We currently have four boys, ranging in age from nearly 21 - 9. Our policy on paying children has fluxuated over the years, mirroring both changes in our own financial fortunes and our children's needs. This post shares our family's principles for Teaching Kids Money Management from the age of 5 -1 6. Enjoy!
AGE 5 -11
When our children are in grammar school, we pay them an allowance. They understand that this money is for doing specific tasks, which are assigned weekly. If they do not complete tasks in a timely, appropriate manner, then their “paycheck” will reflect their job performance. They are expected to tithe ten percent, save fifty percent for future goals, and may spend forty percent.
I'll be posting a list of age-appropriate chores and what we taught our children at each age, next week.
We do not intervene in how they spend their money except in specific circumstances. They are not allowed to purchase any item, which we consider to be inappropriate or immoral. We council them about items which are cheaply made. We have a lot of conversations about “quality” versus “quantity”. A few times they opted to purchase an inferior item, and were sadly disappointed when it broke within a short time. This helped them consider the importance of thinking before purchasing an item.
Prepare yourself! Soon, you will be standing at a garage sale and they will see something that they “just can’t live without”. Gasp! They have spent all of their allowance. Their piggy bank is empty! They will plead with you to advance them money for the item. The first time this happens reply, “Mom and Dad don’t spend money we don’t have and we expect that you won’t either. However, if you wish me to loan you $5.00 for that toy, you will need to pay me back $8.00 next week.” Their face will fall. They will be aghast. They may even scream, “That’s not fair!” Simply reply, “No, THAT’S paying interest.” I did it – once – with each of my older boys. My oldest son was the only one who decided that the price of the loan was equal to the worth of the toy. However, he learned his lesson. I later overheard the older boys warning one of the younger ones, “If you don’t have the money for that, you’d better put it back. Never ask Mom to loan you money!”
By the time our older boys reached their teen years we realized that their needs had changed. Older children need to see the importance of saving and planning for specific goals. So, we explained that they would no longer receive a weekly allowance. That's right! We cut them off. But, not completely. Instead, we explained to them that we wanted to invest in their dreams and simultaneously send them off to utilize some of the "striving-for-excellence" work skills we had endeavored to teach them. They were to set their own goals and save for specific items. Then, they would need to find work (and receive pay) from someone besides us. When they had saved up one half of the amount needed for the item, we would kick in the other half. We continued to pay for school related supplies and events, clothing, and occasional extras.
The boys were ambitious, busy, and hard-working teens. Because half of the money to be spent was theirs, they carefully researched the best prices and values for each item. They were paid for installing a barbed wire fence, cleaning a condo, pet sitting, lawn mowing, and lawn maintenance. They purchased digital cameras, electronic book readers, camcorders, an iPod Touch, a 7 inch tablet, and laptop computers.
The year our middle son was 15, he presented us with a long list of items that he wanted to purchase. He was well aware that, like the Cinderella fairy tale, our offer to match half of his savings would vanish at the stroke of midnight on his 16th birthday. He worked every spare minute. He met every goal. Larry and I spent the year writing "matching funds" checks. This plan has undoubtedly cost us far more than the weekly allowance ever did. But, I believe it prepared them more effectively for life as they turned sixteen.
As you might imagine, at the age of 16 our boys are expected to get part-time jobs in the community. They pay for their own clothing, gifts to others, extra-curricular activities, car insurance, gas, and any other items they wish to purchase (computer accessories, electronic gadgets,etc.) Before you ask, "no", we do not supply them with a cell phone. If they wish to have one, they must purchase the phone and pay for the monthly plan or minutes. We do not. This may seem harsh to some, but our goal is to send young adults out into the world knowing what "things" cost, understanding how to comparison shop, and having the ability to separate "wants" from "needs". These skills are sharpened as they invest their own time and money, instead of us handing them what they need. We would rather they experience all of these realities of life while residing under our roof, so we can help them navigate the tricky world of finances. Additionally, remember, I hand our boys "finances on a silver platter" when they are in high school and take over our family finances for six months. If that doesn't give them a realistic view of money, I don't know what will. Our adult sons tell us that they appreciated us helping them set "reachable goals" and giving them the tools to do it.
Do all to the glory of God,
Do all to the glory of God,