Kids and money.... how do you handle it?
As I spend more time looking into finances I am very aware of how little I really know about the financial world. I do not want that to be the case for my girls. I know there are tons of books out there on the topic but I would like to know what you have done.
Do you give your kids allowances?
When did you start and how much do you give?
Is it chore related or purely for the sake of learning about money?
How have your kids responded to your method?
If you've got a good kids & money book recommendation lay it on me.
And if you don't have kids yet... what did your parents do for you? And did it actually help you to learn financial responsibility or not?
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Ok, I have two examples of his, my own and a friend of mine.
My parents gave me a (small) allowance pretty much as far back as I can remember, until I was able to get a job. It was given to me in exchange for chores. I had weekly chores (washing or drying dishes every night, making dinner a couple times a week when I was older, cleaning my room, vacuuming, dusting etc.). If those chores weren't done, no allowance. I think that this was a smart was to learn not only how to deal with money, but understand that money has real value.
My second example is a friend of mine. Her parents never gave her allowance, and any money she did make working (which started very young) went into a bank account she was never allowed to access. She never, ever had pocket money. Eventually she started hiding tips from her parents so that she could have money. When she was 18, she moved out, at which point the bank account had about $10 000 in it. It was all gone within in 4 months.
Take it as you will.
Sarah,
" It was all gone within in 4 months.
"
interesting!! I'm really glad you shared this!
Dave Ramsey has a unique way of teaching kids about money. Basically they earn money as adults do, by working for it. It's not called an allowance, but a commission. Our kids have jobs that are age appropriate: M must clean her room, put her clothes away, set the table for dinner, vacuum the living room, organizing the shoe shelf and cleaning one bathroom (washing the sink down, wiping the door knobs etc.). She earns one dollar per week for each completed job. If she doesn't do the job, she doesn't get the money. Simple as that. I know it sounds like duh, but there's more.
Once they get their money, Ramsey has them divide it into 3 categories: give, save, spend. They give 1/10 to charity (tithe), save what they want for whatever they want and the rest is theirs to spend as they wish. M gets $6 a week for her chores. She gives .60 a week as tithe, is saving $3 a week for a Nerf gun to battle with her brothers and gets $2.40 a week to spend as she wishes. We try to guide her to spend her spend money wisely, and will veto her spending if a better deal can be found.
B gets $11 a week, but I'll spare you the details of that. You probably get the idea now. We've been doing this for almost 2 years and it works great for the kids. We'll be starting K when she's 5, as that's when, according to Ramsey, they can best understand the relationship between work and money.
Here's a link to a SUPER product Ramsey sells that we use with the kids. It works great and the kids love pay day!
Here's how NOT to do it:
Allow teenager to work three jobs, just because she's bored and understimulated at school. Allow her to pocket ALL OF her earnings, and spend it mostly at the Clinique counter (the obsession started early people), and/or on clothes.
Don't teach her about savings, or credit cards. Credit cards = free money.
Give her an allowance at college, and pay her phone bills, no matter how high they get, each month.
Also, treat her to a whole new wardrobe each spring and fall.
My parents tried to cut me off financially when I was 22, and making $18,000 a year (that's $900 a month take-home pay). Given the above "lessons" I wasn't exactly prepared and have had to learn how to manage money myself.
I paid off my credit card today. That's the last time I'll ever do that. Never again. I mean it.
My Mom taught me to budget from an early age. I don't remember my specific chores or how much allowance I received...but it was fair.
She taught me to budget it out each week...ie:
$1 saved for monthly movie (cuz back then a kid could go to the movies with a friend for $4)
$2 saved in savings account
$2 saved towards something I wanted (usually tapes from Columbia House or a magazine subscription)
$2 to spend however I wanted (CANDY!)
Something like that. We used to write it all down in a little book. I like to think that it carried forward to adulthood. I know it helped when I first moved out and I would write down all of my tips and allot them out in the same way. Made living on a waitress salary so much easier. :)
Tina,
So are you giving each kid their age in $? And do they have that same # of chores or are B's chores worth more money?
