Teaching Our Kids About Money

I didn’t know there was such a science to giving kids' allowance.

The Chart

My husband and I started giving an allowance to our oldest child about a year ago, now eight, (update: he is now ten) and had set up a complicated chore sheet so whenever he accomplished putting his backpack on the hook or throwing away the trash, then he received a checkmark. How many checkmarks he received at the end of the week would determine how much money he would receive for his allowance. At the end of the first week, we were already tired of tracking his daily accomplishments.

Allowance Separate From "Chores"

Later I was talking to a girlfriend about our efforts and she had said her husband had done a lot of research on giving allowance to their daughter and they had set up some system of setting money aside, giving to charity, and teaching her how to use her "spendable" money wisely. I discovered that allowance could be introduced to kids as young as two or three and it is suggested to be separate from “chores” which is a family responsibility. Geez, we thought we already blew it and we had just begun on our journey of teaching our children about money.

Financial Health

We work hard to make sure our children are emotionally and physically healthy, but what about our child's financial health? “A parent is the most influential teacher in a child's life - especially when it comes to money,” claims Susan Beacham in her award-winning “Healthy Finances” column in the Chicago Parent Magazine. She continues, “When you teach children they have choices about what to do with their money, you begin to teach them self-discipline and how to delay gratification.”

Get A Piggy Bank

To my surprise, there is just a swarm of information on teaching our kids about money on the Internet, but they all seem to start off by recommending getting our kid(s) a “Piggy Bank.” So there are all kinds of piggy banks out there and not just the one slot kind anymore. Now they are more of a learning tool and Money Savvy has several versions with four slots which allow our children to determine if the money will go to “save,” “spend,” “donate,” or “invest.” The Sharper Image has a robot that talks and says things such as “I’m hungry, please fill me up,” or if you take any money out it says, “I hope you have a good reason for withdrawing your savings.” Beacham says, “Teach your child that they have four choices for the money in their lives … and the child who learns this lesson will do more with their money than just spend.”

Invisible Money

Terri Cullen writes the “Fiscally Fit” column for the Wall Street Journal Online and points out that our kids are just not as familiar with the hard currency of money these days because of “the declining visibility of cash in American society.” She indicates that it is “even more difficult to teach children about such an abstract concept as managing money. Today, even the smallest of transactions take place electronically. You can charge a burger and fries at Wendy’s … or wave a Speedpass ‘wand’ at the pump at Exxon.” Nan Mead, director of public affairs at the National Endowment for Financial Education in Colorado, says, “There’s an increasing abstraction in teaching children about handling money because kids don’t see parents go to the bank and put money into a savings account,”

A "Knowledge-Based Ecnomy"

Chairman Alan Greenspan at the 33rd Annual Legislative Conference of the Congressional Black Caucus in Washington, D.C. in 2003 remarked, “a strong and effective system of education is one fundamental way to strengthen our economy and raise living standards, and education about personal finance that helps consumers of all ages meet the challenges and demands of our increasingly knowledge-based economy is one important component of such a system.” Maybe long-term money education will help our economy in the long run, but also help our kids currently to control instant gratification and be able to give to others readily.

A Dollar More Each Year

Moneyinstructor.com recommends introducing money early in our kids’ lives and suggestions giving an allowance of one dollar for every year of age every week. In our household, we have set it up that we pay our five and eight year old when we get our paycheck. I go down to the bank and withdraw their allowance in one dollar bills. On their wall at home, pinned indiscreetly behind their closet doors (ssshhh, don’t tell anyone), are three envelopes labeled: Saving, Charity, and Personal. When the kids receive their allowance they put 20% in their Savings envelope, 10% in Charity, and the rest go in Personal which is theirs to spend whenever or however they choose. About twice a year we put their “Savings” into their saving account we set up for them at the bank and they can not touch this money (saving for college any way we can). Their Charity money can go to any charity they choose which usually involves helping another child.

More Info

If you want to learn more about how to teach your kids about money, I would suggest going to Money Instructor (moneyinstructor.com) or Money Savvy Generation (msgen.com) for more information.

