Why financial literacy classes won’t help your kids to pay their bills

by | Homeschooling Financial Education, Kids, Money and Responsibility, Money attitudes and habits

teaching kids to pay their bills
Financial literacy classes won’t help your kids to pay their bills. Most kids use money for discretionary spending, simply because they can. Kids don’t have expenses, but they should.

As parents, you want your kids to develop the habit of paying for age-appropriate expenses. However, parents across generations have different ideas about the appropriate age for kids to pay their own expenses. That age ranges from 19-24, starting after your children become adults legally responsible for their money decisions.  

According to a February 2023 Savings.com survey, 45% of parents support at least one adult child, and the average monthly price tag of that financial assistance is $1,400.

Teach kids to pay their bills so you don’t have to

While your kids are growing up, they develop money habits and behaviors to take with them after high school. However, the habit of “paying the bills first” is not top of mind in teaching kids to manage their money.

In my opinion, the primary reason to give kids allowances is to prepare them to manage money as adults. For this reason, the allowance system needs to help kids manage money for both fun and necessary spending. 

Give your children money with responsibility and the control to manage it all by themselves. 

How much money?

One suggestion is to set weekly allowances at one dollar (or other amount) per year with raises on birthdays. Think of this as a base amount, pocket money to be spent any way the kid decides.

You can also think of each child as a department in your family corporation. Consider their age, activities, and interests as you determine how much money they will control.

How much responsibility?

Select age-appropriate expenses. The idea is to give them skin in the game, encouraging kids to pay their bills, or at least, a part of the expense.

For young kids, it might be a simple as contributing $1 for parent-paid activities such as lessons, camp, or school events. For example, the child’s paying only $1 toward an activity may make them appreciate the opportunity because they contributed from their own money.

For teens this could include paying for many of their day-to-day expenses, that can include personal care, transportation, cell plans and streaming services.

As a parent, you transfer control of funds for these expenses to your kid’s account to manage. This is money you would spend on them anyway so they can learn to track and pay their bills.

How much control?

Give your kids complete control. Make them responsible and accountable, just as you are as an adult. If you don’t pay your bills there are consequences. 

Consequences for your kids could be charging a late fee to be subtracted from their account. For expenses that have a real-life deadline, your kid could missing out on the activity because they didn’t pay on time. 

Your kids know that families have to pay their bills. Talking about that responsibility is a great family discussion. As a parent you have the great opportunity to create an allowance system that prepares your kids to pay their bills like adults. 

By giving them practice paying their expenses, you introduce the habit of being responsible for necessary spending before they are legally responsible for their bills. 

Teach kids to pay their bills to create a good habit

Kids want money. They want to be in control of their money, and they can manage age-appropriate expenses. In fact, most kids enjoy the satisfaction of knowing they used their money for something important to them. 

The amount of their payment is not as important as getting them in the habit of recording the expense in their account. When kids pay their bills they develop a life-long responsible habit.

Financial literacy classes won’t teach your kids to pay their bills. My book, The No-Cash Allowance, is a guidebook for you to use starting with kids as young as three, giving them years of hands-on practice managing their own money. Buy now

Allowance anecdote: A young teen wanted to attend a baseball clinic in January. His mom decided to transfer the application fee to his account in November. She explained that he was responsible for paying the fee on time. If he didn’t, he would not be going to the clinic and would have to refund the money to his parents. She told me her intent was for him to have that “extra money” sitting in his account with the knowledge that he had to “save” it for a future expense.

Next week: Start the school year with your kids responsible for buying supplies for their day job

Read more:

How to help your kids develop money skills to last a life time

How to help your kids develop financial competency as they review their money behavior

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