HDYDI: Teach Your Kids About Money
If there was a class on how to spend money, I could totally teach that.
Oh, I kid. Kinda.
In all seriousness, money is something we think about every day, from paying the electric bill, to eating out (or not) at lunch, to filling up the car with gas. Early on, when our oldest was super little, we gave little thought to teaching him about money management. But, as the years have progressed, jobs have changed and children added, we realized that unless we started laying the groundwork for solid financial planning MasterCard and Mr. Collection Agency would do it for them.
I’m no financial planner, CPA or investment guru – that would totally be my brother-in-law. But, I would like to share a bit of what we do right now, realizing that we have quite a bit more teaching to do with our kids when it comes to money and financial planning.
1. We operate on the philosophy of give, save, spend. Perhaps it’s because I’m married to a man who raises money for a living, but giving of your financial resources to charities in which you believe is a non-negotiable at our house. Just as Scott and I decide the beneficiaries of our charitable giving each year, our children must do the same. When they receive money, whether it’s as a birthday or sacramental gift, the tooth fairy, a “grandparent five” or extra money here and there, we require that they give some away, save some and spend some (if they choose).
2. To make it visual, we implemented a savings jar. That way, they can see their cash and when it dwindles down to coins, the jar doesn’t lie. Every 6-9 months, we clear out the jars and put the money in their savings and 529 accounts. You’d be surprised how much moula little people collect over time! Those jars are primarily used for things like school dance fees, end-of-school-year pizza parties, extras they want to purchase like yearbooks, candy or a small trinket. They don’t get carte blanche with that cash, but they do begin to understand that living takes money and when you spend it, it’s gone.
3. Speaking of lessons, teach your kids the difference between a want and a need. Shoot, for that matter, teach yourself! I’ve convinced myself many times that a want is really a need. Oh, y’all, I am gooood at that. But, looking back over the last 17 years of marriage there’s only purchase I regret NOT making. There are a slew that should’ve never been bought, though. And if you’re wondering what it was, it was a gorgeous baptismal gown in Florence, Italy. I’m quite certain it’s still sitting in the shop window looking quite radiant.
4. While I realize this has the potential to be wildly controversial, we don’t pay our kids an allowance. Instead, we call their daily chores Citizen of the Household (CoH) duties. I don’t think kids should get paid to do things like make their bed, take out the trash, pick up the play room or empty the dishwasher. That’s called responsibility. It’s the tax you pay for living in the house, if you will. Everybody has to contribute to make a happy household. I’m the mom, not the maid.
5. We do, however, pay them for jobs that are above and beyond. As an example, last weekend the boys bagged 21 bags of leaves and they got paid for it. It wasn’t a financial windfall, but it was most definitely more than their usual chore responsibilities.
6. Just as they get paid occasionally for doing things above and beyond, our oldest has also earned money doing small jobs for the neighbors – pet sitting, plant watering and power washing. It’s taught him a few things: 1) responsibility, people are depending upon him to do a job; 2) pride, if he does it well, he just might get hired again; and, 3) money management skills, by learning to budget and save for the things he wants to purchase with that money.
7. Recently, we decided to take our money management lessons a step further by allowing our 13-year-old to open his own checking account on his birthday. Right now, the account is in our name with him as a co-signer. At 16, it will become his, but because he’s still considered a minor we will have access to the account. At 18, he’s on his own. We wanted him to have some limited security with the freedom to make purchasing decisions. We’ve made it clear that any “oopsies,” like overdraft charges, are his responsibility. Better to have him blow through $100 at age 13 than $1,000 at age 23. We’ll be teaching him how to keep a ledger the old-fashioned way, then keep track via an online program like Quicken. It should be a fun experiment, we’ll keep you posted.
8. At some point in the next few years, we’ll also encourage our oldest to take out a small loan and then be responsible for paying it back so he understands that borrowed money isn’t free. Scott’s parents did this with him and he still talks about what a great learning experience it was for him. It’s never too early to create positive credit.
9. Learn to say YES to your kids when it comes to financial decisions. Several years ago, we had a family reunion and to offset the cost, we hosted a family auction. Relatives brought sentimental belongings, store-bought things and hand-crafted items and we put them all on the auction block. Will decided he HAD to have a pink inflatable crayon. I mean, wouldn’t you? The bidding finally ended at $27 and he won. He was so proud. Until five minutes later when his sister poked a hole in it and he saw his $27 evaporate. We came home, had him dig $27 out of his savings jar and then hand it over to the auction to fulfill his obligation. We decided not to bail him out. That’s a lesson he’s never forgotten. We still joke about the $27 pink crayon. That’s a love and logic lesson at its finest.
10. Equally important? Learn to say NO. You are, after all, the parent. In our house, a fifth grader doesn’t need a smart phone or a TV in his room or a $100 pair of basketball shoes. Those are all derivatives of our family philosophy. Yours may be different, but whatever it is, be consistent. And be the adult.
I suspect that as our children get older, we’ll adapt and change when cell phones, cars, boyfriends/girlfriends and after-school jobs/activities enter the picture. So, any of you parents of older kids? Chime in! My ears, they are a listening.
This is almost exactly what we do. We use Dave Ramsey’s Financial Peace Junior for the girls. Same idea, using an envelope system. Our four year old was very sad when she didn’t have any money to put in the basket at church because she hadn’t earned any that week. Good lessons all around.
Our family has many of the same methods of handling money. Our children do receive a small allowance, but it is not for doing (or not doing their chores). It basically is to help them learn to manage money. If they want to purchase souvenirs while on vacation or something like that, they have to pay for it. As soon as they are old enough (and have a part-time job), they will also be responsible for buying their own clothes.
I like the idea about taking out the load and paying it back. I’ll have to make a note of it for future reference. Thank you for sharing!
These are all great! The biggest problem my kids have is with knowing the difference between a want and a need. Hopefully that will come with time!
I’m totally with you (except for #8, we are on the Dave Ramsey plan as well our kids are learning that debt is a four letter word) We got tired of the constant requests for money so we have a combined Dave Ramsey plan which is very similar to yours with kids being paid on commission and the Love and Logic plan with kids just getting the money and learning to budget it. Our kids get paid on the first and the 15th, they get a very small base salary and then have opportunities to earn commissions. It has really cut down on the requests because I just say sure you can buy it with your spend money. A great story though, last fall a Mission group at church was selling bricks to raise money for a trip to Mexico the kids decided to pool all their give money together and buy one! It was so wonderful to see all 5 of them march up to that table and count out their money! It’s not a perfect system (what system is?) but it is really working for us.
Love these ideas. Our oldest is close to 5 so we will be starting these lessons soon. On another note, I LOVE all your different labels. Do you have a template and the font used available somewhere? And do you have to buy certain size label sheets when printing them? And I wish I could find a chore chart like yours! I love that it has pictures next to the words. That is important in a young house!
Hope you’re feeling great,