You may be thinking to yourself, “Is there something I can do to make sure my kids don’t move home after they move out?” In other words, you want a way to make sure they grow up to be financially self-reliant.

I’m here to say, ‘Yes, there are some relatively simple steps you can take to ensure that your kids leave home knowing what to do with that green stuff they will be in charge of making, managing and multiplying in the future.

More young adults are not only leaving college these days because of financial problems (student loan and credit card debt) but they are also moving back home after they graduate because they simply don’t make enough money to go it on their own.

The primary cause is simply that kids don’t have a clue what to do with their money, or anyone else’s for that matter. Most of them are very good at spending money, but it’s a rare 20-something that understands the dangers of credit card abuse or the power of saving and investing. Heck, for that matter, most adults don’t understand these concepts either.

Imagine this scenario…

Your son (or daughter) comes to you one day and says, “Mom, I have decided I really want to grow up and become a major league ball player.” You say, “Wow, that’s cool. Good for you.” And you go back to doing what you were doing.

Your child looks at you and asks, “So, would you get me a ball so I can learn how to throw it?” You say, “Maybe later.” He says, “What about a glove and a bat?” You respond, “Nah, I don’t think so.” He’s a frustrated at this point and asks, “OK, but will you at least teach me the rules?” You say, “Oh, you can learn the rules later.”

Now he is really angry; he’s fuming inside and feels stuck.

Finally he gets really mad and yells, “But MOM, how am I ever going to become a great ball player if I don’t have a ball, bat or glove to practice with and I don’t know the rules?”

This is what parents do, most unknowingly, to their children everyday in regard to money. We grow them into adults but rarely give them the equipment or rules to practice, and get good at, The Money Game!

Let’s look at three simple steps you can take to empower your children with the tools, knowledge and practice they need to grow up financially free.

FIRST, you must set the best example you can for your child. Since human beings learn best by example, it is critical that you first examine what you’re teaching your children through your actions because they really do speak louder than words. How can you expect your child to save and invest if you don’t? How can you expect your child to grow up with a healthy understanding of money if you don’t have a healthy understanding of money? How can you expect your children not to use credit cards if the only way they see you buy things is with a credit card?

The important thing to remember is that children learn from us three ways: by what they see us do, by what they hear us say and through the experiences they have with money. J know that they are always watching and learning from you in ways you probably aren’t even aware of.

If you’re like many adults who don’t understand money, you’re not alone. You weren’t taught when you were young either, however, now’s the time to make a commitment to educate yourself. There are books and seminars everywhere. A great place to start is a program called the Millionaire Mind Intensive. For more information, visit http://www.peakpotentials.com/a/tofreedomandbeyond.

If you’re doing well financially, good job. Keep asking yourself how you might ‘show’ your kids about money with your daily routine and include your kid’s friends. Kids often learn better from people other than their parents so look for opportunities to influence all the kids in your circle.

SECONDLY, talk to your kids about money. Take every opportunity you can to open up a line of conversation about family expenses, credit cards, debt, interest, investing, business, real estate, the stock market, financial beliefs, etc. Some examples of when to talk to your kids about money are:

• When you take money out of the ATM, talk about where the money comes from, why you can only take out so much, etc.
• When you pay for the groceries with a credit card to get points so the whole family can go on vacation, make sure they understand the importance of paying the bill off EVERY SINGLE MONTH!
• When you pay bills, let them help you write checks or pay the bills online. Teach them how to check the accuracy of each bill.
• When you deposit money into your bank, visit your investment advisor or accountant, take your child along.

The worst thing you can do is assume that someone else is teaching your child about money. What children learn from parents who don’t talk about money is that talking about money isn’t OK. A healthier way to look at money is simply as a tool to reach your dreams (a Creative Wealth Principle); it doesn’t mean we’re better or thinner or smarter than others. It’s simply a tool.

THIRDLY, consider giving your child an allowance, but not the kind you may be thinking of. In my book, The Ultimate Allowance, I teach you how to take the money you already spend ON your child and run the money THROUGH them instead. I’ve read that it takes an average of $275,000 to raise a child through age 17. If you run even a portion of that money through your child, imagine the practice he or she is going to get. By making plenty of financial choices—good and bad— they learn the ins and outs of money management before the consequences aren’t so damaging.

