always come back to you. To this day, if I have cash on me, my dollar bills are always organized and facing the same way with the same denomination. I know that sounds silly, but I feel a sense of pride if my cash is “sitting pretty” so to speak.
There is a different concept of money in today’s world meaning it appears to be going in a cashless society. My sons, however, will absolutely learn the value of cash and its value and its legal form of tender. I don’t know if in my lifetime we will become completely cashless, but I don’t think so. I think cash is here to stay. I hope so. There’s nothing like getting good old cash in a birthday card!
**Action Item**
Start a conversation about money and its role in life. Discuss what financial responsibility means and why it’s important for his future. You might ask him about his thoughts on spending, saving, and the value of money, encouraging an open dialogue. All three of our boys have money but they don’t all have the true understanding just yet. The 15-year-old does but the 12-year-olds still have room to grow on this. It’s important to keep talking about it.
**Starting Small: Allowance and Earning**
Teaching financial responsibility can begin with something as simple as an allowance or a chore-based earning system. This approach not only introduces the concept of money management but also instills a sense of accomplishment and accountability. Start with small amounts that he can easily understand and manage. This will provide him with hands-on experience in making decisions about how to allocate his funds.
As you introduce budgeting, encourage him to categorize his money into three main areas: saving, spending, and giving. For instance, if he receives a weekly allowance, guide him to set aside a portion for savings (perhaps aiming for 10%), some for immediate spending, and a small amount for charitable giving. Use everyday situations—like saving for a toy or snack—to illustrate how budgeting works in real life. These lessons teach him that while money can provide instant gratification, patience and planning can lead to more significant rewards.
In our home we have introduced the chore book. It has a list of “extras” that can be done to earn money. My husband and I believe that there are of course things around the house that we are responsible for as heads of the households. We will always take care of certain things. However, there are extras that the boys can help with. Those extras include walking the dog, cleaning out cat box, putting clothes from washer into dryer however, picking up after themselves and keeping their room tidy are not extras. Those are expected from the young men who live under this roof. If they help their dad outside that could earn them some money. They can check off in the chore book what they’ve done, the date they’ve done it and add up what they’ve earned. We check it for accuracy, we may need to confirm with their siblings or see it for ourselves but all in all, we’ve been relatively successful in giving them their pay outs. We do not provide an allowance just for the sake of giving them money. Each dollar needs to be earned.
Our oldest now has two jobs so he’s learned very quickly how different things become when you must spend your own money. It’s interesting to watch. He has also taken our advice and any paycheck that he receives, he saves 10%.
**Action Item**
Create a simple budget together based on their earnings. Use a real-life scenario, such as saving for a toy, to help him allocate his money effectively. Make it a fun activity by using colored envelopes or jars for each category. There are piggy banks out there that are split into categories. The twins use that. The older one has graduated from that to his actual bank account.
**Start Setting Savings Goals**
As your son gains experience managing his money, it’s essential to emphasize the importance of setting savings goals that foster a sense of purpose and achievement. Encouraging him to save early lays a strong foundation for responsible financial behavior in the future. When he receives money from chores, gifts, or allowances, guide him in developing a savings strategy. For instance, we encourage our oldest son to save at least 10% of his earnings. This practice not only reinforces the habit of saving but also instills a sense of ownership over his financial decisions.
To make the concept of saving more engaging, help your son identify specific, tangible goals. For example, he might want to save for a new video game, a bike, or even a special outing with friends. By choosing something he genuinely wants, the saving process transforms from a mere chore into an exciting challenge. Setting these goals helps him understand that patience and persistence can lead to greater rewards. You can create a visual savings chart or a jar to track his progress, allowing him to see how small contributions add up over time. This visualization can boost his motivation and provide a sense of accomplishment as he reaches milestones.
Additionally, discussing the concept of delayed gratification can be particularly impactful. Teach him that waiting to make a purchase can lead to a greater sense of satisfaction and financial security. For instance, if he has his eye on a new gadget, encourage him to save for it rather than purchasing it impulsively. This not only reinforces the value of saving but also cultivates critical thinking about spending choices. As he learns to prioritize his wants and needs, he’ll develop skills that will serve him well into adulthood.
Our oldest did a wonderful job when he had set his sites on his first PlayStation. Admittedly his father and I really had no interest or understanding of this device. We aren’t dinosaurs but it just wasn’t something we were interested in or engaged in. We couldn’t add any value to the discussions about it, we couldn’t play it and that didn’t stop him. He was full throttle in wanting this PlayStation. We let him know that we weren’t going to stop him from getting one but that he had to buy it for himself. He was in 5th grade. He saved birthday money, Christmas money, chore money. He saved any money he could. We did agree that if he was short, we’d chip in, but most of the cost was on him. He hit paydirt so to speak after his First Holy Communion. I think he may have received close to $500 from friends and family. He could not believe it. We had to get to the store within days of his party.
