Family Finances

How I Teach My Children About Finances and Economics Series: Episode 3 – Work Ethics and Financial Responsibility

March 28, 2017
work ethics and financial responsibility

When do children learn how to be adults, and all it entails? The answer is, they are learning throughout their entire childhood – and we are their teachers. According to Newton’s Third Law of Motion: For every action, there is an equal and opposite reaction. This doesn’t just apply to science, but everything in life. If we are setting good examples of work ethics and financial responsibility, the result is our children see our good habits, and are more likely repeat them. Unfortunately the same is true of bad habits.

So why are work ethics and financial responsibility important? As children, we start to learn about work ethics by observing our parents. As teenagers, we begin to form our own work ethics as we enter the work force around high school. We develop an understanding of what it means to have a job, and the financial consequences of not having one.

If you skip out on work when you are scheduled, you won’t get paid. If you call out all the time or goof off at work, you will get fired. As an employee, and a manager for a large corporation, I have seen too many young adults who don’t understand the concept of working the shifts they are scheduled for or working a 40 hour work week. They don’t know why only showing up for 30 hours isn’t good enough, or coming in an hour late matters. They also don’t understand why they can’t call out whenever they want, or have to actually meet production goals.

Life skills are another experience we gain in childhood by observing our parents. We start to learn to complete simple tasks such as cooking, cleaning, mending, and home repairs. The same goes for financial responsibility, saving, and budgeting. By providing a good example for our children to follow and including them in the process, we are teaching them to be able to manage well on their own as adults.

Work and life skills go hand in hand, and the success of our teaching is centered on our children learning how to work. This is where work ethics comes in to play. When our children complete their chores or put in a hard day’s work, they earn money. Payday is positive reinforcement of their efforts. When our children don’t do their work, we need to let them see the flipside.

It’s okay to let kids fail. It is an opportunity to learn a valuable lesson and they will be better adults for it because they will know that not doing their work means their budget falls short that paycheck. Childhood is the best possible time to learn this lesson! If children don’t do their chores or go to work, they don’t earn money. If they don’t earn money, they can’t afford to go see a movie with friends. When kids don’t do their chores, they have a mess on their hands and more to clean up next time. It’s not a life altering lesson, but it makes a point. And that’s the best time to let them learn these lessons. We never want our children to find out the hard way when the safety net of childhood is gone.

Just as we teach them how to work, we have to also teach them how to budget and manage that income. Budgeting is a critical component we have to start helping them put into practice early. That way it becomes second nature! Paychecks are like pie. They get sliced up and eaten by different areas of our lives. As adults there is rent, groceries, gas, car payment, savings, credit card bills, clothing, utilities, and the list goes on and on. When children learn how to ration, or budget their paycheck, they are also learning what their limits are so they can prioritize their financial obligations and live within their means. As adults this will help them know the impact of their choice to skip work or splurge on that impulse buy they’re eyeing, because they will know what their bottom line is.

So how do we start teaching work ethics and financial responsibility early? Chores and allowance.  

work ethic and financial responsibilityI have heard a lot of debate over the years regarding chores – should kids have to do them, and should they get paid an allowance for doing their chores? In my opinion, the answer is yes to both. What better way to start instilling work ethics, financial management, and home responsibilities, than with chores, coupled with earning an allowance for completing them?

As a child, my siblings and I had chores. We were active in sports and extra-curricular activities, but chores were still required, no matter how busy we were. In high school, I had hours of homework nightly. I also had sports practice/games after school and a part time job. I had actually stopped receiving an allowance because I had my own income, but through it all the responsibilities at home didn’t change.

Sound like a lot for a teenager to handle? Maybe, but it was a good life lesson. As an adult, no matter how tiring or busy my day is, chores at home still have to be taken care of.  There isn’t a magic elf to pick up the slack. As children move out on their own, they are usually on tight budgets. They can’t afford to eat out every meal because they don’t want to cook. They can’t hire a maid because they are too busy to clean. When young adults are already familiar with completing daily chores, it’s second nature to ensure they get completed, or Newton’s Law applies (and it’s not pretty).

On the same note, children need to have practice with earning money before they enter the workforce, so they are ready to handle a sizeable paycheck. Remember when you got your first real paycheck? I won’t ever forget it! I had almost $300 and I couldn’t stop thinking of the ways to spend it! Having a job as a teenager is definitely an excellent opportunity to gain real world experience before full exposure to adulthood, but why wait until then?

The value of a dollar is something children should be learning early and often.