Together we can teach our kids how to manage their money and just maybe, as Alan Greenspan points out, to learn economic principles so that they can help their country when they grow up. (published in La Jolla Light - January 2008)

What tips or ideas do you have about teaching your
kids about money?

How To Save Money - Now and Forever

Two of our friends have recently lost their jobs. Now they were not just low paying jobs or even middle-of-the-road, bridge jobs (jobs only taken to get to another job); they were professionals bringing in an income which supported a spouse, kids, house, and retirement. One of those friends was laid off two weeks before Christmas. Big time bummer. The big bummer part was that, he as such a nice guy, he had just helped his mother-in-law buy a house by lending her his savings thinking he would get the money back while in his "secure" job. Then he unexpectadly lost his job and the savings money was tied up in someone else's house and he then he had no income (his wife had a small part-time job).

Okay, maybe it wasn't such a good idea to lend someone ALL of one's savings, but still something like this scenario COULD happen to anyone of one us during this economic time. Since my husband is in an architect and he could possibly be laid off (after everyone else, besides the principal, in the firm is laid off so we will be able to see it coming) we realized we really have to be prepared. Last year we bought a bonifide fixer-upper home and we have spending all of our pretty nickels on house maintenance. This January we had to freeze our house spending budget. How our house looks today is how it will look a year from now (still needs lots of work though). So, the idea is that the money we don't spend on the house will go into our savings (which was almost all used to buy the house). I also started thinking about other ways to save money.

1. Groceries: Okay, if you are anything like me, you go to several stores to get all the ingredients for a meal. Lately, I have been a bit scattered and have been buying food that I need for that day. I go to one store to get produce (Henry's Market), another store to buy snacks and "fun" foods (Trader Joe's), another store to buy bulk items (Costco), and yet another store to buy the substantial foods such as meat and canned goods. I avoid the Von's, Albertson's, Ralph's, and those stores, because frankly I find them to be very expensive. But then, who has the time to go running around to all the stores I go to just to save money using my precious time up. I am not disciplined enough to make a menu and break all the ingredients up onto separate store lists. Last week I did make a menu and was able to get all the ingredients in one store (Food 4 Less) and my life and my budget was so much better.

2. Clothes: When my husband and I were first married we had a huge debt we had to pay off. It was my husband's school debt which was enormous. So, we froze our clothes budget and did not buy not even one sock for an entire year. It worked out fine after all and I really had to resolve to not looking at catalogs or trying to keep up with the latest fads anyway. Now, instead of cleaning out my closet, I exam all my clothes that I don't wear and try to figure out why I don't wear them. Shirt too short for this year's long wearing style? Pants too big or flare out too far. Too long, too big, too small, out of fashion? Once I figure it out, I take it to the tailors and she alters the clothes. Walla! I have new clothes for a smidget of the price. Shirts and pants may have extra material on the ends, but it now seems to be my new signature style.

3. Household Items: We have been trying to move into this house for a year. I know there are people out there who can move into a place and then three weeks later throw a party. Our house is still getting unpacked. If there is a "blank" space in our house and I see something on CB2 or West Elm (my two favorite decorating magazines) instead of buying the item I try to find if I have anything like it in our current household possessions. It hasn't always worked, but sometimes I find something that works even better. So, I have resolved to try and use what we already have, just move it around and try to be creative. No need to do it the same way as it was in the last place.

4. Entertainment: My husband and I love movies! Any chance we can we want to go and see a movie. I know for a date day we just sit and watch a movie and don't talk to each other, but after the movie stimulates good conversation. Well, first of all we can't afford to go to a movie and meal every time we go out (which is a rare treat anyway), so we have now resolved to be a bit more creative with our time. Now we try and go on a bike ride or walk down to a local cafe' in our neighborhood. With our kids we also go on bike rides or hikes and for low paying entertainment we have been enjoying bowling with the kids.

These are just a few areas we try and save money. What creative ways do you save or make money in your household?