Wednesday, November 12, 2008

Teaching Money Management to Kids

Today's frequent use of credit cards, debit cards, checks, and ATM's often give kids the subconscious idea that money merely spits out of machines, or that it comes from some other magical, renewable source, rather than having to be earned by good, old fashioned, hard work. Of course most kids have been told that it's not all that simple. Many can even explain how all of the before mentioned processes really work, though it probably seems surreal to them.

It's as if some magic trick has been performed before their eyes. They've been told it's just an illusion, but the flawless performance throws them off. The conflicting messages causes their minds to be wary and unsure about which source they should trust; their own eyes, or the words of others. Mix all that with the fact that magic is more adventurous, romantic, not to mention less work, and "presto!", there you have it: A youngster who subconsciously believes in unlimited resources and minimal consequences to some degree.

Though growing up dispels some of the myths children learn while in their younger years, others are so deeply rooted that they may become a life long struggle for them and their loved ones. Those that know better try to help the rest, but it is a long, hard journey belittled with mixed results. What exactly should be taught? How do we approach such taboo topics? Is this person open to learning such matters? What is the best way to learn these lessons? Should people be bailed out ever? If so, where does the line between giving someone a fresh start and enabling them fall? What are our duties as loving friends and family members anyhow?

Although I don't know the answer to all of these questions, I've learned a few things from both ends of the spectrum which can be useful to those searching for ideas. And, though the answers vary according to the individuals involved, there are a few sound fundamentals which I've learned that can at least help us better prepare the rising generation for their financial future. After all, our kids will never be more malleable than they are now, nor the consequences as benign.

Like most parents, Dave and I have tried various systems over the years to provide our youngsters with opportunities to earn money because we felt it necessary to start practicing young. The children mostly spent their money, and we seemed to be making little headway. We assumed that we just hadn't found the right reward system and tweeked things a few more times.

Then we started having problems with the kids' school meal accounts, as their lunch money would be out before it was supposed to be. We tried punishing them, reiterating the rules, and we even had them pay us back from time to time, but the problems still continued. It became evident that their money troubles ran deeper than we thought.

It became clearer that consistency was part of the problem, so Dave and I worked out a uniform consequence. We also realized that this type of discipline needed to include a way for our children to make the necessary reparations, as well as supply additional reproof until they had done so. We settled on having them bring sack lunches to school until they had paid us back in extra chores. This was a slow process, and though we saw some results, we didn't think that they were enough. The kids weren't passionate either, or trying to fix things that hard. They reacted like a dog tucking it's tail between it's hind legs; obedient, but dejected.

We wondered if there was a better way. Then we read the following article in Scouting Magazine, which got the wheels turning some more: (Although I highly recommend you read this report, it isn't necessary to understand what I'm about to say. It does have some additional useful tips though.) It talked of not just giving kids money, or having them earn it, but of having an age appropriate responsibility go hand in hand with it. Something that will automatically provide the child with a natural consequence should he abuse his funds. The expert used the example of supplying younger children with snack money with the understanding that they are to buy their own snacks whenever they go to the movies, or other family outings. If their money is all gone when a particular event comes up, they participate snack less. Teens could be given a clothing allowance with which to buy their school clothes etc... The frequency of these payments should also be age sensitive, but there should be absolutely no loans or bail outs!

After discussing how we would apply this principle to our own family's situation and needs, Dave and I sat the kids down to a family council. We then announced that instead of putting their lunch money onto their meal accounts like before, we would give each child their fair share in cash every weekend. They would now be responsible for deciding how they would utilize that money. Because we also wanted to encourage them to learn how to sacrifice, save up, and be thrifty etc..., we told them that they were welcome to take sack lunches from home free of charge for now, but that there would be no complaining at the monotony of their selection. We told them no loans or advances, and that we wouldn't replace lost or stolen money either.

Well, you should have heard all the "whoops" and "yippees" and seen their bright smiley faces! You would have thought it was Christmas! LOL So far the system is working, though I am sure we will need to tweek things from time to time. In fact, now that we have had this system in place for 3 weeks or so, Dave and I are now going to require them to buy their own sack lunch supplies. They will get an additional dollar too. This way they aren't getting anything even remotely close to a bailout, and they can also learn to make sacrifices in order to pay their tithing and save.

The nice thing is that this doesn't really cost us anything either. In the long run it will probably costs us less, by the time you figure in how much extra they spent on second helpings and treats, not to mention the stress of dealing with it all. Now the kids are their own bad guys (ie...the one's enforcing their own rules). If they don't like a decision, well it's on them.

In conjunction with these hands on opportunities, we are going to be starting a series of FHE's that don't just teach the kids the how's and the why's to money management, but other practical exercises that lets them see it's effects. (Stuff that we didn't completely understand very well when we were little: such as how advertising works, interest, and how long it really takes to pay off a credit card and so forth.)

Dave also found a cool game online that we would love to get, but seeing as we have our own lessons to learn... well, you get the idea. Although the adult version is nearly $200, here is the link for the kid version ($40) if you are interested: (It better be a good game for that kind of price!) Between all of this, we are hoping that our own kids will grow up to be even more savey and better prepared than we were when we first got married.


Trillium said...

I commend you! It makes me tired just thinking about it. LOL

DebbieLou said...

Thinking about it, or reading about it? LOL
I admit I am a bit wordy sometimes. Believe me though, I cut out a lot in the end. (I have been writting this entry for about 2 weeks now, and I was already thinking about what I wanted to say a week before that.) I'm slow, what more can I say?

Rebecca said...

We have tried different things too. The only time our kids get money is when they get their report cards and each grade level has different premiums for letter grades. They have gotten really good at saving their money for something they really want.

We will buy the kids a new book once they have finished their old book (we still go to Barnes and Noble).

Family Activities are contingent upon chore completion. They have missed out on movie nights when their rooms aren't clean and Victor and I have left them home and gone to movies that they really wanted to watch.

There are times where we have stepped out of the basic money spending rules and have allowed our children to splurg... not always a good idea.

Anonymous said...

Wow, those are really good tips! I will have to remember that if we decide to give our kids an allowance (we will probably just give them money for different chores...maybe...). That is one thing I wish I had learned before I got married. It has been a long, hard struggle to learn how to manage money. Whew...