Teach money matters early to help kids thrive as adults.
Several years ago I spoke with a woman who was a financial planner about giving my son allowance. I wasn’t sure what the going rate was and whether or not the current rate really made sense. Many kids at that time seemed to have this sense of entitlement that made me cringe and I didn’t want to have to deal with that with my own child. I didn’t want to go overboard but I certainly knew I needed to teach him to be conscious about money matters.
I started out with $10.00 every two weeks as my goal for allowance. I’d made a list of chores outside of his self-serving chores that should have been his normal responsibilities like cleaning his room and sorting his laundry. There was no way I was going to pay a kids for doing what he was supposed to do anyway. Could you imagine going to your manager at work and asking him to pay you for coming to work with clean clothes and giving you a bonus for being on time each day?
Kids today have far more than we had when I grew up and parents need to be creative in showing them about money matters. It’s not fair to them to have the gravy train until their 18 and then suddenly have to figure it all out when they become of legal age. When this happens, far too many times I’ve seen young people get into way to much debt too early and ruin their credit. The worst case was a 23 year old who filed bankruptcy because she’s racked up $50,000 in credit card debt to pay for her fun loving lifestyle. Her credit was ruined and she had a hard time getting a job in the financial industry after amassing huge student loans for a degree in finance.
Here are a few things to consider when thinking about creating financially savvy kids.
1.) Decide on a reasonable chore list outside of the child’s basic “self” responsibilities like bathing, picking up in their room and sorting laundry. Examples could be: helping dry the car after a car wash, washing dishes properly without being told, bathing the dog without being told etc.
2.) Don’t forget Uncle Sam! The IRS will hit your first pay check before you even know what your bring home will be, so get kids prepared early. My son’s allowance came with a mini pay stub that looked something like this. In our house (I believed in church responsibilities and would sometimes add an extra fifty cents for his church contribution but tack on a one dollar employee bonus to make up for it so his bring home was nine dollars. )
- FICA $.030
- Medical $0.10
- Federal Tax $0.40
- State Tax $0.20
3.) Teach them how to budget. When your kids want something, why just whip out cash to get it? When you grocery shop is a great time to show them what budgeting is all about and how much food you get for the money your work for weekly.
4.) Balancing check books for fun! When you’re showing your child how to budget and save for whatever they want, don’t forget about balancing a check book. I’ve met many adults who have no clue about how to balance their own check book and end up overdrawn all the time.
It may seem silly to do some of these things with your child but in all honesty you’re helping them in the long run. How many of us wish someone would have helped us learn all of this BEFORE we had to or BEFORE we messed up our own finances. Teaching healthy habits early, lead to better financial literacy. Showing them how far money does or does not stretch will be key in helping your children learn to live within their means and be happier adults.
Photo: Flickr/ Family Treasures