Raising Financially Capable Children

One of the most important things you can do for your children is to raise them as financially responsible and independent children.


Start with the language you use around money.  Make sure it is always positive and encourages them. Then provide opportunities for children to take responsibility for their financial situation.


By all means give them pocket money or allowance from a young age but always provide it in return for chores.  In the real world we don’t receive money for nothing and this is a good lesson to learn early on.


Empowering children to do small jobs for payment teaches them so many different things including reliability, commitment, and responsibility.


These might be jobs like washing the dishes or emptying the dishwasher (always a much coveted job in our household), putting out the rubbish and recycling, mowing the lawns, cleaning the bathrooms, vacuuming, cooking dinner, painting or water-blasting the fence etc.  In each case there is reward for effort, and this is how it works in the real world.  Pay them appropriately for the jobs they do and let them enjoy choosing how to spend their money.  Encourage them to save part of their earnings so they can buy bigger things in the future.


Of course everyone still needs to do their bit around the house such as making their bed, keeping their room tidy, setting the table and clearing dishes.


As children get older give them specific allowances so they can choose how to allocate their funds.  For example we gave our children clothing and transport allowances when they started secondary school.  That meant that if they walked or biked to school they could keep their bus fare.  They could choose to buy a few special clothing pieces or lots of cheaper ones.  We paid for school uniforms so we noticed our boys wore their school socks and track pants a lot!  One of our sons also used part of his clothing allowance plus some other savings to buy a laptop.


They may be able to do other work for you especially if you own your own business.  For example they may be able to do data entry, compiling and packing orders, delivering fliers, cleaning the office, social media etc.  Or you may have friends who have businesses that they can do paid work for.  Encourage initiative to write an ad for a community noticeboard or at the supermarket offering services around the office, babysitting, dog walking, mowing lawns etc.  Or encourage them to apply for part time work at the local supermarket or other nearby shops. Help them prepare a CV outlining their achievements and skills.  Employers will value their voluntary work and sports team contributions as much as their academic achievements.


Above all avoid creating economic dependents.  These are the children who have always been provided for financially and who will be expecting mum and dad to help them out financially throughout their lives and them leave them a healthy inheritance.  If they have a partner the partner may also be sharing in the benefits but may not be around for long.  If you have had a difficult life financially then it’s understandable that you will want to help your children so that life is easier for them, but remember, with all actions there are consequences.

David and Sarah had been married for around 15 years.  He had worked as a financial adviser and she in her own business as a communications contractor.  When he was made redundant shortly after they were married David applied for a few jobs but then ended up staying at home while they had children.  For the next 14 years he made no effort to look for work, always promising that he would be contributing financially once his mother passed away.  After 15 years David left Sarah for another woman and Sarah saw nothing of the promised inheritance and his mother is still alive.  She feels she was taken for a ride and blames his mother (he was an only child) for creating David as an economic dependent.

Many parents tell me they pay for all their children’s needs because they want them to spend their time studying and relaxing rather than being stressed having to find  a job as well.  If you have an expectation that this support will cease at some stage then you need to make this very clear to your adult child. Otherwise you will be funding them for the rest of their lives.


One way you can practically help is with a deposit or guarantee for their first home.  If you can afford it then that help is needed more when they’re in their 20s than when they’re in their 60s and you die.


Some children, especially those with special needs, will need to be provided for long term and this may best be done through a family trust.


So remember, if you want to raise financially independent and capable children, be conscious about the language you use around money and give your children every opportunity to earn their own money so they can start taking responsibility for their financial decisions.

The information in this blog does not purport to be financial advice and no reliance should be placed on it. It is of a general nature only based on my experience as a Chartered Accountant in practice and specific advice should be sought for your particular situation.