Raising Kid with Financial Sense (spin off)

[Linda on the move]

Neither DH or I were raised with any understanding of money. We've learned a lot over the years (some of it the hard way). We really like Dave Ramsey stuff and the book "The Millionaire Next Door" (though honestly, we take what works for us and leave the rest).

Our kids are teens now I'd like to help them enter adulthood a little better equipped to make financial decisions. So far....

• Our kids have chores and have allowance. Their allowance is their "fun money" and they have to plan ahead when something big, like the Ren Fest is coming up. Allowance didn't work when they were little because they just spent it all on stupid stuff, but at 13 and 15, they can budge for simple, recreational activities. (They like to shop at the used book store because their allowance goes further there)
• Clothing lump sum. When seasons change, we give our kids a lump sum for clothes. I sit down with them and talk through what they need. Do they need new underwear? Shoes? Coat? etc. They go through what they have and sort what still works and doesn't work. Then they plan where to go. They have learned to hit places like TJ Max before heading to the mall, but that jeans you love are worth paying a little extra for. 
• We have some financial conversations around them -- such as tax planning, 401K, the cost of college, how different career choices end up with different incomes.  We would like them to pursue something they are passionate about, but we also want them to have a little realism that about how income is tied to those choices.
• We are trying to hit a middle road of teaching them that it is silly to spend more than you have to for something, but that some things are worth the extra cost. 

On one hand, I think we are doing a better job that a lot of parents I see around me, but since I didn't grow up with any sort of education in this area, I'm curious what other parents do that seems to work. 

I'd really like it if when they leave home, they are capable of making financial decisions they will be happy with. I don't care if they end up with the same list of "things that are worth paying a little extra for" and I don't want them to believe that they need to end up with a high income to be happy.

So, what did your parents do that seemed to work?  What are you doing with your own kids?

[CatsCradle]

The biggest life-long habit that was instilled early by my parents was the requirement to save.  I think my first passbook savings account dates back to when I was about four or five years old.  This may sound harsh to some, but most of what I received in money gifts as a child had to go into my savings account.  It was just a requirement that my parents had and to this day I don't have any regrets.  We received a teeny tiny weekly allowance (which was not related to chores - since chores were an expected part of family business and not paid work) and we could use our allowance on what we wished.  Funny, though, but I tended save my allowance because that concept was so drilled in me since an early age.  My dad once told me that if I needed any additional spending money, I'd have to get a job...which I did...starting with babysitting and graduating to selling Avon products and then eventually getting a part-time job in a print shop when I was old enough.  Sounds sick, but I used to pride myself on seeing the balance grow and grow.  It was a long process, but a personally rewarding one.  In a way, it has turned me into someone of a miser so I have to watch my attitude.

Last summer, when DD was 4.5, I took her up to the corner bank with a bag full of coins and birthday money, and we opened a savings account for her.  She got her own piggy bank for opening the account and that kid is thrilled every time it gets full enough to make another trip to the bank.  It is hers and she is building it on her own. 

She's a little young (5) to understand taxes and 401ks, but it really wasn't something that I truly began to grasp until I was in my teens and actually working a job.  Right now, I think our goal is for her to understand that just because you have it, doesn't mean you have to spend it. 

[~Adorkable~]

i think it sounds like you have a great balance in your goals, i think about these things a lot too. i look forward to hearing what other parents say. dont think i am going to comment personally right now, i just got done writing my heart out on the "other" thread and need to take a few deeps breaths.

[DoubleDouble]

My parents taught me to spend less than I earned. That is a rule that I think is the most important.

As a derivative from that, "you have less money than you think you do" is a useful perspective to have. Instead of "we have all that money saved up, let's spend it on <the desirable item of the moment>", subtract an emergency fund from it first, and make it substantial. It is good to always have extras - a car breaks down, or the basement floods, or a tooth needs a crown, something always happens. 

Another useful rule is "don't spend now counting on expected future earnings" - for example, not doing things like getting a more expensive place to live because husband will soon get that promotion (and when in a few months later he gets laid off instead, it hurts a lot financially.) Expecting and anticipating income does not guarantee getting it.

The last thing - if things are starting to turn for the worse, trim expenses as if you are already quite broke. Cut non-essential things a bit harsher than necessary - it will give a better survival margin, and I think it's better psychologically, one drastic "bug out" is shorter and better than slow agonizing sinking.

