The Value of a Dollar

I started to leave a comment on Melissa's post about kids and money but after the fourth paragraph I folded up my tent and decided to write about it over here.

Money is an interesting topic. How much we have, how much we earn, how much we save are all topics people don't discuss much. Not even within the family. But here's the thing: how do your kids learn to handle money if you don't talk about it? Help them plan? Teach them the ropes?

Theories about children and money abound. Different things work for different families. Here is the way we went about things:

Up through second grade money was not an issue. We bought the Precious Daughters the things they needed, and sometimes the things they wanted. If they received checks on special occasions from family we parked it in the savings accounts we opened for them when they were still very small.

In third grade they started receiving a weekly allowance. (I took cash out of our account at the start of each month so I didn't get caught short or forget altogether.) They received one dollar per grade year. And yes, in the later grades we looked like cheapskates. Many folks adhere to the dollar per year of age ratio. But our girls babysat, mowed lawns, did "vacation duty" for traveling friends and were paid to do "Big Chores" that went above and beyond the usual. And let's face it, we still did the lions share of the purchasing.

In sixth grade the saving account changed to a money market account. When the statements came we would open them and I'd show them their interest from the last month. (Remember the glory years in the 90's when interest rates were 6% to 7%?) And they were all "Woot, free money! I didn't have to do a thing and these people gave me money!" It encouraged them to put money away in their money market account instead of just blowing it.

Twice a year we did a "big" clothes shopping trip. I'd withdraw a predetermined, per child amount in cash and stick it in an envelope. They'd have a list of must buys, and what was left over could be spent on whatever they wanted. Expensive jeans and tennis shoes did not seem so important if it meant you weren't going to get that cute sweater or t-shirt two stores over!

In high school we moved them to a monthly allowance. Between allowance and their "jobs" they were expected to take care of all their day-to-day expenses including gifts for friends, lunches, coffee, movies, etc. I still provided a twice yearly envelope of cash for clothing, but didn't feel the need to hover while they made selections.

At sixteen they got a checking account and debit card. This revolutionized the ease with which we operated. Instead of cash, I'd just move funds to their account and they'd use their debit cards. They could drive THEMSELVES to the mall! Better yet? They could run errands for me and I could reimburse them electronically!

At sixteen they also started working for an actual paycheck. The expectation is that the paycheck gets deposited in the money market account; then smaller amounts are moved to the checking account/debit card.

They fill their gas tanks. They pay for movies and dinners out. They purchase a lot of their own clothes. They don't ask us for money. Although the offer of gas money if they've been running family errands or cash to grab a burger is gladly accepted, they have no expectation that there is a money tree growing in our back yard.

Both girls have tidy sums saved. They're careful with their purchases. They seek out free and/or cheap forms of entertainment. (Have I mentioned there's a lot of sitting on my couch eating my snacks?!) Budgeting money is second nature.

Precious Oldest is in college. We've talked to her about the temptation of credit card offers and the horrors of getting into debt. We've discussed the evils of pay day loan schemes. We've extolled the virtues of driving a mediocre car, but one you paid cash for. Long before she graduates we'll make sure she has started planning for retirement. No, we DON'T think it's too early.

These are tough economic times. What are you doing to prepare your children?