FRANKFORT, Ky. - From the early years and beyond teach children these two truisms; keep in mind that you will likely repeat these fairly regularly (I know I do):
1. Money does not grow on trees
2. You don't earn money just for breathing
With those two truisms firmly in mind, let's get some general guidelines down. I like to be sure children know that while you can do lots of things with money they all fall in three categories.
The categories are in no particular order really, but conventional wisdom and some households do place more value on one category more than the others. They are Save, Give and Spend. If you all look at your own spending, you will see each item fits in one of these categories. While it would seem prudent to add a Waste or Blow category, that is not necessary as those items fit in the spend category.
When children are young, I'd say up to at least 16 years old, you set the percentage for each category. The key is to help them form a habit of saving and giving. Let's face it, we don't have to teach them to have a heart for spending; our culture helps us out on that front.
The habit training around the spend category is to plan your spending. Yes, keep a list of things you want or need and always spend off that list. This training keeps children, and dare I say adults, from impulse buying or wasting money. On the spend list it is okay to add some blow money. You can even build a habit into that; chose an amount or percentage of money that belongs to no item in particular.
Another general guideline is that all money is up for division. This is true because we want to reinforce what we said earlier, that 1) Money does not grow on trees and 2) You don't earn money just for breathing, right? I know the argument with this guideline, so let's deal with it first.
1. Gifts of Money and Found Money: Let's face it; it happens — birthdays, grandparents, finding money and any other reason. Sometimes, strangers give them money just because they're cute! Why you ask, must they Save and Give this money. In a word, consistency. To form a habit, consistency is a must. The goal is to train our children so they will never be broke (the save habit) and to never be selfish (the give habit).
2. Allowance: Refer back to truisms 1 and 2; money does not grow on trees and you don't earn money for breathing. Allowance should not be granted but earned. On a personal note, our daughter does not earn money for regular household chores. We chalk chores up to you live here, so you help take care of the house. However, always offer age-appropriate opportunities for the children to earn some money. Some age-appropriate activities are:
- For the very young, helping pick up after a younger sibling or delivering folded laundry to the appropriate bedrooms.
- A bit older children can clean out the car or organize a junk drawer.
- Much older children can do bigger jobs like wash and wax the car, clean out the garage or basement, make the grocery list or clean the outside of ground level windows on the house. There are a ton of activities that go above basic house-cleaning duties to which a monetary value can be attached. Also, for those parents who are self-employed, they can actually employ their older children, which will allow that child to start an IRA. Woo Hoo!
While I am on the allowance subject, I would be remiss not to mention paying for grades. This is a highly charged argument that is personal. My personal opinion, which by the way is not shared by my husband, is that I don't agree with paying for grades because they only benefit the child. Let me soften that by saying that I do praise for hard work and good grades, by allowing my child to do things other than sleep, eat, do chores and go to school. When school is on-track (not perfect grades) just diligently working, doing her best, she is allowed extra-curricular activities. As I said, this is a personal family issue, so you decide. My only advice: if you do decide to pay for grades is to be consistent. For example, don't only pay if you have extra money or if they also had perfect behavior, unless that was part of the agreement already.
3. Living under your roof, but think they are grown-up. Before, we pretty much directed their extra money for them. Now it is okay to loosen the reins and teach responsibility about money. While you can still encourage and hope the habits of saving and giving formed, you could no longer require it. It may be time to open or allow them to now manage a savings account. Another, bigger responsibility is to give them their own clothing allowance to manage. Now they may negotiate or you may initiate saving for a class ring, prom or a car. A checking account won't be available without an adult until they are 18 years old, but they can manage a fictitious checkbook using their spend category money.
In closing, let me say that all the financial training in the world will be useless if the habits you are trying to teach are not modeled for them by the people they watch most closely, you the parent.
For more information email Regina at RHarris@MFLC.Zeiders.com or give her a call at 502-548-4836.