Teaching your kids the values of money
Healthy finances - December 2004
Tuesday, November 23, 2004
Too much information. That’s what I find myself saying each time I see yet another article on kids and money. Every medium is wagging its finger at parents, letting us know we have not done enough.
Credit problems? Debit card abuse? Lack of savings? It’s all our fault. No one seems to be ready to say what we should have done, but the pundits definitely know we are failing our kids.
These articles hook me every time. I am too quick to agree with the author who is taking me to task. And I am an eternal optimist. I always hope that the next few lines will help me do a better job. But that rarely happens. The suggestions are either oversimplified or too ambitious.
My girls, ages 13 and 10, have action-packed lives that leave little time for anything else. I have trouble incorporating money matters into my girls’ lives and I do this for a living. Who am I? I teach parents and educators how to teach kids about money; call me a financial literacy professional. But I still am a mom, and I have all the same challenges you do in getting finances incorporated into my children’s lives.
Money management is not an exact science because money and emotion are so closely tied. Parents of older children frequently tell me they feel as though they have failed their kids because it was easier to talk about the birds and the bees than to discuss dollars and sense. The emotion of money can trip us up; often we avoid tending to our children’s financial education because we believe we have failed in our own finances and therefore can’t teach it right. Don’t worry, we can afford to make mistakes in our teaching. But we cannot afford to put it off.
So, we need advice on how to teach our children about money. But we need it to be easy enough that we can do it consistently enough to make a difference in our child’s life.
In this column, which will appear every other month in Chicago Parent, I hope to do just that. I will share my short list of things we can do to help introduce money to our children. I’ll let you know how this plays out at our house; you tell me how it plays out in yours. I promise not to give you obvious or too ambitious a short list. But if you think I have, I promise to listen to you. Send me a note; let me know. No. 1 is allowance So, let me go to the top of my short list: allowance. Don’t groan, just keep reading. The girls pushed hard for an allowance this summer. Both of them were tired of asking me for money to buy candy at summer camp. I wanted them to use our home stash rather than spend three times the normal price at the camp store. But I was thinking like a 46-year-old mom, they were thinking like kids. To them, this represented a social—not just a financial—transaction. It was their independence.
When I finally got it, we started the allowance.
I created a contract and listed expenses that we agreed the allowance had to cover: spending money at camp, toiletries and clothing. I multiplied by four what I thought I was spending weekly—about $20 a week—and set the monthly payout date on the first of the month. We both signed the contract. Then I told them they had to keep track of receipts. Before the next allowance, we would go over the prior month’s expenses.
I gave them each $80. I told them they had four things they needed to do with the money: save, spend, donate and invest. On the day they were paid, they needed to allocate some money into each of the four choices. I did not say how much. This was my way of introducing the concept of pay yourself first and divvy up the rest into the other categories. I wanted to see what they would do left on their own.
Allowance has been happening for four months now. I haven’t always done my part—I twice missed my self-imposed payout deadline—something the girls bring up when they are short on receipts. The girls struggled with keeping track of expenditures. Both were broke early in the first month, did better the second and, when they realized with horror that shampoo was part of toiletries, started putting aside money for needs so they did not run out by spending it on wants before the end of the month.
We are still working out the bugs, but the most important lessons? Don’t quit when you blow it, and don’t pretend problems can wait. The girls wanted this financial independence, so they push for the allocation each month and work to meet the requirements I set.
I want them to learn responsible money management and not to always rely on me for everything so I am motivated to get better about getting to the bank so I don’t miss the monthly payout.
I am convinced this allowance approach works. After four months, my girls proved it to me. After last month’s allowance, both came to me carrying envelopes labeled “donate.” Inside were four weeks’ worth of giving. When I asked why they were bringing it in all at once, they said, very matter-of-factly, that this way the money would not get spent on something else.
Not bad girls, not bad at all.
Susan Beacham is the founder and CEO of Money Savvy Generation, a financial education company that provides innovative products and services to help parents and educators teach children the skills of basic personal finance, www.MoneySavvyGeneration.com. E-mail her at Susan@MSGen.com.