Part of the Whole Package

Teaching kids about money is only one element of parenting.  But it’s part of a whole package.  Everyone – including parents and including kids – is going to have strengths and weaknesses.  We all grow as individuals if we can build on our strengths and do our best to mitigate our weaknesses.  Child need parenting that helps them do this. 

 

So if your child is doing well with managing the budget you give her for auto fuel, but she’s flunking algebra, make sure all the parenting pieces are fitting together well.  Do you need an algebra tutor or just the motivation for studying is in place?  Financial lessons needs to make logical sense.  For instance, parents need to be careful about “paying” for grades.  It might send the message that academic achievement will automatically bring financial rewards.  As any public school teacher who had a brilliant academic career can tell you, that’s not necessarily the case.  And yet a teenager’s primary job is generally agreed to be to get an education and find out enough about what her passion in life is to build a career.  So if working hard enough on grades is worthy of some financial support from parents, that’s worthwhile. 

 

As a parent of three teenagers, every once in a while I have to take a couple of steps back and ask myself, “Is it realistic that this child of mine who’s making me crazy right now should get a clothing allowance?”  If all the pieces aren’t fitting together for comprehensive responsible parenting, reassess.  And when you do reassess, remember that parenting isn’t about making your kids into clones of you.  It’s about helping them find who they are and maximize their sense of responsibility. 

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When to Start Allowance

Parents want to know when the right time is to pay allowance.  It’s sort of like knowing when the right time is to get married or have kids.  It depends on the family and on the individual kids. 

 

For most kids, when they are aware that things cost money, they’re ready to have some money of their own.  And the right amount is usually about a dollar per week per year of age.  So a five year old could have as much as $5 per week.  The next step is crucial!  Don’t buy the child all of the discretionary purchases you have in the past.  It’s up to her to buy those things.  And define what it’s ok and not ok to buy.  So if she can buy candy, small toys, and stickers, tell her so.  If she’s not allowed to buy a puppy or a pocket knife, tell her that.  Leave the lines of communication open so she can ask if something is an approved purchase.  Don’t bail her out and don’t reimburse her for inappropriate purchases.  So if she buys a cheap little toy and it breaks within the week, don’t give her back the money.  If it’s truly faulty, you can take her to the store and help her get a refund, but you shouldn’t be “the store”.  If she buys a switchblade (not an approved purchase), her choices are to see if the store will take the item back and give her a refund, or you take the item and she doesn’t get a refund. 

 

For families that are struggling to make ends meet, giving money to the kids should be a rare or nonexistent occasion.  But the kids can still be learning about financial responsibility.  One way is to discuss some of the family finances.  For instance, if the grocery budget is on the agenda, have the kids help plan meals around coupons or sales in neighborhood grocery stores.  One way to let kids have a little money of their own in a sight family budget is to tell them they can have a portion of money they “find” for the family.  So if your teenager finds a way to save on the electric or water bill, he gets a quarter of that money back the first month the savings hit.  Your family still comes out ahead, he’s more financially aware, and he gets some money to spend as he wants – within what you allow.

 

Keep dialog open.  Let them talk about their money with you.  Be willing to talk with them about some of your financial situation.  It’s important to remember that there’s a difference between talking about money and lecturing or criticizing. 

 

Kids will make some mistakes with their money.  But it’s easier for them to learn from those mistakes now – while you’re feeding, clothing, and housing them – than when they’re on their own. 

 

There’s lots more on this issue and others to teach kids finance in The Ultimate Parenting Map to Money Smart Kids available at www.brightleitz.com . 

5 Tips for Raising Money Smart Kids

  1. Remember that experience is better than lecturing.  When your kids are ready to learn about money, start letting them make some financial decisions.  It might be as basic as choosing between an ice cream treat and a soda, but let them decide and let them know it’s about deciding what to get, not getting everything they want.
  2. Start younger than you think you should.  Many kids in pre-school can make the ice cream vs soda decision.  Elementary school kids can have an allowance that let’s them buy some things that you used to buy for them.  In late middle school kids can start managing a budget to buy their own clothes.
  3. Lay out boundaries up front.  Let them know what they are not allowed to buy – clothes displaying profanity, dangerous objects like knives, whatever you decide is inappropriate for your family and their age.  Let them know they’re welcome to check with you if they wonder if a purchase is acceptable.  And let them know that if they buy something they shouldn’t, they either have to return the purchase for a refund or give the poor purchase to you for no refund.
  4. Let them be themselves.  They might spend money on things you would never want, but it’s what they want and let’s them start developing their own money personality and skills. 
  5. No bailouts!  If kids make bad choices, express your compassion for the error, ask how they might handle the situation differently in the future, and let them deal with the outcome.  Don’t give them money to recover their loss.  We all learn from our mistakes.  And if you bailout your kids from their financial mishaps, they learn that mistakes aren’t a problem, because you’ll always rescue them.  That’s a very expensive life lesson for them and for you.