By Andy Bailey
Want to introduce your kids to the concept of business without hiring them to work in your business? Try breaking them in gradually by implementing the concept of your household as a “business” to teach your children financial planning concepts.
Kids are not known for their financial-planning acumen. Who can blame them? They’re typically shielded from big-picture household finances and are only introduced to money in terms of weekly chore-based allowances. They’re not faced with the reality or even the concept of taxes, interest, credit, mortgages, etc. until later in life—and sometimes, that’s too late.
Smart money management is an essential life skill we need to impart to our children—the trick is in teaching fiscal values in a relatable way.
My wife and I attended a business conference five years ago that changed the way we parent our two girls in relation to financial values. Richard Eyers, author of “Teaching Your Children Values,” spoke about parenting practices that apply business principles and real-life economic value systems to the household.
With Richard’s guidelines in mind, my wife and I created our Bailey-family economy plan. This plan empowers our girls to make smart financial decisions through the following strategies:
- Foster full transparency—Invite your kids to be involved in your household’s financial situation. Explain what the family is bringing in, like salaries, and taking out, like the mortgage, taxes, utilities, etc.
- Invite a contribution—Explain to your kids how they can advance the family’s economic success. Completing chores is one way and and enabling efficiency by doing things the first time they’re asked is another.
- Provide income—Each time your kids complete a task, or contribute to the family economy, they receive a token, which may be redeemed at the end of the month for a previously determined amount of money.
Unlike the typical chore/allowance arrangements where kids get extra spending money for completing household tasks, Bailey-family economy plan payments act as income. Our kids are expected to fund their clothing, extracurricular activities and friends’ birthday presents with their monthly pay. This way, they get a better feel for how income operates in the real world.
- Tax and save—Just as an adult’s income is taxed, your kids’ economy-plan money should be as well. In our home we deduct the same income taxes from our kids’ paychecks as we adults have deducted from ours. We explain the tax rates to our kids with every paycheck. My wife and I also reroute 10 percent of each girl’s paycheck to a savings account and 10 percent to charity. We want them to learn these responsible habits early.
- Be consistent and organized—It might be difficult to watch your pre-teen walk out of the house in high waters because she wants to save her money, but fight the urge to intervene and buy her new jeans. This is a learning process. Let it happen.
Also, create a monthly payment system that makes the process easier. When our kids complete their assigned tasks, they mark it on our homemade economy board. After a week is complete and they are ready to cash in their tokens, each girl fills out a deposit slip and turns it in to her mother. My wife then transfers the money into each girl’s bank account.
I mentioned earlier that the trick to teaching your kids financial values in to make the subject matter relatable. This plan accomplishes that in two ways:
- Kids want to be adults. Through the family economy plan, they are able to feel independent while still under parent supervision.
- Kids want to have a say. The plan encourages conversation and a positive contribution to the family’s big picture.
Whether your children grow up to work in your family business, become entrepreneurs on their own or become employees, the lessons they learn from this family economy plan will serve them well.
If you’re interested in a copy of the Bailey-family economy plan, email me at Andy@petracoach.com.
Andy Bailey is lead entrepreneur coach with business coaching firm Petra and serves as the Entrepreneur Organization’s global membership director. Visit his blog at petracoach.com for more business and leadership insight.