I grew up in a very frugal household where my stay-at-home mom clipped coupons and shopped sales while my dad worked a government job. My mom cooked almost all of our meals at home; eating out was something she and my dad did on rare date nights when they paid a neighborhood girl to come watch my sister and I. We drove on family vacations, packed picnic lunches and spent summers at the local pool and parks. Our house was well maintained and in a great school district but it wasn’t new or fancy. It was functional.
One day I came home from school and asked my mom why we didn’t live in a nicer, bigger house like a lot of my friends did. Somehow I knew how much my friend’s father made and compared to my dad, it was less. Yet their house was much nicer, she had name brand clothes and the newest electronics. My mom sat me down and explained that different families choose to spend money in different ways. My childhood years of helping her grocery shop and doing price comparisons, learning to cook and managing my own money with an allowance (to varying degrees) all helped build my financial personality today.
Now that I have kids of my own not only am I incredibly grateful to my mom for how much she taught me about money but I also realize how hard she worked to pass on that financial legacy. I want my kids to understand the value of a hard earned dollar and to save for emergencies but also the principles behind investing and making wise purchases. And teaching kids the ins and outs of money in our world is incredibly difficult!
So I did what I do best, I researched. I asked friends and family for advice; I read books (this one is my favorite). I turned to technology. My husband and I came up with these three priorities for our family.
We introduced our kids to banks.
I don’t really visit the bank much because we use cards for most purchases but we want the kids to be familiar with what a bank is and why we go there. We had them open savings accounts and explained the concept of interest. It’s pretty abstract right now but they receive statements every quarter and we show them how their account increases (by pennies) when they leave the money there.
We give them a weekly allowance.
The kids receive a weekly allowance that is not tied to chores. This allowance is divided up into 4 funds – Donate (10%), Long Term Savings (30%), Medium Term Savings (30%) and Spend (30%). Long Term Savings money gets deposited in their savings accounts and Medium Term is for a toy or activity for which they want to save up.
Spend is just that – free to spend on whatever they want (within reason). And yes, I cringe when my step-daughter wants to blow her spend and saved money on a tie dye Barbie set she’ll play with once and then loose the parts. But, it’s her choice and part of having the money is making the decision how to spend it.
Donate money can be given to church or any other charitable cause they find. We talk to them about how we donate parts of our money to our church, to support my husband’s sister, who is a missionary, and to sponsor kids from Compassion International. We want them to see us practicing what we are teaching them.
We actually use a website called FamZoo to help us credit the kids allowance accounts and provide them the money on a prepaid card for spending. In the future, we plan to add various paid chores (babysitting, yard work, etc.) for additional earning opportunities.
We talk about money and the choices we make with it.
There is a big difference between “we can’t afford that” and “we choose not to buy that.” I want our kids to know the difference. There are a lot of times we tell the kids no or that something is too expensive but we’ve now tried explaining why we made that choice and allow them to help make decisions about activities.
Too often talking about money is swept under the rug in families because it causes conflict. We want our kids to know that talking about money is good and how to do it in a healthy way.