In summary, remember that human beings learn best by example. Your children are watching everything you do with your money, listening to everything you say about money and internalizing all the experiences they are having with money, so pay attention to the example you are setting.

And finally, please talk to them about everything financial. It’s the best investment you can make in your child’s financial future and we promise it will ‘pay off’ in the end!

For more information on all of our unique financial literacy products and programs, please visit The Ultimate Allowance and Creative Wealth International or give us a call at 805-957-1024.

We’ve all heard, and probably said, that practice makes perfect. while most of us know there’s no such thing as perfect, there is, however, learning to do the best you can with what you have to work with and what you know at any particular time.

If you’re like most parents, you know deep down in the recesses of your mind, that you have to at least attempt to teach your kids how to use money wisely. Often when the topic of kids and money or teens and money comes up in conversation, many parents admit they just don’t don’t what to do to teach their children how to manage money.

The question is, How to you teach your kids how to handle money and not have it cost you a futune or lead to constant fighting over money?

This is where the confusion often kicks in…you only know what you’ve experienced in the realm of financial knowledge and that may not be the best place to start. The most important thing is simply start somewhere.

At some point in their children’s lives, most parents usually consider giving their children an allowance of one type or another. The challenge lies in determining which type of allowance to give.

There’s the “giving an allowance just because” method, the “giving an allowance and making them do chores method:, there’s the “giving them an allowance for grades method” and there’s the free for all method where you keep trying different things and eventually throw up your hands because nothing seems to be working.

At this point most parents opt for the ‘pray it all works out somehow’ method. Sometimes it does; sometimes it doesn’t.

What if there was a way to truly empower your children with the tools and information they needed to move out and stay out, except for visits, of course?

What if giving your child an allowance could actually save you money instead of costing you extra money?

Well, there is such a method, but before you start using this powerful system, let’s look at why it works.

Experience is the best teacher:

Most of us have discovered over the years that we learn best when we’ve experienced something first hand. It’s a nice idea to learn from other people’s mistakes and be motivated by other people’s triumphs but the fact remains…if we do it ourselves, we get the visceral lesson and there’s no better or longer lasting lesson than that!

Letting your children learn about money is exactly the same thing. You can’t TEACH them how to spend money wisely but you sure can put them in situations where they experience how to do it wisely (or not, as the case my be:-).

Imagine that your child wants to be a professional basketball player but you never giving him a basketball to dribble or throw, never giving him time on the court to practice, oh yeah, never give him a coach, and, oh yeah, never teaching him the rules to the game. This is what money is like for most young adults. They are rarely given a chance to learn how to use it wisely. Most of them learn how to spend it really well. Spending it, however, doesn’t lead to financial success or freedom!

Learning to do more than simply spend money is why providing your child with an allowance is so critical. Practice is how lessons are learned and habits are formed. There is a saying that says, “Repetition is the mother of skill.” If this is true, then only through the actual practice of using money will a child truly learn to use this resource wisely. That’s why allowances are important. No practice, no lessons. No lessons, no skill. No skill, well?, we know what happens when there’s no skill. You have a society that’s deep in debt with no knowledge of how it got there or how to get out.

Practice, Practice, Practice:

It’s up to parents to provide the financial practice our kids need to go it on their own successfully. And it’s that what you really want? There’s no prouder moment than when you realize your child is a full-grown adult who is fully responsible for himself and his family.

With the right type of allowance (we’ll get to that in a bit), your child will experience the three important aspects of financial practice, all with their inherent lessons woven in.

Remember that human beings are typically motivated in two ways:

1. We move away from pain (the most prevalent).

2. We move toward pleasure.

Let’s look at how an allowance can prepare your kids for real life through these two constructs: pain and pleasure.

Practice learning from poor choices.

There’s nothing like making a painful mistake to teach you a lesson. The most valuable lessons we ever learn come from making decisions that didn’t turn out in our favor.

Once they’ve make a financial choice that was somehow painful and unacceptable to them, they generally steer clear of that choice in the future.

Practice learning from making wise choices.

Most of our most vivid memories are attached to moments in our life where we did good, conquered an obstacle, reached a goal and the like. Wise financial choices have a powerful way of making lasting impressions on us.