M vacuums?!?! God I've got to put Kid to work!
Bi0nicw0man,
Wow... your mom was serious about money!
Heather,
Yay on the credit card! :)
I find the recollections on all of your childhoods to be fascinating and maybe even more informative since you know how it turned out! Thanks!!
My dad is a financial genious with his own money. I think that has helped a lot. My parents are tax advisors and hearing them bitch about how other people are dumb with money helped a lot. I got an allowance growing up, just like $1 a week. Usually spent it on candy. However grandma birthday money and whatever other money I had went into a bank account each week (started a kids bank account at about 8?). I could take money out if I wanted for big shopping trips to the city and Christmas shopping and whatever. I was a hoarder though. On top of our allowance, we were paid for doing "work" at the farm (on top of every day chores) or in mom and dad's office (shredding or filing etc).
When I was about 15, allowances stopped and each kid had to make a budget and basically buy all our own clothes, make-up, hair products etc. We'd make a detailed annual budget from everything down to how many pairs of underwear each year to how many hair cuts, we always overestimated, but after mom and dad approved our annual budget, we'd get 1/12 of that each month which we'd put in our bank account until we'd go shopping or whatever. I think it worked well.
The most important (in my opinion) is YOUR attitude towards money. For example, my parents commonly talked about the "idiots" who didn't pay off their credit card each month, and didn't max out their RRSP contribution (Canadian retirement savings thing) each year. So it's been ingrained in me that those are idiotic things to do.
Randi,
Double Wow on your having your own budget as a teenager!!! I love it! I think that is genius. That gave you a solid couple of years to practice before it was your own money.
You Canadians seem a little more on your game...
By the way Randi your arms look amazing!
Ok, You're going to laugh.
But have you seen this?
My sister (the one who recommended the first one) uses it, she's got 4 teenage boys and RAVES about her system. I haven't read it yet though. (But I think the basic concept is a bigger allowance with more responsibility as kids get older. They do chores, they get money, but then they're responsible for paying for haircuts, movies with friends, shampoo, etc. She said they got socks for Christmas and were ecstatic because they knew the value of a dollar and were excited they didn't have to spend their money on it.)
oh, and they got other stuff for Christmas too...not JUST the socks, lol...
Do you give your kids allowances?
Yes. All of them. Even the 1 yr old. 100% goes into savings until they are 5. Everyone gets $2/wk until they're 5, then $15/mo. After 5, half of the money has to go into savings, and the other half has to be used for "I Wants", with the potential for earning matching money for saving for major "wants". All major wants must then be "sat" on for 20 days after the money is saved to make sure you really really want it (it usually rolls over to a more expensive 'want').
A certain amount of the spendible allowance is saved for family perks, like the annual zoo membership, the monthly movie, etc.
When did you start and how much do you give?
1 year old. You have to be able to pick something up in order to get allowance.
Is it chore related or purely for the sake of learning about money?
Both. We teach that we do chores because we live in this house together, and it is our responsibility to take care of our home as well as the things inside of it. That said, if they don't take care of their things, we (the parents) will have to save their allowance to eventually replace the things they're not taking care of (also known as 'no chores, no allowance'.) They are also taught then when they grow up, they will have to work to make money to afford to havea place to, something to eat, and a way to get around. Our 7 yr old had an acute case of myparentsarerichitis so we give her play money and she sits down with me to pay the savings and the bills and see what is left over for disposable income. She sees how we save our money for retirement, because she knows that people don't work forever. She knows that our family has long-term goals (pay off the mortgage, get a Disney Vacation Club real estate share) as well as short-term goals (gut and remodel the bathroom.)
How have your kids responded to your method?
They don't really know another way, so I guess they think it's normal.
If you've got a good kids & money book recommendation lay it on me.
