Kids' Money

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What's In It For the Kids

People always ask me if my kids complain about living thriftily. So I thought I would write a little about something that I don't hear discussed much in the conversations of those who are trying to move their families to a thriftier life: what's in it for the kids.

One great parenting technique that many of us have learned to value is letting the child experience the natural consequences of an action. If the child doesn't set the alarm clock, he or she may miss the school bus. Letting kids miss the bus gives them a real-life consequence and makes a big impression. When he or she neglects to do the thing for which responsibility has been accepted (like set the alarm), it is very tempting to race around and fix it (wake them up anyway). However, this cheats the kid out of an important life lesson that will be needed in adulthood, when neglecting to make it a priority to set the alarm could cost much more.

So it is with thrift. What do our kids learn when we wear $30 shoes and we pay for them to wear $135 shoes? We love our children and want them to be happy, but we send mixed messages when we protect them from real world decisions about money that we, as parents, must make all the time in our lives.

Parents are afraid they are going to get grief from their kids if they become thrifty, but I've found that if your explain to your kids why, what it is you are trying to accomplish, then kids not only don't object, they pitch in.

One mom told me this story: she has a 13-year-old son, Tony, who wanted a certain style of Nikes that were $85. She laid out for him the details of their budget, money in and money out. She also told him of the goal she and her husband had set to live on what they made, pay off their credit cards and have some money in savings for emergencies. She told him, "We want you to have the things that are important to you and we'll help you get them. And we also think you are now ready to help us reach our financial goals for the family." Then she told him she would give him $30 for sneakers and would help him find a way to earn the rest of the money or to find an acceptable pair of sneakers that didn't cost so much.

Not only did Tony not object to this arrangement, he came home the next day and told her that his friend's dad had offered to let them work all day Saturday taking inventory in his store, and Tony had looked in the newspaper and found the Nikes that he wanted on sale for $65. With the $30 from his mom and the money he earned, he bought his Nikes within a week, and his mom said Tony was extremely proud of himself. She thought he was happy both because he got what he wanted and because he was included in the team effort to reach the family goal.

Now, this mom was still supportive and caring, but at the same time, she gave her son a chance to learn something that is going to serve him well when he leaves home.

I have found that my kids can easily connect actions with consequences if I point them out. For instance, when we were saving money so that my husband, Jim could quit his job and begin to be a full-time massage therapist, I would say to the kids, "We are going to be in town doing errands at lunchtime. Let's make a lunch and go to the park to eat it and put the money we saved by not eating out into the 'Dad quits his job' fund.

As money went into the fund, we colored a big arrow in with a red marker. Ivy, who was four at the time, would come home and request that I add a little red mark for the money we saved. She understood that when it was completely filled in, she would also get to see her dad a lot more.

Kids of all ages seem to respond well when they are included in the family "business". They can understand that thrift has some beneficial consequences for them, too. Make it easy on yourself and ask for their help.

Children and Money

Nevertheless, financial instruction continues to be neglected in school systems and in most families. Perhaps for the first time in American history, better money attitudes and management skills will be required curriculum for the next generation.

Loving What You Do

Teenage years are the best time to experiment with different jobs before there is pressure to build a stable resume or to provide for yourself. As a teenager, I tried a variety of occupations that were available to me. I shoveled snow, raked leaves, caddied at a golf course, set pins in a bowling alley, and many others. My career at each occupation lasted only a few weeks, because in each case I left to find work I liked better. Finally, at age fifteen, I found a job in a restaurant, washing dishes, taking out the garbage, and sweeping up. I liked it there, primarily because I felt appreciated. By the time I left, upon graduation from high school, I had advanced to short order cook.

Teach your children that there is joy in work. It does not have to be drudgery. Working only for the money is a losing proposition, no matter how much money you receive.

Give An Allowance

An allowance gives your children an opportunity to develop responsibility about money. Parents should set a definite amount to be paid, at a definite time and define the services expected in return. Set a definite schedule for negotiations about increases. Make it clear which items you will continue to provide for your child. This is really no more than any adult would demand from a responsible employer. Pay their allowance promptly and decline requests for advances or loans. Resist the possible temptation to withhold allowance as punishment for things which are unrelated to the allowance agreement.

Teach your children about money by encouraging them to carry it with them, so they can buy the things they want, instead of having to constantly ask you to buy things during your trips to the store.

Selling and Saving

Children are natural salespeople. It seems that during teenage years, when peer pressure and approval assumes undue importance, this natural sales ability is lost. Encourage your children's efforts to earn their own income. Let them know that all income comes from selling, and that mastering the sales process is the most important skill they can gain to aid their future financial independence.

Setting aside a definite percentage of one's income is the one way to buy something that happens to cost more than the amount of money you receive at one time. Once your children have a basic understanding of mathematics, they can understand this principle. It is not rocket science to figure out that if you continually spend 100% of your income, then you'll never get rich. Understanding is not enough, because practice is required. Show your children that learning to save is the way to be able to afford anything they want. Most banks have substantially increased minimum balance requirements on savings accounts. Although saving is more important than ever, getting started is harder than ever. For this reason, it may be advisable for you to be the custodian of your children's savings account(s) until they accumulate enough to open their own account at the bank.

Another important point about saving is that money is worthless until you spend it. Thus the purpose of saving is not just to accumulate a big bank balance, but rather to have the freedom to buy what you want. Teach them this principle by suggesting they choose an item they want and then encourage them to save for it, and then buy it once the purchase price has been saved.

The Value of Money

The average American watches TV 1,550 hours per year, listens to the radio 1,160 hours per year and sees almost 40,000 advertisements. The sponsors of these ads want us to believe that spending money on what they are offering will solve problems and improve our lives.

Money is only good for buying things. It can never take the place of good health, satisfying work and relationships. Teach your children that there are things more valuable than money. Teach them to value people based on criteria other than their wealth.

Making Mistakes

Although this may be a source of frustration, it is likely that your children have different values than you; thus they will want to buy different things than you. Since they will be dealing with small amounts, any mistakes they make cannot be very costly. Mistakes are a fine way to learn, so long as they don't cost too much.

It is doubtful that you can rely on the educational system to teach your children effective money making and management skills. Teaching and/or helping your children understand the financial skills they need to handle money may be just as valuable as a fine education.

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