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teaching financial responsibility

Well, P101, I'm just driving myself batty these last couple of weeks of pregnancy staying awake, thinking about random stuff. My house is spotless for the first time in aaaaages, and I've come to bug you again.

Today's question on my mind is: How do you teach your child financial responsibility?

My parents controlled all of my money growing up, they took all my Lunar New Year lucky money, birthday money etc, and gave me money to buy things as I needed. I can see now that they were very careful spenders and savers, frugal in all the right places, but I never saw any of that, because they always bought what I wanted whenever I wanted it, and when we went on holidays (overseas every three years, more locally in between), money was never an object.

It wasn't until I started university that my parents left me to finally open a bank account on my own, get a job, etc, leaving me to pay for everything, (including a hefty weekly room+board to them) unless I specifically asked for money, which they would hand over with a lecture/guilt trip. They bailed me out of my credit card debt at 19. I haven't had a credit card since, I'm so terrified of them now, at 30.

I feel like I'm terrible with money now, and still in the back of my head I know if anything goes wrong I can just ask my parents to bail me out. I do my best to live within our means though, and we haven't had a debt that wasn't mortgage debt for a very long time.

I think it comes down to the fact that my parents didn't want us kids to know that we weren't very well off and that they wanted us to have the best of everything. My parents were uneducated immigrants, I'm sure we would have understood, but my mum bawled her eyes out when she worked out she couldn't send my little brother to a $17k a year private school. My parents also are huge on keeping up with the Joneses, so even if we were being punished by having various electronics confiscated, they would often buy us the latest gadget because so-and-so had one.

I *love* buying things for my 2yo son and seeing him happy. I'm not even good at buying things for his birthday and actually saving them until the actual day to open them with him. I don't know how I'm ever going to say no to things!

I've opened him a bank account today though, and put in all his birthday money etc. I'm probably likely to give him an allowance, and try and tell him when he's older, that he can only buy toys etc with his allowance. What else do you do? Do you let your kids see you saving up for stuff? I remember my dad telling my little brother at age 4 that he had no money for the big Batman tent/car/toy that he wanted, and my brother telling him to go to the ATM and get some then! (Dad bought him the toy the next day. My brother didn't even make a fuss when we didn't buy it on the day, shows you what my Dad was like)

Okay, sorry for the rambly essay, I really should try and get some sleep.


( 15 comments — Leave a comment )
Nov. 15th, 2012 01:22 pm (UTC)
My dad works in banking, and even so, I feel like he didn't explain enough about fiscal responsibility, even though, like you, I live within my means and have no non-mortgage debt.

When I was little, I did get a chore-based allowance, and whenever I wanted to buy something, I had to save double, because they required me to match the toy amount with money to put in the bank in order to make the purchase. However, they did often purchase things for me, including clothes and toys. I remember as a tween/teen my sister and I would go shopping and put a bunch of stuff on hold and we'd ask my dad to stop by the mall on his way home to buy it. He usually would :-P

I did have a period of time in college where I was making decent money and was a pretty frivolous spender, and I wish now that my parents had stressed the importance of saving earlier, so maybe I would've focused on putting some of that money away.

I think the best way to teach your kid about money is to talk to them about money. As they get older, explain how credit cards work, how credit works, and why saving is important. I remember the first time I spent a significant amount on a credit card (on a MacBook) and calculated how much I had actually paid for it after interest. I was shocked! Haven't put any large purchases on it since, unless I could pay them off right away.

When they're young, buy them what they need, but don't just buy them things they want all the time. Use you gifts as rewards (for behavior) instead of as random just-because.
Nov. 15th, 2012 02:26 pm (UTC)
my step dad told me a great story about credit cards/ loans/ etc when I was 12. Let's say you want a packet of gum from the corner market, but you have no money. The gum costs 1$. you strike up a deal with the market owner that you will take the gum for free but pay him a quarter once a month for a whole year. you end up paying 3 dollars for the gum that you likely ate within the first month.

to answer your question, I think that my parents own bad examples in life were enough to teach me frugality and living within my means. That story aside, my parents were constantly either in debt or declaring bankruptcy and every time they had a spare dollar they would want to go out and spend it and it was distressing because we, as children, knew that they couldn't afford this lavish trip to target and we were up nights scared because of the stress of my step dad maybe losing ANOTHER job, or my mom quitting her job to take care and home school us kids and maybe we wouldn't even have a Christmas tree this year, and the car broke down again. etc etc.

Nov. 15th, 2012 02:48 pm (UTC)
Finances were discussed at the dinner table growing up. We were working class. We were basically taught to never ask for anything because we didn't have money (which really sucked), but we knew about budgeting all along. We were taught to save and to spend money on big things. We had to get permission to withdraw money from our bank accounts. My sister's might have been a special piece of clothing. Normal clothes were bought by our parents. My brother's would have been electronics. He bought a computer, printer, etc. Mine were often camera purchases. Anyway, we were taught that we didn't have much, but if we saved we could buy it.