I really like ING Direct's Planet Orange. You can print out activities and whatever to teach your kid about money and saving, and there's a really great interactive game sort of thing there. I think the print outs are in the teacher section, under tips and tools at http://www.ingdirect.com
For my own reading, I like Kiplinger's Raising Money Smart Kids, because it covers all ages, and it also gives you good tools on how to talk to your kids about money.
My oldest daughter knows that she is expected to go to college after high school, that it costs a lot of money, and that she will have to help save for it. We have 529 accounts for all of the kids to help ease the burden of that cost, and their birthday money and gift money goes right into it (we can also get a tax deduction for the amount of money we put in the accounts each year.)
There's my big long thing about how I'm teaching my kids about money.
Katieo,
yeah that one is listed in the front of the one I have... I didn't know if you had read it yet or not. So you aren't doing allowances yet? I have some friends who already are and some who haven't thought of it yet. I think I might start this summer along with some daily chores while she's home all day every day!
That should be "a place to live" in there. Sometimes I think faster than I type.
Oh, you totally have to put kid to work. My 2 and 3 yr olds regularly clean up their toys (before nap and before bed) they dust (everyone loves a swiffer duster), they are afraid of the vacuum, but they like to scrub things with a sponge and baking soda (just make sure it's a bit wet). They match socks by color, and they are required to hand me their clothes to be put into their drawers (or they put them in with close supervision.) Evie (2.5) helps unload groceries, and she'll put the items that go into the lazy susan cabinets away. Topher (3.5) takes the cold stuff out of the bags and makes a pile in front of the fridge. They all put their dirty clothes in the laundry. The little ones put spoons in the silverware drawer, and Elizabeth (7.5) puts forks and butter knives away. Sharps are for mom (that's the mantra).
Emily (1.5) is just required to pick something up and try to get it in the toy bucket. We don't care what. She comes with us to put her clothes in the laundry.
I figure in about 4 years, I won't have any housework to do. :D
My bad, Ramsey's system can be done as early as 3.
Yes B has more chores. They get the same amount of money as their age. Some of B's chores are worth $2 each due to their extensiveness. He has to clean the backyard 3x a week, vacuum the car, clean his room, clear the table after meals, unload the dishwasher and put the dishes away, put his clean clothes away and he also has 2 bathrooms to clean, thoroughly.
Every year on their birthday they get new chores to correspond to earning more money. They have totally learned the value of a dollar and will think twice about a toy they want. Sometimes they'll specifically wait for it to go on sale or they get a coupon so they can spend less.
We've also taught them about debt, B in particular. He owed his sister like $5 once and about died until he paid her off. Right now he's working on paying me back for his replacement Ipod. He's got $50 left that he owes, but he's paying faithfully. He hates oweing money and I think he's gotten the message about how debt sucks.
My own experience:
When I was old enough to get a job, my Mom insisted that I do just that. My earnings were my own and I got to do with them as I wished. However, I did not receive additional money from my parents (with some exceptions).
My Mom always talked to me about saving for things I wanted or for a rainy day. So, if I wanted to go to the movie, but already spent all of my paycheck, I learned a lesson about saving some for a situation just like this one.
My parents also didn't buy me things like the shoes I really wanted but that weren't practical. My Mom would encourage me to save my own money and buy them when I had enough.
The first exception to this rule is that I was also given an allowance 2x/year for clothes and shoes. I can't remember how much, but let's say $500 2x/year and that was all I got from my parents for school clothes.
Second exception was necessities. My parents still provided necessities (school supplies, medical care, etc).
The third exception was LARGE purchases. I was allowed to propose financial agreements to my parents. Loans or joint-ownership. This is how I got my first car. My Mom provided like 60% and I provided like 40% of the cost.
I think it worked for the most part! I do wish there had been more discussion about saving long-term, understanding about how money grows. I wish I knew more about mutual funds, high interest savings accounts, etc. I had the spare cash back then to actually put them to good use.