[3xMama]

My kids are young (5 and under) so I've not hit this point, but I'm going to sub and hope for ideas and the ability to remember them for eight to ten years! Just want to say, I wish my parents had done this with me and I'm thankful to see someone actively doing it with their children. 

[nina_yyc]

So far we give our 5yo an allowance but it's really small, mostly just to give DD a way to pick out some of her own stuff without having to go through me.  Cuts down on the whining in stores ;-)  When my kids are older I would like to handle things much like the OP.

Came here to share a cool story a friend of mine told me.  Her mom used to post a list of extra chores the kids could do for money starting in the fall.  The kids would pick their chores and get paid, and then before Christmas her dad would take them to the mall one at a time to pick out presents for the family from the money.  She says it's how she learned how to budget :-)

My parents really didn't teach me anything about budgeting.  They probably would have bought me about anything I asked for but I was never comfortable asking for much.  I didn't get along with my mom as a teenager and it just felt wrong to ask her for stuff...although I clearly didn't have a problem living with them, driving the car or anything like that ;-)  I had babysitting jobs and summer jobs and I lived with my parents when I was in college.  When I got my first job I guess I just figured it out.  I'm naturally cheap and I never needed a budget until I wanted to save money to go traveling.

The one thing my mom told me was never to go into debt.  I took this extremely literally and did not get a credit card in college, then couldn't get one when I was out.  I got my first credit card at 25 or so, which in retrospect is extremely lucky.

[TiredX2]

Originally Posted by Linda on the move 
 

Our kids are teens now I'd like to help them enter adulthood a little better equipped to make financial decisions. So far....

• Clothing lump sum. When seasons change, we give our kids a lump sum for clothes. I sit down with them and talk through what they need. Do they need new underwear? Shoes? Coat? etc. They go through what they have and sort what still works and doesn't work. Then they plan where to go. They have learned to hit places like TJ Max before heading to the mall, but that jeans you love are worth paying a little extra for. 

I'd really like to do this starting with my DD (who just turned 13 last month).  Can I ask--- how did you determine the amount of $ to give?  And do you *insist* they buy certain items?  Has it ever come up that they did not have the item you wanted/needed them to have and so you provided the additional money or how would you deal with that?

TIA

[Linda on the move]

Originally Posted by TiredX2 
 

Can I ask--- how did you determine the amount of $ to give?  And do you *insist* they buy certain items?  Has it ever come up that they did not have the item you wanted/needed them to have and so you provided the additional money or how would you deal with that?

The amount is a rough estimate of how much I think is reasonable considering what they most likely need. They get more for winter clothes because they are more expensive.

We started with a simply shop and gradually worked up. I think our first shopping trip was for casual clothes for summer. So it was a package of panties plus a selection of shorts, tees, sundresses. It was something they really couldn't go too far wrong with.

We have bought other items at other times -- for example, we didn't include money for shoes this fall (which they were fine with -- at the time they didn't need any) but once it really got cold, one of my DD wanted/needed new boots, so we just bought them.  My other DD bought what she felt she needed this fall but didn't use all her money. She saved it and then later bought another blouse -- which I thought showed a lot of maturity.

My kids do have savings accounts but we don't do much with them. I tried for awhile to have them save a set part of their allowance, but it involved me always have change and just was too much of a PITA to be sustainable. But I like the idea of teaching them the value of putting away money just to have it put away, so next time I raise their allowance, I think I might make it a monthly raise that they are required to plunk directly into savings. (a take off from Cat's Cradle). I'd like to get them excited about watching balances grow. That seems like a good thing to instill in the teen years.

[Snydley]

Hi-

   I was watching Suzie Orman one night (randomly) and LOVED her suggestions for kids.  She says no "ALLOWANCE"; why are you giving money for either doing nothing or for the simple tasks to contribute to the home maintenance (making your bed, etc)? Also, why would your DC's allowance increase just because you he/she gets older? 

She says - cash for work. Period.  3 dollar tasks, 5, 10, up to $20.  The child must complete many 3 dollar tasks at the highest standard before even being allowed to undertake a job that pays $5.  

I plan to do this and make the jobs pretty tough; however, DD will always have to opportunity to earn this money if she chooses.  I think she's going to wind up being pretty careful about what she buys/how much she saves as a result.

