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Tuesday, June 10, 2014

Teaching Young Children Money Management


I recently shared on “Why We Let Our Teenager Manage Our Budget”.  Someone requested that I share tips for money and younger children.  We have four boys, ranging in age from 17 to 6.  My older boys joke that they have been guinea pigs for all of our theories.  I smile, thank them for their longsuffering patience, and assure them that we are, indeed, redefining our policies for the younger boys.  So, here are my tips – only the best ones.  J 

GIVING ALLOWANCES: 

AGE 5-10


Our policy on paying children has fluxuated over the years and has mirrored changes in our own financial fortunes.  When our children are in grammar school, we pay them an allowance. They understand that this money is for doing specific tasks, which are assigned weekly.  If they do not complete tasks in a timely, appropriate manner, then their “paycheck” will reflect their job performance.  They are expected to tithe ten percent, save fifty percent, and can spend forty percent.

Lists of age appropriate chore suggestions can be found here.  

We do not intervene in how they spend their money except in specific circumstances.  They are not allowed to purchase any item, which we consider to be inappropriate or immoral.  We council them about items which are cheaply made. We have a lot of conversations about “quality” versus “quantity”.  A few times they opted to purchase an inferior item, and were sadly disappointed when it broke within a short time.  This helped them consider the importance thinking before purchasing an item.

“PAY-DAY” LOANS


Prepare yourself!  Soon, you will be standing at a garage sale and they will see something that they “just can’t live without”.  Gasp!  They have spent all of their allowance.  The piggy bank is empty!  They will plead with you to advance them money for the item.  The first time this happens reply, “Mom and Dad don’t spend money we don’t have and we expect that you won’t either.  However, if you wish me to loan you $5.00 for that toy, you will need to pay be back $8.00 next week, not $5.00.”  Their face will fall, they will be aghast, they may even scream, “That’s not fair!”  Simply reply, “No, THAT’S  paying interest.”  I did it – once – with each of my older boys.  Never did they decide that the price of the loan was equal to the worth of the toy.  I once overheard the older boys warning one of the younger ones, “If you don’t have the money for that, you’d better put it back.  Never ask Mom to loan you money!” 


AGE 11-15


By the time our older boys reached middle school, we had more children, more expenses, and less money.  We also realized that their needs had changed.  Older children need to begin to see the importance of saving and planning for long-term goals.  So, we explained that they would no longer receive a weekly allowance.  That's right!  We cut them off.  But, not completely.  Instead, we told them we were willing to invest in their dreams and send them off to utilize some of the "striving-for-excellence" work skills we had striven to teach them.  They were to set their own goals and save for SPECIFIC items.  Then, they would need to find work (and receive pay) from someone besides us.  When they had saved up ONE HALF of the amount needed for the item, we would kick in the other half. 

The boys have been ambitious, busy, and hard-working teens.  Because half of the money to be spent was theirs, they have carefully researched the best prices and values for each item.  They have been paid for installing a barbed wire fence, cleaning a condo, (Remember all those early lessons I gave them in how to properly clean?), pet sitting, and lawn maintenance.  They have purchased digital cameras, electronic book readers, camcorders, an iPod Touch, a 7 inch tablet, and laptop computers.  Our 15 year old is gaining quite a reputation for being hard-working and is paid quite well for helping folks on lawn mowing and maintenance.  

This plan has undoubtedly cost us more over the long-run than the weekly allowance did.  But, I believe it prepared them more effectively for life as they turn sixteen.   

AGE 16+


As you might imagine, at the age of 16 our boys are expected to get part-time jobs in the community.  They are expected to pay for their own clothing, gifts to others, extra-curricular activities, car insurance, gas, and any other items they wish to purchase (computer accessories, electronic gadgets,etc.)  Before you ask, "no", we do not supply them with a cell phone.  If they wish to have one, they must purchase the phone and pay for the monthly plan or minutes.  We do not.  This may seem harsh to some, but is it fair to send a young man out into the world with NO idea what "things" cost, having no understanding of how to comparison shop, and no concept of how to separate "wants" from "needs"?  These skills are sharpened as they invest their own time and money, instead of us handing them what they need.  We would rather they experience all of these REALITIES of life while residing under our roof, so we can help them navigate the tricky world of finances. And remember, I hand our boys "finances on a silver platter" when they are in high school and take over our family finances for six months.  If that doesn't give them a realistic view of money, I don't know what will.   Our boys tell us that they have appreciated us helping them set "reachable goals" and giving them the tools to do it.  


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