Thanks guys that is a lot of really thorough information!
These kids are going to start to carry their own weight around here... pronto ;)
Midge,
1st... was that you walking a dog in a bathrobe the other night?! ;)
2nd... wow I am so impressed by your parents. Lets just say that is not how I was introduced to money as a teenager! It seems from the few of you who had similar upbringings that this style really does work though. Interesting. Check on the savings info... I think that is really important.
Me "Are you ready to start earning your own money?"
Kid "yep"
Me "What would you do with it?"
Kid "Put it in my piggy bank"
Me "So you're going to save it up? Then what are you going to do with it?"
Kid "give it to Baby."
I strongly recommend "Love and Money" by Updyke. He addresses how emotion and money are intertwined and why it's important to understand that when making decisions about money. One chapter is devoted to money and children. "Raising a Fiscally Fit Kid" is also a good one, and I saw the author speak last year -- she was phenomenal.
I'm pretty fiscally responsible and generally have been with one exception when I was laid off early in my career. My parents generally followed the Updyke method.
We do "chores" here for "allowance". My girls are (just turned) 4 and (almost) 3 and we've been doing this for about 6 months, and so far it works great. What we do is print out their "chores" for the week on a weekly calendar and hang it on the fridge (each girl gets one. also, since they can't read i print the picture of the chores so they know what they are). Their chores are: clean up toys, clean up room, put plates in sink after meals, brush teeth, and helping/sharing (this one was my 4yo's idea). At the end of each day we go to the calendars and put a sticker on each chore they complete. (if we had to yell or constantly remind them, no sticker). And if they get all their stickers they get a quarter for the day and put it in their bank. If they really want something (new doll, etc) we tell them how many quarters they will need and they can then count down to it.
While they don't get the idea of exactly what quarters/dollars are, they do get that things cost money and some things cost more "quarters" then others. Also, they know that they have to do things around the house in order to "earn" their money.
Added bonus is that the "if I have to ask again, no quarter!" results in things being done VERY quickly!!
The last big thing they saved for was Disney. They decided they wanted to save their money to buy themselves a "present" at WDW (totally their idea). Well, they saved up $6 and were SOOOOO excited to buy something with "their" money. My oldest got a set of plastic drinking cups and the middle got a set of Finding Nemo toys and even now (1 month later) they treat them like GOLD because they are "their SPECIAL things that they bought with THEIR money!" (ok, ok, we added about $10 to each of their money, but come on...its disney inflation! and no, we didn't tell them that it wasn't all their money..)
Ok, enough of my book. Bye!
well since i am a children's book editor i can recommend this brilliant book from my company: http://www.amazon.com/Money-Where-Comes-Save-Spend/dp/1897066104/ref=sr_1_2?ie=UTF8&s=books&qid=1205523901&sr=1-2
if you are into it i can send you a copy (for free)
it's slightly too old for your kids but it's a really fab book and all the concepts they would need are there.
my parents gave us allowance for chores, we did a variety of chores over the years. However, we were never told what we should/could do with the money and I don't recall every being told I had to save, give etc.
I do know that about 5 years ago I found out that interest rates went really high when I was a kid and my parents struggled to keep the home, which they did, I never knew, they made a decision to not tell my sister and I, and not share any worry over finances ever, I don't agree with this approach when I moved out I got 10 different types of credit cards and maxed them all, long since paid and gone but I really had no clue how much the phone cost, eletricity, groceries nothing..
I like the more regulated approaches parents are offering up as comments, and casual chit chat around the kids about money, lets just say I would have really liked that in hindsight..
eurydice,
I'll shoot you an email.
Shirls,
I managed to avoid debt and crazy spending... not because I was informed but because I over heard fights (I was a listener) about money as a kid and never got talked to about it. Opposite of your experience but still a decided decision on my parents part to not talk to us about money. Definitely not the right approach.
As an accountant, it warms my heart to hear kid wants to put her money in her piggy bank.
