Friday, August 1, 2008

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?


Swirl Girl said...

My parents always taught us kids to 'pay yourself first'. We all worked (as soon as was legal) and when we got the paycheck, we would cash it - give my mom some $, put some away in savings, blow the rest.

I always thought she was charging us rent, then one day when I was leaving for college...she gave me all the money I had given her for the past few years. At that time, $1200.00 was a ton of money.

For my girls...we opened 529 plans as soon as they were born. They both have savings accts, and piggy banks. The little one is still balancing pennies on her nose,but the older one is starting to understand the value of money. We will institute the chore chart for allowance. She will start to pay for things with her own money, and if that means going 'without' she will learn how to plan.

It will , for sure, be a tough road ahead ...for all of us.

Jenn @ Juggling Life said...

Your system is great.

My kids are anomalies among their friends because they buy their own gas, work for their money, and have learned that it just makes sense to eat at home for free versus spending all your money on eating out.

Green Girl in Wisconsin said...

When your book comes out, I'm buying copies for all my friends with kids. What a system. I've now printed out this post--I wondered when to move to the boys participating in back to school shopping and whatnot. We've taken their birthday money and bought bonds over the years, so I guess that's the only major difference in approach thus far.


jenontheedge said...

This is amazing. An excellent plan. I'm going to discuss this with my husband.

Vanessa said...

I think it's fabulous that you teach your kids about money. How can we expect them to handle money responsibly when it's something most families don't talk about and many aren't even sure themselves what they are doing, much less what to tell their kids. Then at 18 we expect them to magically make smart, educated decisions? Imagine trying to prepare for college that way!

Holly (me.) said...

You give me hope! Maybe,just maybe, the wacky tactics employed to teach my brood about the cost of things, how to save, and avoiding the evil lure of revolving debt will one day pay off as yours have...

Leanne said...

Oh sh*t. Another thing to feel like a bad mother about.


Great post though.