How do you pay for things? Do you buy 'wants' and then fuss and fret about not being able to pay for the 'needs'? It is important to teach children how to save but showing them how to spend money wisely is just as important. Create a budget for your family. After you have your budget set, share it (maybe as a percentage) with the kids. Talk with them about what you need and what you want with the family. A great article from USAA, "Budgeting Basics - Needs vs Wants", asks the question about Friday night pizza: "Is this something that we need to do or simply something that we want to do? My kids say need. My wife and I say want." A little discussion will show them how important a budget is and helps make our wants more affordable.
Education Begins at home
In a Northwestern Mutual survey, 43 percent of parents said they believed schools should be doing more money education. Kids do need to learn money management at a young age but I'm not sure school should be the core-educators. According to an article from the Navy's Fleet and Family Support Centers, Financially Fit Kids, "Studies show that the single most important place where children learn about money is in the home and the most important teachers are their parents." We hold such an important role as parents. We are their primary trainers and can not rely on outside educators to show our children the proper way to save a dollar, spend a dollar and budget a dollar. If you don't feel comfortable then take the time to educate yourself! There are a wealth of articles out there from reputable resources that are there to help you.
Here is a small sample of articles to get you started:
- MilitaryAvenue.com Resources: Money & The Military
- Shop smart using saver savvy tips
- Budget Better
- Tips for Managing Your Money
What do you tie your allowance to?
I believe very strongly that household-chores are part of being a family. When we do "5-minute jobs" on Saturdays, they aren't going to be paid. When they empty the dishwasher, they aren't going to be paid. When they clean up their toys in the family room, they aren't going to be paid. Why? Because I am not paid to make dinner. My husband is not paid to pack their lunches. They are not paid for household chores. It is part of being a family!
I appreciated this comment on an article at USAA.com, Making Allowances: "Experts say there's no single, right way to approach the big allowance debate [To pay for chores — or not?]." I know there are some strong arguments that allowance should be tied to chores; and I won't refute them. It is a personal decision. You as a parent need to make a decision as to what to tie your allowance to and then stick with it.
My family ties allowance to school. Right now their job is going to school, getting their homework done, earning good grades. When a report card comes home with straight-A's or they have significantly improved in an area that was lacking they get a bonus. My 2nd grader lights up when he is handed $5 for his report card full of As. Our teenager has enjoyed a significant 'pay increase' over the years from maintaining a near perfect-card. I suspect our now kindergartner will struggle more but we will find ways to encourage him to do his best.
How do you help facilitate long-term saving for your child?
My parents gave us a dollar for every dollar we put in to our college account when we were young, like a 401(k) plan for kids! This worked well especially when I came home with babysitting money. I saved some for my wallet but it felt so good to give my parents $10 for the bank and to see the deposit of $20! By the time I was ready for college I had money to help fund my own education. This helped my parents set aside as well and it was a great lesson in savings account interest.
For my own children now, my husband and I keep all out change in a change sorting bank, something similar to this bank at Amazon.com. When we fill up a row of pennies, nickles, dimes or quarters we roll it and put it in one of the child's piggy banks ready for our next trip to the credit union. It's just a little bit extra for their accounts but the boys can help us roll the money and it also shows how quickly pocket-change can add up!
Ignorance is not bliss.
Almost three years ago I wrote a blog about Financial Independence:
Financial Independence re-visited. So now we have Josh and his new-found checkbook and ATM card. My husband has set it up so that his allowance is automatically deposited into his account twice a month, much like a paycheck. (Ah... that is one thing off of my financial "to-do" list while Paul is deployed; remembering to pay allowance.)... - Financial (In)dependenceWhen I was 16 I had my first credit card. When our oldest was 14 he had his first checking account. All of us have had savings accounts since we were babies. It all sounds so young but it works! It is a great way to educate your children before they sprout wings and leave the nest. It ties back to 'Education at Home'. If you open an account for your child show them the dividends and earnings they make on their savings account. When they have their first checking account help them balance their statement each month. When they are financially-savvy enough to handle a credit card make there no question that it will be paid each month! Don't set them up for failure. Teach them. Walk hand in hand and they will be ready to fly.
- Leanne from MilitaryAvenue.com
If all this has you thinking, be sure to read the book "Money Doesn't Grow on Trees" by Neale S. Godfrey. It was given to me at a recent military support event and I enjoyed reading it. It is full of tips, games, and much more that will help you teach your children from as young as two through their teenage years about money.