Bottom Line
Teaching your children
Educating your children on their role in the family's financial scheme will carry them far in life

By Steve Freidell
Land Line contributor


Like many OOIDA members and readers of this magazine, you are probably the owner of one or more trucks. Your trucks and the people involved in your small business are always going in different directions. However, with a little cooperation, this business is manageable and can operate like a well-oiled machine.

Managing your family’s finances can occur in much the same manner. Successful business owners often apply the same tools for managing their company toward managing the family.

First, start by surrounding yourself with like-minded people. The most important person in this equation is your spouse or significant other, who must agree with the same goals as you. Otherwise, you need to redraft the family’s goals until you do agree.

One of the written goals should be a budget; however, it’s not the only goal. Other goals include saving for college, a new car, a nicer house, a vacation, retirement, etc.

Although it is just as important to make sure kids aligned with the family goals, they are handled differently. Merely discussing their allowances won’t allow them to feel part of the team.

Like most of you, I had an allowance growing up but that did not help me to understand how to manage money. I decided to undertake a different approach with my children.

I realized that discussing all the family’s goals is required, which takes some time and can’t be accomplished in one conversation. Educating kids on the financial responsibilities of the family not only allows them to see where their piece of the puzzle fits in, but also lets them see the whole picture.

I wanted my kids to understand that obtaining anything in life requires hard work and careful management of your resources.

I never gave my kids an allowance. On the refrigerator was a list of jobs to perform. For each of the jobs, I assigned a healthy reward, more than most would pay for a child to perform the task. I let them pick the jobs. As they grew older, their demands for more “things” required them to perform more work.

When we went shopping for something, my kids were required to bring their own money, as they knew I never loaned money to them or anyone else. They quickly learned to associate hard work with plentiful reward. Through this lesson they have accomplished more than I ever thought they would, and I’ve never needed to prod them along.

As each child grew older, began to drive, and started working at part-time jobs in the summertime, I opened simple checking accounts in their names. As I have suggested for each of you, I taught my kids how to manage their money through an online or computer-based program. They also received debit cards to use for basic purchases. Unlike a credit card, the debit card would allow them to spend only what they had in their accounts.

If they went over, they were penalized with an overdraft fee, which quickly taught them not to spend more than they had earned. Occasional failures such as a bank overdraft or an improperly reconciled checking account can serve as excellent teaching tools. I was never upset at my children’s failure, as each time they learned a valuable lesson that they wouldn’t have to learn later at a much more costly point in their lives.

As they went off to college, they carried these valuable tools with them. Since they had their own checking accounts and had already learned how to be financially independent, they spent wisely and frugally, rather than going wild with the family credit card.

Even when they were in-between jobs, or trying to focus on their studies and needed a little help from home, we would always agree on a fixed amount. They had to manage their rent, utilities, food, insurance, gasoline and entertainment expenses with this set amount. This arrangement further reinforced that money doesn’t grow on trees and that a well-planned, disciplined budget is crucial.

Managing one’s own finances helps instill self-confidence and a sense of what it means to be an adult. This learning process leads your children to be better decision makers in other areas of their lives as well.

Being a good business owner or parent requires the help, cooperation, and commitment of everyone in the group to succeed. If you do a good job of helping them to understand the whole picture, you’re in effect building signposts along the long and challenging road to success. LL

This material has been prepared for informational purposes only; it is not intended to provide and should not be relied upon for accounting, legal or tax advice.

Steve Freidell has assisted clients in their cash management, trading, and portfolio management of fixed income securities since 1975. Steve started his career at the First National Bank of Kansas City and later served as first vice president with Commerce Bank, where he served his clients for 25 years. He joined the DeWaay organization in 2006, the financial management company utilized by OOIDA. Steve Freidell may be reached at