My kids are young we are more at teaching them that just because something is advertised on TV doesn't mean you need it.
Nov. 15th, 2012 03:17 pm (UTC)
We plan to give our daughter a an allowance for chores when she is old enough to do them (shes three so I'm sure with in the next year or two) but the money she gets now for birthdays and what have you we have been saving for her. I'm pretty sure shes got close to 40 dollars in her piggy bank at the moment, we are going to open a savings account up for it once we get enough money to do so. My husband is thankfully very good at managing money so I think she will be ok learning from him, I'm pretty sure he is planning to have her buy toys she wants with her own money she gets from chores and the like so she gets to pick what she wants and has the experience of choosing how to spend her money early on. We would of course still purchase necessities and gifts for her but I'd like her to be more responsible with her money than I ever was and I know my mother is going to spoil her with anything she wants regardless because that's how my mom is. If you want it she will give you the money to get it even if it detriments her but she won't ever let that on. That is I'm sure one of the reasons I have been so bad with money for so long, I had a job when I was 17 but even if I for whatever reason didn't have the money to buy something or get gas she would give it to me instead of telling me to save up/not go anywhere (though this might have been more guilt over her ex husband being a d-bag to us), I managed to over draw a bank account before I was even 20 but since my husband is good with finances its been rubbing off on me hopefully it will my daughter as well.
Nov. 15th, 2012 03:21 pm (UTC)
Growing up, my mom just spent spent spent and figured out how to get necessities somehow (I believe she went through bankrupcy twice) and my dad just lived below his means (which while a good thing, does not really teach how to manage money) but was terrible about paying his bills on time. I am super anal about money because of the bad example that was set for me.
My daughter is only 3 now, but when she starts "getting" money (she is just starting to get an interest, so probably around 4) she will get an allowance to learn to manage money. In the beginning, she will be expected to donate a %, save a % for future education, about a third for saving for a set goal, and will be allowed to do as she wishes with the remainder. She will be expected to split up gift money the same way. This is a habit I hope to instill in her while she is young.
Nov. 15th, 2012 04:08 pm (UTC)
I can't say how successful a strategy it is yet, but we plan on being very open about the family finances with our kids. Showing them exactly how much is coming in from where and where it all goes - and why no, we can't buy that video game even though we do have enough money in our bank account, but if we spent it now then we won't be able to take a fun vacation this summer. Things like that.

My husband is ridiculously responsible with money. I'm not. I'm not bad with it - I haven't had a credit card balance in over a decade, I have no problem with budgeting to meet our needs - but when it comes to "fun money" (gifts or other unexpected windfalls) my first impulse is to spend while his is to save. Hopefully we can convince the kids that his methods are better. ;)
Nov. 15th, 2012 04:30 pm (UTC)
At 4, my son started getting an allowance of a dollar a week, if he's done the things on his chore chart - his small things like putting his clothes in the hamper, emptying the utensils from the dishwasher, feeding the cat. I give it to him in change. We take 10% off the top for savings in the jar, and then 10% tithe to church - both values we want to reinforce over the long haul. The remaining $.80 is his to do what he wants with, and so far he usually spends it on candy - since he doesn't have the patience to save for a couple weeks, and there's not much else $.80 will buy! But I feel like it's his allowance, and if he wants to spend it on a lollipop, fine.

When he's able to understand a bit more and do a bit more, we'll increase the allowance to a more usable amount.

I am frank about money when he asks. Sometimes I say "no, that costs too much money". Or simply "no, we won't buy that because it's not a good price". Whatever we have or don't have, I want to pass on the idea of value. I don't know if it's sinking in - I remember him saying at the grocery store "eight dollars is not a lot of money, mama" and while it's true that it's not, eight dollars a pound for dark cherries off season is not a good VALUE. That's a hard concept to get through to a 4 y/o but we're trying.
Nov. 15th, 2012 04:50 pm (UTC)
One of the things we started doing when our daughter was little was giving her money to budget in certain situations. Starting around when she was 4, and we went on vacation, we might tell her she could spend $10 on a memento. Anything she didn't spend, she could save. She blew her money on junk a lot, but she's now 9 and is much more responsible. If we give her $20 to spend over the course of a vacation, she might allocate $10 to impulse purchases, and $10 to something "special." When she attends events (swim meets, chess meets, whatever) where she's expected to possibly buy some food, she gets the same deal. She price shops, because she knows if she drinks water from the water fountain instead of buying a bottle of water, she can spend that $1.50 on something else, or keep it at the end of the day.

