2 CommentsI never thought much about how my children thought of money until, one day, my 5-year-old son brought home a playmate who walked into our middle-class home, took one look around and proclaimed, “How can you live in such a dump?”
While I realize that there are a range of living styles, and that mine does not involve a dedicated home theater, I never thought that children paid so much attention. (Politeness is a worthy topic, too, but more on that another time.)
Of course, questions do come up. “Why can’t I have the Xbox/Wii/American Girl/Air Jordan?” and so on that someone else has. But how far do we take our answers? Is it enough just to say, “It’s too expensive?” How far should we go in explaining to our kids how much money the family has? How do we teach the concept of good money management without making our kids anxious and too focused on the whole topic?
For children like 7-year-old Rachel Lawell, allowances teach budgeting and financial responsibility. (Photo: www.lawellphoto.com)
Psychologist Dr. Bob Weinberger said children as young as 3 or 4 can understand that toys cost different amounts. An allowance system and a chore chart are good steps to show budgeting and earning, he said, while, typically, teenagers can handle more complex subjects such as stocks and portfolios.
Parents should take cues from their children, experts say. There are going to be the lemonade-stand entrepreneurs, paper-route moguls and babysitting divas. Other children are happy sticking to a single piggy bank for saving allowance.
Nikky Lawell’s 7-year-old daughter is an only child and an only grandchild. That means she gets a lot of swag. Using an idea from a Christian bookstore, Nikky took three plastic jars and, with her daughter, decorated and labeled them – saving, spending and charity.
At first, only her daughter’s allowance money went into these jars, but then Nikky realized she needed to teach earning as well as saving. She added a chore chart with payment for each chore. (Some chores are expected as part of family duties, and others carry a cash value.) For example, taking out the trash can and bringing it back are each worth 25 cents. Her daughter has the potential to earn up to $7.50 per week. Not bad for someone who is not old enough to cross the street by herself.
That technique is great for kids still negotiating rates for the tooth fairy, but they get more demanding as they get older. Designer jeans cost a lot more than Pokémon cards.
Interior designer Sarah Eilers started a system for her children that has paid off now that they are becoming adults. It all came from listening to a TV talk show. (Never doubt the power of Oprah.)
She started giving them an allowance and opened savings accounts when they were in grade school. They learned to put all gifts and earnings into it, so that when they turned 16 and wanted a car, she made a deal. They gave her a deposit on the car. She bought it, and they paid off the rest in installments with summer jobs.
They had to pay all gas and entertainment expenses. She taught them how to use Quicken financial software to manage their money. Now she has one child graduated from college and financially independent, one in college, and one just starting college. By the time they all graduate, they will have a paid-off car and a savings account.
Tax attorney Russell Hall suggests giving allowances to teach about cash flow.
Children younger than middle school do not need to know more than that, he said. He said to teach middle and high school children about the stock market, but not to necessarily use your own portfolio as an example.
Psychologist Dr. Yael Avivi said parents need to look at finances from the child’s point of view. If a child is nervous that the family is struggling, then it’s good to assure him or her that you have enough means to survive comfortably, she said. Don’t let a discussion of money morph into a parental venting session, she said, which can dump your worries onto the child who has no way to deal with the upsetting feelings.
You might not know until adulthood whether your teaching of finances paid off. But, in the meantime, if your child walks into someone’s home and hurls insults, it may be time to do some investing – in an etiquette class.