I remember this day like it was yesterday. He had a wallet. It was stuffed with gift cards, cash and even change. He knew what he wanted, and I must give the woman credit at the store (Game Stop), she could tell, even at a young age, he knew what he wanted and why he wanted it. She spoke to him, not to me. She spoke to him about a brand-new PlayStation and a “refurbished” PlayStation. She explained how they did it, what they did to it, confirmed that it was guaranteed to work and that it would cost him $200 less than he was ready to spend. They both agreed that he would purchase the “refurbished” PlayStation.
He was on the ground of the store, with her, showing her his money, doing the math, handing her gift cards and then the cash. The only thing I helped him with was the exact change. I couldn’t have been prouder, and he felt the same way about himself. He negotiated a great deal, understood that he was getting a great deal and walked out of there so happy and with money to spare. He did buy two or three games as well and still had money to spare. What a day for him.
Since then, though, he has purchased a new PlayStation and sold his old one to his twin brothers! It still works all these years later.
**Action Item**
Help your son set a specific savings goal that excites him. Whether it’s for a new toy or an outing, encourage him to create a plan for how he will reach that goal and celebrate milestones along the way. Consider regular check-ins to discuss his progress and adjust his savings strategy as needed, making it a collaborative and engaging experience.
**Understanding Loans and Interest**
Introducing the concept of loans and interest is a crucial step in equipping your son with the financial knowledge he will need as he matures into adulthood. Begin by creating a safe and controlled environment, such as a family bank, where he can practice borrowing money for items he desires. For instance, if he wants to buy a new video game but doesn’t have enough saved, offer to lend him the difference. Explain clearly that he will need to repay you with a small amount of interest, helping him understand that borrowing money comes with a cost. This exercise not only illustrates how loans work but also instills a sense of accountability.
As he navigates this process, delve deeper into the mechanics of interest. Start with simple concepts before moving to more complex ideas like compound interest. Use practical examples, such as a savings account versus a credit card. Show him how interest can benefit him when saving, as it allows his money to grow over time, while also demonstrating the costs associated with borrowing. For example, you might illustrate how a $100 loan at a 10% interest rate would require him to pay back $110, making it clear that borrowing isn’t free and must be planned for.
As your son matures, transition these lessons into discussions about real-world applications of loans and interest. Explain the importance of credit scores, what they are, and how they can affect his financial future. A good credit score can open doors to favorable loan terms, such as lower interest rates on mortgages or car loans, while a poor score can result in higher costs and limited access to credit. Help him understand the factors that influence credit scores, such as payment history, credit utilization, and the length of credit history.
To further prepare him for adulthood, engage in conversations about the types of loans he may encounter—student loans, car loans, and personal loans. Discuss the pros and cons of each, emphasizing that while loans can help him achieve significant milestones, they come with obligations that require careful consideration. For instance, educate him about student loans, including the difference between federal and private loans, interest rates, and repayment options. Encourage him to consider the total cost of borrowing over time and the potential impact on his future financial situation.
As your son approaches young adulthood, it’s essential to help him develop strategies for managing loans and debts responsibly. Teach him the importance of budgeting to accommodate loan payments, emphasizing that understanding his income and expenses is critical to maintaining financial health. Encourage him to create a repayment plan before taking on any debt, factoring in interest and the timeline for repayment. Discuss the concept of emergency savings as a safety net, which can prevent him from relying on loans in unexpected situations.
Depending on the age of your children this topic of loans may seem so far into the future but it’s not. Time flies by almost unfairly. My oldest with his two jobs is saving for a truck. One of the twins is saving for a 4×4. The other isn’t saving for anything just yet, but he knows to hold onto it and not just spend it willy nilly. He learned a hard lesson when he accidentally threw away a $25 gift card that his dad gave him for his birthday. We were all taking a trip to the store (Cabela’s) and he was unable to borrow from his bothers and he was unable to ask us for any additional money. He had some VISA gift cards, but he missed out on a $25 Cabela’s gift card because he was careless. It was a tough lesson for him as he was doing the math in the store of what he wanted. I said to him “you better count how much all of this costs, you are not getting any money from us or your brothers”. He had to put some things away. That’s a lesson hard to learn.
**Action Item**
Organize a family discussion about loans and interest, using real-life scenarios to illustrate the concepts. Create a small borrowing simulation, such as lending him a set amount with interest, and track the repayment process together. As he grows older, introduce him to the various types of loans he may encounter, discussing their implications and helping him prepare for responsible financial decision-making. Regularly revisit these topics, fostering an environment where he feels comfortable asking questions and seeking guidance as he navigates the financial landscape of adulthood.
Thank you for reading this article. We hope you find these tips and tricks helpful as you navigate through your commonsense parenting journey. Financial literacy is critical for young boys. It’s critical for all young children but since we are raising boys, our approach will always be coming from the parents of boys. Young men might feel more pressure to earn more money, save more money, provide the wealth. The burden really shouldn’t be all on them and them alone but it’s still remaining a critical part of life that we as parents must instill. I invite you to subscribe to our newsletter for more insights, strategies, and real-life tools to help navigate the commonsense way to parent.