-Jen

[Linda on the move]

Originally Posted by Snydley 

Hi-

   I was watching Suzie Orman one night (randomly) and LOVED her suggestions for kids.  She says no "ALLOWANCE"; why are you giving money for either doing nothing or for the simple tasks to contribute to the home maintenance (making your bed, etc)? Also, why would your DC's allowance increase just because you he/she gets older? 

She says - cash for work. Period.  3 dollar tasks, 5, 10, up to $20.  The child must complete many 3 dollar tasks at the highest standard before even being allowed to undertake a job that pays $5.  

Does Suzie Orman even have kids? I think that system sounds like a PITA for the parent.

My kids have chores that include many routine things that have to be done around here to keep life following every day, and they also help clean the house (which would cost me about $100 bucks to hire some one to do.) Why in the world would I break down how much vacuuming the living room is worth, scrubbing the toilets, etc? And then keep track of each little thing and pay by the job? How is that better that teaching kids The List of what it means to do the daily stuff around the house, and what it means to do the weekly stuff around the house, and then giving them a flat sum?

I seriously doubt the ability of any one who has not tried to run a household with kids and pets to even understand that the simple task add up in time and effort, and at some point, it really is about teaching children to be consistent.

This stuff isn't optional at our house. You can't decide you don't want the money and therefore not bothering helping, and having tried it both ways, skipping allowance is highly motivating to my children.

I'm quite fine with the fact that my kids come home from school and do their chores without being reminded and help clean the house without complaining, and I find it impossible to understand what is wrong with them having an "allowance day" to plan around.

My mother spent a lot of time telling me I wasn't cleaning to her standard, it didn't teach me much expect that I will never please my mother.

[dbsam]

My children are only 7 so we are not doing as much as Linda on the move - but I like her ideas. 

My son has an interest in money and asks a lot of questions about money, budgets, insurance, mortgages, college costs, etc.  He takes care of his money.

My daughter couldn't care less at this age and is not interested in or careful with her money.

Both children have a 'Junior Investor Account' which is basically a passbook savings and they actually have the little book so they can see the balance going up.

We do not give allowances but I could see adding an allowance at some point.  There are chores/jobs that they are expected to do just to contribute to the household; there are other jobs for which I will pay them (usually ranges between $0.05 and $3).  My son accumulates his money in his safe - he wanted a safe last year and bought one with his own money.  Since my daughter looses her money around the house, I keep a running balance of her paid work and transfer it directly into to her account periodically.  (She doesn't do as much work as my son because she isn't motivated by money, if I paid her in sweets...she'd be cleaning the entire house!)  My son also does small jobs for the neighbor, he pet sits when they are out of town and rakes their leaves.  When he considers buying something he puts a lot of thought into it and often decides it is not worth spending the money.  My daughter has no interest in buying things, so I guess the fact that she 'works' less isn't as issue since she never dips into her account.

I guess our system is similar to the one suggested by S. Orman.  It is not a PITA for me.  I keep a mason jar of change and singles and just pay my son as he completes a job. 

[AbbyGrant]

Quote:

Originally Posted by CatsCradle 

The biggest life-long habit that was instilled early by my parents was the requirement to save.  I think my first passbook savings account dates back to when I was about four or five years old.  This may sound harsh to some, but most of what I received in money gifts as a child had to go into my savings account.  It was just a requirement that my parents had and to this day I don't have any regrets.  

My sister did the same thing with her kids, and at the time I thought she was a big meanie. Actually, when I found out about the rule, I always made sure to send the kids gift certificates instead of cash.   But now that I have my own kids, I can kind of see the value of such a rule.

Do you just encourage your daughter to do the same, or do you require it?  I'm curious hear other's thoughts about this too. It seems so controlling in some ways, but so good in others.   

[Imakcerka]

Good ideas Linda.  Though I'm not up for giving them lump sums of money for clothes... I'd rather just buy what they want.  DD1 won't spend money EVER.  DD2 hides hers somewhere, she wouldn't spend it either.  They're so weird.  It would be like trying to teach them a lesson when they hoard their money.  I found DD2's once and she had over 30 in 2 dollar US bills.  Grandma loves to send them in every letter.  I need to start opening these letters!!!!  They're a lot like my little sister who refused to spend any of her money ever.  My parents would tell her she would have to save to do something and she would save... then couldn't spend it.  Just wouldn't.  She would seriously forgo what she had originally wanted to keep her money.  Now she's 21 unemployed and both her and her DH could live for 2 years without a job.  I wish I was her!!! 