Allowance allows us as parents to teach them about money and financial responsibility from a very early age. The sooner they are exposed to financial concepts, the easier it is for kids to implement them as adults. Connecting chores to allowance gives them actual money they have to actually earn. Practice with these concepts prepares them for the day they earn actual paychecks – and practice makes perfect!

Most children actually start learning about chores when they are toddlers. We never call it that, but when they help pick up their toys, help set the table, tidy their rooms, etc., they are learning to complete daily tasks, or chores. Around Kindergarten my children were given their first couple of daily chores. I would mark off the completion of these chores when I saw they were done. At the end of the week, they were paid their allowance. We still practice this routine today, and they are all tweens.

Allowance doesn’t have to be expensive, and the amount they earn should match the age of the child. When they are starting out, a quarter is sufficient for completing a given chore for the week. To little kids, it’s a fortune!

At the ages they are now, my three children each have the ability to earn $5.00 a week. (Note that I said the ability to earn, rather than are given). They each have five chores they are responsible for completing throughout the week. Some are daily, some are rotating, some are once a week. Every Saturday, I look at their list. For each chore completed successfully that week, regardless of how many times it needed to be done, they get $1. If all five chores are done that week, they earn $5. Every missed chore is a loss of $1. It would be way easier to just give the kids an allowance, but it’s not teaching my children work ethics, or the value of the money.

My opportunity to provide some bonus education:

A year ago, my husband and I started our business, K and T Creations, which I managed full time.  I had a summer full of Farmer’s Markets, four times a week. The children aren’t in school, and therefore would attend the markets with me. My husband and I decided we would give them the opportunity to “work” alongside me. They would each be paid $10 a week for their help. Here’s how we made it interesting and educational: Every time I had to break up an argument or got pushback on helping, the responsible party lost $1 of their pay. You will be shocked at how quickly the kids responded and corrected their behavior when their paycheck was deflating. In fact, after the first couple of issues, I rarely had to take away dollars.

Budgeting applied to every paycheck. As children, their financial obligations are pretty much nonexistent, so we created some for them. We showed them how to use the envelope system to keep the money separate. We also created the budget with percentages rather than firm amounts so it can also apply to future earnings, regardless of the size of the paycheck. It’s important for kids to see that responsibility grows with their earnings. The more money a person makes, the more they should put in savings, etc.

Weekly Budget for paycheck:

  • 50% spending
  • 30% savings
  • 20% charity

As adults, these aren’t necessarily practical budgetary numbers, but the point is clear. Saving needs to be a healthy percentage of their paychecks, and it’s important to give back. Saving money was a familiar concept, but giving to charity was new to them.  Happily though, charity is something they enjoy contributing to, especially when they get to choose the charity themselves.

I always stress that they are getting paid, whether it’s an allowance, or actually working with me.  Why? There is no easier way to equate work with a paycheck, and actions with consequences.  When the kids CHOOSE to go to work or do their chores, then the CONSEQUENCE is they earn their paycheck. Learning this lesson in adulthood can be catastrophic. If they can’t pay their rent, they are going to end up evicted and moving back home, or worse.

Now, I’m not going to pretend that teaching work ethics and adult responsibilities such as home and financial management is easy. There will always be battles. They should lessen over time though.

In my case, all three of my kids see money and chores differently.

  • My youngest son loves money and has the constant urge to spend every dollar he can, as soon as he can. Otherwise, it burns the proverbial hole in his pocket. He absolutely hates working for his pay. After immediately spending his money, he spends the rest of the week complaining because his siblings are buying things he can’t.
  • My daughter is very middle of the road. She likes to spend money, but she likes to HAVE money, so she is pretty prudent with what she buys. She loves to help me around the house with chores, especially with cooking and sewing projects. Since she is always willing pitch in, so she always earns her allowance.
  • My oldest is quite miserly for a child (but only with HIS money). He does his chores and usually does a good job, but rarely goes above and beyond without the promise of incentives.

The results:

I have come to realize that each of my children need to be guided individually. That way each child learns to be responsible in ways that best match their personalities.

Imagine if your children didn’t start learning any of these concepts until they entered adulthood and the work force?! By teaching them early, children have the opportunity to learn to curb instant gratification urges and impulse buys. They have time to practice budgeting, and working towards financial goals. In other words, they learn how to be self-sufficient and successful in life. And isn’t that what we want for them?

I would love to hear how your family approaches teaching work ethics and finances! Please leave a comment below.

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