Helping children understand finances.
My wife and I have 4 kids ages 16,15,13, 5. Like most families, we give our children an allowance. We give them a small amount of money on a regular basis that they manage using the “10-10-80” principle: tithing 10%; saving 10%; and spending the 80%. Recently, we’ve noticed that even though we’ve been diligent at helping them establish a Godly priority for their finances, we’ve never given them a healthy strategy to help them manage their spending. Let’s face it…you can 10-10-80 yourself to debt if you’re still not disciplined in how you spend the 80%. Here are some of the things we’ve done throughout the years that have had positive results:
Allowance $. We make sure to pay them the same amount every 2 weeks. This gets them in the habit of knowing their ‘rate of pay’, so they can begin saving for specific items and budgeting. However, we have also made it known that their allowance is NOT based only on their chores. Many of their chores are things they’re just expected to do around the house. Sometimes, we’ll even give them extra money for doing ‘extra’ things. But we didn’t want money to be the only motivating factor for doing stuff.
Eating out. Give each child a set amount ($5) and tell them they can spend it however they want. If they want fries, burger and a soda, that’s OK, but they may want to buy an ice cream instead of the soda. Giving them cash will help them learn how to shop on a budget and help them prioritize how they want to spend it. Once, my daughter asked, “Dad, do we have to go out? I’d rather save this for something else”. Hmmm…I think she’s getting it.
Clothes Shopping. The typical kid wants it all (shoes, shirts, jeans, a watch or jewelry, toys, etc.) Normally, we just go and buy them the stuff. But the key is to involve them and give them ownership. So, if your kid needs clothes…First, tell them how much money they have to start with…let’s say $50. Next, pick a shopping day and have them watch for sales so they can plan out where they can go to get the stuff. The point is to get them to work within their means and make their money stretch as far as it can. Maybe they skip the bracelet to buy a belt. Or, they pass on the name-brand jeans to get 2 pairs of jeans somewhere else.
Family Trips. When going to the movies, zoo, theme park, etc., as a family…again, start with a specific amount of money. Decide as a family how the money will be spent and remember, when it’s gone, it’s gone.
Eliminate gift cards. The danger with gift cards is that kids never see any money changing hands. When they’re young, kids need to begin by understanding the basics of money and the importance of “when it’s gone, it’s gone”. If they grow up with the mindset of “wave this plastic card at the cashier and get stuff” mentality, they’ll be in trouble and in debt for the rest of their life.
As kids grow older, pre-paid Visa cards may be a good next step, so they can start to learn the principle of using ‘plastic’ as a money-in/money-out discipline.
Results. We’ve seen all kinds of results: They are saving more. They are wiser with their spending. We make it a habit of telling them “we can’t afford that right now”. And, they don’t complain when we say “no, we’re eating at home because it’s cheaper.” It’s also a great motivator for us, too. The other day, my daughter asked, “Dad, can we go to Disneyland when we get out of debt?” Gulp–That sure makes me want to get out of debt sooner. Oh, by the way, on her suggestion–our family started saving for the Disneyland trip that day…together!
Dennis Bloodworth 