Think back right now on your past to a time when you made a wise decision or choice with money. (If you can’t remember one, this is all the more reason to get your kids on a powerful allowance system as soon as possible.) It’s probably something you have repeated several times since then.

Examples are buying, remodeling and selling a piece of property for a profit, investing in a great stock that went up in value and you sold it for a nice profit, starting a business with a great idea that eventually became the way you made your living and became financially independent.

All of these examples are why people end up in real estate, business or the stock market as their primary method of investing. Success leads to pleasure, pleasure leads to a propensity toward becoming an expert in a certain area and expert status leads one, directly or indirectly, into different careers and lifestyles.

Practice learning as a matter of repetition.

It’s hard to do something wrong over and over and over again. For most people, once you’ve done something wrong, especially if you’ve done it wrong more than once, it’s time either give up, try harder or get help and coaching.

When children are put in charge of their own financial affairs at an early enough age, let’s say 6-8 years old, they have more than a decade to figure out what works and what doesn’t work. This is why it’s so important to start providing opportunities for practice with money as soon as the child is ready.

Please note that some children never appear ready. They never ask for money, never ask for stuff, and don’t want to be responsible. At some point this type of child must be put in charge of their finances or they may never move out! And that’s not usually in the generally accepted parent-child contract!

So how do you give your child an allowance that works without it costing your a bloody fortune? Simple, you take the money you’re already spending ON your child raising them, and you run a lot of that money THROUGH them instead.

We’re not talking about running rent, basic food, insurance and stuff like that; we’re talking clothes, hair bows, sports equipment, school supplies, books, entertainment, and the other stuff of life that they could easily be put in charge of.

The intention of this type of allowance is that by the time they are 18 and move away from home, they are 100% responsible for everything they need to survive on their own, and hopefully, a few of the things they want to make life enjoyable.

In addition to running some of the money your use to pay for their basic needs through them, along this path you’re going to encourage your children to start making their OWN money as well.

This is not as challenging as you may think at first. Children are little entrepreneurs in the making; they are idea magnets. It’s their job. They see opportunities everyone IF they have a parent, guardian or mentor to open their eyes to the opportunities in the first place.

The Ultimate Allowance: How to Get Started

It’s pretty simple to start this type of allowance. Simply get out a piece of paper and your favorite pen, sit down with your child and start looking at all of the expenses you are now shelling out for directly.

Depending on your child’s age and level of maturity, decide together what items you will start putting them in charge of purchasing. Decide together how often you’ll provide this allowance (weekly, biweekly, monthly) and talk about what might happen in terms of making poor choices (consequences are better if they know them before hand), coming up short or even losing money.

Talk about what could happen if they make great choices. Knowing they get to celebrate with a movie or ice cream, gold stars on a nice clean poster board, a small bonus for cutting costs (make it as life like as you can) all can help motivate them to make better choices.

Ask Don’t Tell:

Please do not ‘tell’ your child that you are going to start giving them an allowance and ‘this is the way it works.’ Consider this a financial rite of passage so to speak and enroll them in the excitement of being able to fend for themselves, be in charge of their own destiny, become the CEO of their own lives!

Just like adults, we despise being told what to do. We generally feel really good when we’re honestly enrolled into something exciting, especially if there’s something in it for us. You know your child best—their buttons, their passions, what move them. Spend time thinking about how best to enroll your child in the idea of being self-sufficient and in control. You may be surprised at how willing they are to take on this next exciting challenge.

Nothing is more powerful that being fully responsible for your own life. Using the right allowance strategy will provide the essential, and critical, financial practice your children need, before they move out on their own, to do, be, have and create anything they want in their lives.

What more could a proud parent ask for? Sit back and feel the glow knowing you’re doing everything you can to prepare your child for success, whatever that ends up meaning to them. Feels great, doesn’t it?

Elisabeth Donati is the owner of Creative Wealth Intl., LLC and creator of Camp Millionaire, a unique financial intelligence program for youth.
Elisabeth is known as The Financial Literacy Lady

Elisabeth is an expert in teaching the basic financial principles everyone needs in a way that is engaging, empowering and fun.

She is the author of The Ultimate Allowance and the weekly ezine full of thought provoking insight and information on all things
financial literacy related…
Financial Wisdom with a TWI$T.

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