The girls have savings accounts that I opened years ago and they put money into them often.  One thing I noticed was that they love to get their monthly statements to see what they have.  I think that's pretty good.  It's their mail too so I don't open it I just give it to them.  Once they have a large enough amount my cousin will help us figure out what to do with it.  He's a financial planner, but I think I'll let him and the girls do all the talking and I'll sit back and watch.  Them having control of their finances it's very interesting.

[dbsam]

Originally Posted by AbbyGrant 

Do you just encourage your daughter to do the same, or do you require it?  I'm curious hear other's thoughts about this too. It seems so controlling in some ways, but so good in others.   

My mom made us put all gift money and job money into our bank account.  (We had small jobs at very young ages - paper routes, working church bingo, etc.)  Then at one point my father lost his job and she took out all our (the children's) money to use for household bills.  I was really resentful as a child.  I understand it now.  She never did reimburse us.  We were all in grade school at that time.  After that, we had more control over our money and were able to spend/save as we chose. 

[CatsCradle]

Originally Posted by AbbyGrant 

Quote:

My sister did the same thing with her kids, and at the time I thought she was a big meanie. Actually, when I found out about the rule, I always made sure to send the kids gift certificates instead of cash.   But now that I have my own kids, I can kind of see the value of such a rule.

Do you just encourage your daughter to do the same, or do you require it?  I'm curious hear other's thoughts about this too. It seems so controlling in some ways, but so good in others.   

It depends, Abby.  I loosely apply the $20 rule...if the gift is over $20, then into savings.  My mom and dad will often send DD $2 or $3 cash in a card (like for Valentines).  That type of cash goes into her precious things box and if there is a small toy or something that she wants, I always ask her if she has enough money in her box.  She's getting better and better at seeing the connection to the item (like a toy) and the idea of having to spend her own dollars.  Often she opts out...which makes me particularly happy. 

I guess there is a level of parental control with saving that would make one bristle, but my take on it is that it ultimately teaches a bit of self-control in the long term.  I might lighten up a bit when she's a teenager...have her make the decision of where it goes...but we're not there yet.
 

[CatsCradle]

Originally Posted by Snydley 

Hi-

   I was watching Suzie Orman one night (randomly) and LOVED her suggestions for kids.  She says no "ALLOWANCE"; why are you giving money for either doing nothing or for the simple tasks to contribute to the home maintenance (making your bed, etc)? Also, why would your DC's allowance increase just because you he/she gets older? 

She says - cash for work. Period.  3 dollar tasks, 5, 10, up to $20.  The child must complete many 3 dollar tasks at the highest standard before even being allowed to undertake a job that pays $5.  

I plan to do this and make the jobs pretty tough; however, DD will always have to opportunity to earn this money if she chooses.  I think she's going to wind up being pretty careful about what she buys/how much she saves as a result.

-Jen

This is one area were Suzie and I diverge.  I don't think household tasks/maintenance should be tied to cash rewards.  If you're part of the family, you help out.  Personal and family responsibility as well as cooperation are no-brainers for me.  Trim the neighbor's hedge or run an errand for the old lady down the street - those should be tasks related to picking up a few dollars here and there.  But, I don't give cash to DH to scoop the litter box or clean out the storage closet and likewise I wouldn't give cash to DD to do the same. 

I think non-work related allowances are good because it gives the child a sense of autonomy plus it is a tool to enable the child to learn to manage money.  For me, age comes with greater responsibility and that is why kids, IMO, should get increases as they get older. 
 

[Imakcerka]

My mom didn't pay for household chores but always helped me find someone in the neighborhood or at church that needed work done.  Like raking and cleaning.  I babysat a lot as well.  She always helped me find opportunities and after awhile I was able to find my own.  Saving money for me was pretty easy and I always had my own money.  I don't do chore money either.  I don't like the idea of it.  The girls were asked by a neighbor to water their lawn for a week while they were away.  And they earned 5 dollars a day.  Which they already had plans for.  There was a game they both wanted so it worked out perfectly.  And they really enjoyed doing the job.  Who wouldn't though?  Don't all kids love the water hose?