I started saving every cent I earned when I was 7 or 8. I had enough money to buy my own car when I was 14, yes, before I could drive.
My philosophy in raising my own kids is that they should do a certain level of chores (age appropriate) with no money tied to it, just as a part of their contribution to the family/household. I started giving my teenager an allowance when she was in 1st grade - $5 a week...and she always has had the option of doing extra chores/work to earn more money.
I also think every person has their own natural tendencies, some are natural spenders (and keep themselves as clueless as possible to avoid the reality of money/budget) some natural savers. So you need to find out what your kids are, and try to teach them the skills that are appropriate for them as individuals. My teeanage is not a natural saver, so I set her up with an account that I deposit all of her allowance/earnings into - then she had to actually think about things before she pulls the money out.
That being said - it is always harder to keep to these plans in reality, than verbalizing them.
We are trying to teach the kids a the 10/10/80 rule, give 10% to charity (church,foodpantry,whatever need touches them) save 10%, and use the 80%. Of course what also needs to happen is helping them to learn that the more they save the quicker it adds up, how to shop and spend wisely, and I am planning on all of them taking consumer math in highschool to learn budgeting,checkbook use,etc...
PS, that 10/10/80 thing is in Katieo's fav finance book, but it is really close to what I was making the kids do anyways, the hard part is sticking to that as an adult...
I haven't finished reading through all the comments yet, but I wanted add that I have Moonjars for boys and even though we don't fully use them in the way they are intended, I really like the concept.
Here's a link: www.moonjar.com
eurydice, what is the name of the children's book you recommend?
Julie,
the book is HERE.
Hey Julie,
is the moonjar (I did go look) a 33/33/33 thing?
Shelley,
" So you need to find out what your kids are, and try to teach them the skills that are appropriate for them as individuals."
Good point.
Emmy,
We're off to the homeschooling fair... I'll report back!
Mrs F, the moon jar does not have to split in thirds evenly...but you have 3 different little jars to put the money in.
for the record i am not ignoring your email - it's just my work address so i'll get to you (and read it) on monday! :)
eurydice,
oh no big deal.... I figured as much! :)
Busted...it was totally me walking the dog in my bathrobe and pajamas. I'm hoping you only saw me 1 night out of the three?! :)
I didn't get an allowance growing up, and I didn't have set chores. When I asked my parents for something, I generally got it. However, before you think I was completely spoiled, let me add these things:
-My family didn't have a lot of money when growing up, and I learned very quickly what was reasonable to ask for and what wasn't. I didn't ask for a lot.
-When there were chores to be done, my mom asked me to help, and I did them.
-When I was about 17, I started working, just because it seemed like the "right" thing to do (most of my friends got afterschool jobs). I kept the money I earned in my own bank account and spent it as I wished. I could still ask my parents for money if I needed it, but again, I rarely asked.
-In college, my meal plan/housing was paid for, and I got $700/semester to buy books/non-campus food/whatever else I wanted. When that ran out, I could ask my parents for more. I rarely asked for more than $100 or so. All of this compared to my peers who complained about getting about $700 per MONTH.
Today, I'm a recent college graduate who's just started paying back student loans. My parents gave me bedroom furniture as a graduation gift, and now I am completely financially independent. I have a good job, and use an Excel spreadsheet to make a budget for myself. This includes rent, utilities, allowance for potential medical expenses, food, and "fun stuff" (anything else I want to buy). And most importantly, I save a small amount with each paycheck and put a large portion toward paying off my college loans. They have me set to be done in ten years, but I have planned to finish them in two because I want to go to business school then and don't want old loans hanging over my head.
So - I think I turned out pretty well, even though my parents' strategy was definitely lax. I guess the moral is that a LOT depends on your kid. Even with my mom's credit card in hand (she gave me a copy when I was 16 or so), I didn't abuse it, and only bought what I actually needed. Don't assume your kids will blow it - some can handle the responsibility.
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