RAISING FINANCIALLY INDEPENDENT CHILDREN

As many children are raised today without a proper understanding of finances, it’s my belief as a parent that we are responsible to teach our children everything we can about finances and to prepare them for the world. To sit down and really think through what our expectations are for our children financially — from high school through the rest of their life – is a crucial step towards financial independence.

My wife and I came up with an agreement on how we would manage the transition from being 100% responsible for them financially, to a point where we were not financially responsible for them anymore. We put it in writing and worked through the stages. We gave them a copy of the agreement and let them have the opportunity to speak into it, ask questions, and come up with a plan we all agreed on. The goal was for the children to feel the terms were generous, but with the obvious goal of transitioning. Because they all agreed up front, and everyone signed the letter, we have had no issue on any financial matter with our children whatsoever. Countless times, both my wife and I, along with the children, have asked, “What does the letter say?” when trying to determine who pays for a particular item. It is an amazing tool, which I share as a handout in this post, and encourage you to use it as a model for your own family.

1. THERE’S A RIGHT WAY TO BE GENEROUS

I guess you could say my wife and I were probably a little more generous paying our children for the chores they did, however, we didn’t offer an allowance. Everybody had chores and knew what their part was. We made it clear that we were a family unit and we all contributed to the family’s success. Our children knew that everyone had a valuable role.

Although we always displayed generosity, and encouraged our children to do the same, we also made it clear that our children needed to find ways to make money by going above and beyond their daily chores. There was always work available in the family, outside the family, and at the family office. The more they worked, the more they had to give.

The bottom line is, we were generous without enabling a sense of entitlement, and I believe it was one of the best things we did for our children. All of them are hard workers, generous with their money, and financially independent.

I highly encourage you to teach your children what it means to be generous from a mindset of working hard, not only to provide for themselves, but to share generously with others. 

2. THE IMMENSE VALUE IN HARD WORK

One of the mottos we taught our children growing up was: “We work half the day; we play half the day.” From my observation, children that don’t have a strong work ethic, don’t fare well in life. 

When I was a child, every Saturday morning my dad would drop me off somewhere in the neighborhood to mow lawns and do yard work, and he wouldn’t come back to get me until five p.m. I knew that in order to get something, I needed to work hard for it. Even as far back as the second grade, I collected Coke bottles worth three cents each. I’d search all over town to find Coke bottles to recycle. That was one of the first ways I made money and began learning the value of hard work.

Our position as parents was that our children needed a job as early as possible. If they didn’t find one right away, they weren’t just going to sit at home and do nothing. We instructed them to work at the family foundation office and contribute to the family business until they found their own career path. This was an integral part of instilling the value of hard work as early as possible.

3. IT HAPPENS IN STAGES – CHILDREN’S EXPENSE LETTER

When planning for our children’s financial independence, my wife and I clearly saw that our financial provisions couldn’t stop all at once. There were different things at different levels. So, we put together a letter that listed everything we were providing for our children and identified at what point each provision would stop.

For us, some things stopped when they moved into high school, some things stopped when they moved into college, some things stopped when they graduated, (or a few years after graduation), and some things never stopped.

Of course, we shared the expense letter with all three of our children. We sat down and discussed it, and they had good pushback! They had some things to add and subtract, and we came up with an agreement of how to manage the transition. This eventually led us away from being 100% responsible for them to a point where we were virtually not financially responsible for them anymore. Because we worked through the stages and allowed them to communicate what was working and not working, we had no financial arguments with our children at any point in time as this Expense Letter was executed.

To be successful in raising financially independent children, it’s best, in my opinion, to go in stages and prepare them bit-by-bit to handle their own expenses as time goes on. Truly, this tool has been one of the best things my wife and I have implemented over the years and we can’t recommend it highly enough. We pray it will be a valuable tool for your family as well, as you raise your children to have strong work ethics, value generosity, and become financially independent.

Now, here is the handout titled, “Children’s Expense Letter.” As you begin to implement it, we would love to hear how this tool impacts your family!

ACTION STEP:

We highly recommend scheduling a “planning date” with your wife to create your own Children’s Expense Letter based on your family dynamics. Then, plan a time to share it with your children and get their feedback.