Step 4: Teach Your Children to Work

My neighbors, Barbara and Glenn, encouraged their two daughters—one is now in college, the other is out of college—to work from the time they were early teens. How do I know? Jess and Amanda were my best babysitters, but that's not all. Their parents paid them to do jobs that they would have paid outsiders to do—from washing the car to babysitting for younger cousins. As they got older (and their desire for more expensive things outstripped the value of the jobs they had to do around the house), they encouraged them to get jobs as waitresses at the nearby golf course. When Amanda got her driver's license, she added a second job working in a store that sells the sorts of trendy clothes she loves—as much for the employee discount as anything else. Result: The two girls grew up fiercely independent, rarely asking their parents for money for anything.

Working in high school and college seems to pay off later in life as well. According to a study conducted by Roper ASW in 2003 (for my book, You Don't Have to Be Rich), people who worked through high school are significantly more likely to achieve their financial goals and to be knowledgeable about money and investing than those who did not. And they're not likely to do less well in school. Other research has shown high school and college kids can work up to 15 hours a week without negatively impacting their schoolwork. How do you groom a good work ethic in your kids?

Don't give them everything they want
Again, this seems to be a running theme in this program. If you give your children enough money to buy every little thing their little hearts desire, you're enabling them not to value anything at all. They have to want things—and then wait for them—for meaning to return. And you'll soon come to understand that things they buy with their own money have much more meaning to them than anything (and everything) that they buy with yours.

Show them how to search
Trust me on this: Babysitting is not bad work these days. Depending upon where they live, kids in their early teens earn $5 to $10 an hour. But eventually, your children will—and should—want more. Show them how to read the classified ads in their local newspaper, their local newspaper's online advertising section and websites like Monster.com and Snagajob.com (which specialize in hourly work). Sit with them as they make those daunting first phone calls, put together a rudimentary résumé, write cover letters (proofread carefully!) and book their first interviews.

Hold mock interviews at home
For some kids, the idea of talking—interviewing—with a strange adult is more daunting than the idea of going to work. You can ease some of this strain by holding mock-interviews before they head out on their very first real one. Ask them the following questions:

• Why do you want to work at ____________?
• What qualifications or skills do you have that you think make you a good candidate for this job?
• How will you juggle having a job with your schoolwork?
• And finally, this was the question Woody Allen asked me when I interviewed to be his assistant—I completely botched it, but answering it well will serve your children well: What should I know about you that isn't on your résumé or in your cover letter?

Help them keep the job
Once your children land their first job, help them keep it. Encourage them to start keeping their schedule someplace they're not likely to lose it (like Yahoo.com). Explain to them how lateness or questionable absences are viewed in the workplace. And make sure when they leave to go back to school or pursue other interests that they do so on a good note, with written references in hand to pass on to future employers.

Open an IRA
Finally, a financial note. Once your children start earning money (it has to be reported income—which means they have to file a tax return even though they don't have to pay taxes until they earn $5,150 a year), they are able to contribute to an individual retirement account. Preferably, this should be a Roth IRA, which not only grows tax-free forever (you contribute post-tax dollars) but allows penalty-free withdrawals for education and buying your first house. If your children have spent much of their money or balk at the idea of socking it all away, you can make the contribution for them. It may be well worth it.

A $2,000 Roth IRA contribution for a 16 year-old that grows at 8 percent annually will be worth $86,855 when that 16-year-old is 65. Make that contribution every year and the 16-year-old will have $1,232,395 at retirement.

Now it's time for Step 5: Teaching your kids how to give back

Get all the steps to raising money-savvy kids