I think talking about money, showing her our budget, working out with her saving, spending, giving, those are all great. But I think more than anything taking advantage of these small opportunities where she can put that into play. It's not just Woo hoo! $20 in birthday money! Let's go to the toy store! But the experience of seeing how careful budgeting, being conscious of what she's spending money on (bottle of water vs water fountain) can benefit her in the end. But she's 9. She could still end up being rotten with money when she's older. :)
Nov. 16th, 2012 12:54 am (UTC)
I really like your approach. It lets her learn consequences of spending AND saving, which I think is a better teacher in the long haul.
Nov. 15th, 2012 04:52 pm (UTC)
We have a special piggy bank for our 5yo daughter (got it when she was 3), it has three openings, one for fun money, one for savings and one for donations. Every time she gets money, we break it down so she can split it between the three. Currently out of every dollar she puts half into savings a quarter in fun and a quarter in donations (she loves putting coins in the salvation army things in front of stores). It was her choice to split her money that way, after we explained to her that if she wanted any big toys she'd have to save up and pay half for them. Small toys and clothes we buy her, although once she's twelve she'll have to start helping pay for clothes that aren't needed for school. I wish my parents had done this for me when I was younger, I got a monthly allowance and now that she's 5 we're going to start Aislynn on probably a dollar a week.
Nov. 15th, 2012 08:52 pm (UTC)
My oldest one is a spender and my youngest one is a saver. We haven't taught them anything differently, I just think it's their personalities.

We found that giving them money before they were 6 or 7ish in an attempt to teach them about money just ended up with them bringing crap into our homes that we wouldn't have bought otherwise. (I earned $3, let's go to the dollar store!!!) As they got older, it got easier and they save 10% of their allowance, donate 10% of their allowance and can spend the rest...or save it, or donate it or whatever.

Anyhow, I think we may have finally made a breakthrough the other day. I bought my son (he's 12) some shirts that he needed and he tried them on to see if they fit. I said "Do you like these? Are you going to wear them? Because if not, I'm going to take them back and get my money back because I had to work an hour for each of those shirts." I think it was the first time he put the idea of work = things together, even though we've done a chore based allowance for quite a while.
Nov. 15th, 2012 10:00 pm (UTC)
For kids a bit older than your son, try this website: highscorehouse.com You as the parent can enter chores, rewards, the "price" of each completed chore and the "cost" of each reward (prices/costs are given in stars, you work to earn stars and can redeem earned stars for prizes). I think it is a good precursor to dealing with actual money for kids, especially when I don't want to shell out 50 cents for them doing the dishes or whatever EVERY time they do it. They can accumulate the rewards online and then redeem them, I approve the prizes and then I give the prize (or take them to do it if it's an activity prize).

I let my kids keep their birthday/Christmas money, but I put it in an envelope with a "deposit slip" and keep it out of their reach. (My kids are 5 and 8). I write down when they put money into the envelope, let them look at their slip, and when they want something, we count to see if they have enough, then take out the money and deduct it from their slip. My 8 year old is getting a pretty good idea of what things cost a lot and what things she can usually afford (my dad sends them $10 for every holiday, like Halloween and Valentine's day, so they usually have something to spend). My 5 year old doesn't get it yet, but she DOES know if she spends $5 on a small toy, it'll take much longer to be able to buy a big toy she is saving for. Right now she wants an alligator hand puppet that is about $25. She was up to $14 and then spent $5 on a toy, and now I keep reminding her everytime she asks to spend that last $9, "you CAN, but then you won't be as close to buying the alligator." She usually decides against spending in favor of saving, but when she decides to spend it, I usually let her. I do reserve the right to say no if she just bought something, if I don't WANT them to have that thing, if they haven't been well-behaved and I don't want them to get something new at the moment, etc.

I was pretty proud of her in that back in April, when she had just turned 5, she saw a stuffed sealion at the aquarium that she wanted BADLY. I told her the price, we counted her money at home, and she didn't have enough. She did chores and didn't buy a few little things she wanted until she had enough. Then my mom took her to the aquarium and my daughter was able to buy it with her own money. She was very very pleased and I was proud of her saving ability. It only took 2 months for her to save up, but that's a LONG time when you're 5.

TL;DR: I think it's important to give kids the CHOICE to save or spend, but it's also your job to remind them when they don't have the money because they spent it on something else, and to help remind them of something they might be saving for when faced with an impulse buy. If you remove their ability to make their own choice (within reason), you are not letting them realize what true financial responsibility is, including the potentially negative consequences.
Nov. 16th, 2012 01:00 am (UTC)
Thanks for the website - neat idea.

I fully agree with you about the choice to save or spend and living with the choices/consequences, good or bad. They learn from those choices the best.
Nov. 16th, 2012 09:29 pm (UTC)
I just saw this via Pintrest the other day:
Nov. 17th, 2012 03:10 am (UTC)
I was just about to post this
( 15 comments — Leave a comment )


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