[MrsGregory]

Like you, Linda on the move, neither my husband or I were raised with any understanding of money management and household budgeting.  We're determined to do better.  I'm still teaching money management to my child in theory only - she's 5 months old now, so her concept of money management does not yet exist.  I have discussed the subject with my husband at length, and we've discovered that we do each have some innate strengths when it comes to money management, although he would argue we have very different styles.  What I want for my children is for them to be included in our financial conversations so they can see how we work together, reach consensus, and how two different approaches can compliment one another and shore up any weak points in a single approach.  I want our children to be included so they can understand the concept of money coming in and money going out.  I also read up on what I found to be an awesome idea, which I think will fit well with our parenting style, which we are currently describing as a very benevolent monarchy - that is to say, we intend to parent from a position of authority, however, we intend to make it clear that our authority extends no further than our children's well-being.  The method I intend to adopt is to view the house and it's associated chores as "ours"; the child owns as large a share and is as responsible as the adults.  This is where the authority comes in, I figure, as I can't reasonably expect a two year old to use and then clean out the washing machine, so I will handle her responsibility for her.  When she's old enough, I'll hand over the reins.  This, as far as I can see, will apply to everything, from chores to decisions.  Mama will handle it until you can.  So the house is ours, and the money is also ours.  It's a little scary for me, because I come from a very authoritarian background, but the idea is that the money belongs to everyone;  the house and the bills are paid, of course, and then money is set aside for investment and saving (which also benefits everyone), and then the spending money is divvied up by need.  For example, if we wind up with 1200.00 in spending cash, and there are 4 of us, we each get 300.00 - in theory.  Now, coming from that position of authority, I can say to my 11 year old that she must put 250.00 in savings in addition to what was already budgeted and set aside, and the other 50.00 is hers to spend or save, or hide in the walls if she wants.  Or, let's say we come up with 1200.00 extra that month, but Papa needs 3 teeth pulled.  Well, the family is advised of his need and everyone loses some or all of their share of the extra so we can get Papa's teeth pulled.  Or, let's say Papa really, really, really wants a new amp for his bass.  Then we can vote if we want to give him any of our share or not.  I am HOPING this will model a family behavior I aspire to, as well as teach responsibility with money and household operations.  Do any of the more seasoned parents see any massive holes in my plans they want to point out now?

dbsam, I had a sizable account started for me as a child by grandparents which my parents commandeered and spent.  On what, I don't know.  I resent them for that to this day.  The funny thing is, if they had asked me for the money, I would have given it to them.

[AbbyGrant]

Originally Posted by CatsCradle 

It depends, Abby.  I loosely apply the $20 rule...if the gift is over $20, then into savings.  My mom and dad will often send DD $2 or $3 cash in a card (like for Valentines).  That type of cash goes into her precious things box and if there is a small toy or something that she wants, I always ask her if she has enough money in her box.  She's getting better and better at seeing the connection to the item (like a toy) and the idea of having to spend her own dollars.  Often she opts out...which makes me particularly happy. 

I guess there is a level of parental control with saving that would make one bristle, but my take on it is that it ultimately teaches a bit of self-control in the long term.  I might lighten up a bit when she's a teenager...have her make the decision of where it goes...but we're not there yet.

Thanks for answering.  I love the $20 rule..allows for a little bit of fun and flexibility. I might have to modify it though because $20 is what my mom puts in cards for little holidays like Valentine's and Halloween. She can't help herself.  

I also liked that you mentioned the possibility of changing things as your daughter gets older. Sometimes I seriously forget that these kinds of things don't have to be permanent, and it was the teenager that I was thinking about when I mentioned the rule feeling a bit controlling.  But I feel totally comfortable doing something like this now, and by the time my kids are teenagers hopefully they will have learned something from it. Now I need to see if I can get some little passbooks from the bank for their savings accounts.  

[dbsam]

Originally Posted by MrsGregory 

dbsam, I had a sizable account started for me as a child by grandparents which my parents commandeered and spent.  On what, I don't know.  I resent them for that to this day.  The funny thing is, if they had asked me for the money, I would have given it to them.

I think that is what bothered me too.  We didn't know she took out the money and she allowed us to continue thinking we had the money for quite some time.  (I believe we found out when my brother rode his bike to the bank hoping to withdraw money to purchase a moped and he found out his money was gone.)  Maybe she was hoping to put it back and never tell us...I don't know.  My mother was never good at communicating with us.