When I was in my early 20’s I did the dumbest thing anyone can do: I was overspending and literally robbing Peter to pay Paul (or whatever the saying is) drawing on a credit card to cover a check or checks. Fortunately it wasn’t THAT serious. And I was smart enough to ask for help before I dug myself into to deep a hole. It was a lesson I’ve never forgot.
Twenty five years later the stakes are higher: property, cars, and investments, whatever it is I won’t allow myself to get backed into a corner and get into debt. More importantly, I go out of my way — probably painstakingly so — to teach my daughter the value of a buck and ensure she doesn’t make any of the same mistakes I made when I thought my pockets were deeper than a Texas oil well.
Aside from common sense I’ve learned to be open to sound methods of teaching and instilling lessons on kids. Here are some of my favorites — a handful of saving and spending skills I’m happy to say my daughter has put to good use. She may only be 12 years old, but she probably has more money to spend that I do
(o-k…not really but it sure seems that way some times).
When my daughter turned 8 years old she entered the world of high finance: She started receiving an allowance of 4 dollars a week (o-k, it was actually 4 euro cuz we live in Italy but you get my point) in exchange for making her bed and helping do the dishes. Anyway — I’m convinced that if you ever want to teach children how to make important spending decisions give them a few bucks and turn them loose. My kid may have felt she won the lottery but the bigger lesson was she understood early on that if she spend her money quickly it was gone…and if she held on to it she had a little left over that carried over to her next “payday.” Now if that’s not a parable for modern finance I don’t know what is.
Having a few bucks also taught my daughter how to save for a goal. Unfortunately, being thrifty isn’t something you are born into. No matter what age you are, you’ll save your sheckles if you have an objective. In my daughter’s case her goals have evolved from gum to dolls to WITCH comics to CDs and clothes.
My daughter made a quantum leap in her spending habits when she started accompanying my wife to the market. In Italy the market is like a traveling mall – every day it goes to a different city and you can haggle to your heart’s content as you eyeball everything from clothing to appliances. My wife has this down to a science so who better for my daughter to learn about pricing then from her mother.
My daughter is too young to have a checking account, but in another year or two I will give her a pre-paid ATM card. I’m not sure if they have pre-paid ATM cars in the US, but on this side of the pond you can get an ATM card and “re-charge” like you would you phone. This has created another savings goal for my daughter – she can’t have the card until she has enough money to charge it and that needs to be at least $100.00. Ahhh nothing like long-term saving with a purpose.
I think my daughter is off to a good start. Lately I’ve been having my daughter play around with the calculator — plugging numbers and seeing how her savings can add up. There happens to be a way-cool link at www.orangekids.com.
The biggest lesson I could ever hope to teach my daughter is how not to get into debt. That’s a difficult one to impress on a 12 year old. Another great site Moneyinstructor.com (www.moneyinstructor.com) is chock full of great lessons, lesson plans and examples to share with your children when you’re teaching them about dollars and cents. There is a lot of good info to be found as well on www.foreverfamilies.net
Some other cool ideas for your child’s allowance:
– Don’t hand out the cash if the chores aren’t getting done. I actually take money away – say my daughter only cleaned her room 5 days out of 7 then she loses 50 cents.
– Make a work contract and have your child sign it. It makes the whole money-earning thing seem more official. Parents should sign as well.
– An allowance should be half as much as the child’s age. My daughter is 12 years old so she gets 6 euro a week.
– And last but not least – learn to say “no” to your kids. They need to understand that they can’t have everything. It’s hard enough to understand that when we’re older. Better to get a head start on this one while their young.
One thing is certain when it comes to giving your child an allowance and teaching them a solid foundation for saving and spending: if you don’t have a handle on your finances how are you going to teach your child? Kids are like sponges so let them absorb good financial sense (and also cents!)