It’s a fear we’ve all had.
For us, it began once we placed our sweet babies in daycare. For others, maybe it struck in the checkout line while purchasing diapers, or at the pharmacy, picking up yet another antibiotic, or in the orthodontist’s office. Or maybe it didn’t really strike home until you wrote that first college tuition check:
“Is this kid going to make me go broke?”
For me, this thought was immediately followed by a panicky, “My children are financial vampires! They’re sucking me dry! They’re going to turn 30, and I’m still going to be paying for everything for them!”
Thankfully, I’m not alone in my desire to teach my kids about money in an effort to avoid having to spray them with holy water and garlic when they turn 18. Resources from blogs to podcasts are out there if you too want to set your children on the path to financial independence. My husband and I read about teaching financial literacy to kids a few years back and settled on a few ideas to implement in our own way. These included:
- Giving the kids a weekly allowance
As nice as the idea of giving them a dollar for every year old they are seems, we just couldn’t stomach watching our then 5 year old spend $5 a week on candy that we would then have to distribute. For us, we stuck with a dollar a week until our kids were actually able to read and consider a price tag. For Nell, our 9 year old, that happened at age 8.
- Tying the allowance to being a “contributing member of the household” and not to specific chores
Everything I read said we shouldn’t pay kids for chores as this will lead to them never doing anything unless they’re paid to do it. I get that. At the same time, my husband was pretty clear that the primary reason we’re both holding down jobs is for a paycheck. We settled on this kind of nebulous line: we give them an allowance for being “positive contributors to the household.” This means we look for them to do their agreed upon chores without complaint. We also take away a portion of their allowances if we have to remind them, or if they argue when we ask them to do something. It’s not perfect. I’m not sure they get it. But I do like talking to them more about ways they contribute to our home vs. nitpicking every little chore on a checklist.
- Having them divide their allowance money into three categories: spend, save, & share
We like the Moon Jar because its bright colors and separate containers made this somewhat abstract idea much clearer to our kiddos. I’ve seen other folks use three plastic bags taped to a wall as effectively though.
- Letting them choose how to spend their allowance
Most of the time, this is super painful for my husband and I to watch. On the plus side, I NEVER have to say no to a toy or treat when we’re out. My go-to response whenever they ask for whatever is, “Well, did you bring your money?” 9 times out of 10, they haven’t, and I’m not the bad guy. And when they do bring their money, often they don’t have enough for what it is they want, resulting in a teachable moment. Note: We did veto our 6 year old when she wanted to spend $60 on 5 stuffed deer in a store one day on the grounds that we did not have room in our home for 5 new stuffed animals!
This has been our system for about two years, and after my 9 year old made her first major purchase with her allowance money this weekend, I was curious what lessons were actually sticking. Of course, since you can’t just interview one daughter without creating mayhem, I went ahead and interviewed both. The following is my unedited interview with Nell, who is in the 3rd grade, and with Libby, who is a first grader.
with a Vampire My Daughters about Their Allowances
ME: Why do you have an allowance?
LIBBY: Because I do chores to earn money. And my mom is so nice.
NELL: Well… because I work hard & contribute to the family by doing extra chores and making my own bed and stuff.
ME: What are the 3 things we do with our money?
LIBBY: Spend, save, share, and give.
NELL: Save, spend, & give, I think.
ME: What are you spending your money on these days?
LIBBY: I’m spending my money on a fish.
NELL: I basically I put nothing in my spend jar. I save all my money.
ME: What are you saving your money for?
LIBBY: I don’t know yet.
NELL: Well, I was saving for a bike. Now that I bought my own bike, I guess I’m just saving my money until I find something I want to spend it on.
ME: Tell me about buying your own bike.
NELL: It took me about a year to save all the money I needed. It was pretty hard. I ended up negotiating a bigger allowance so it would be easier for me to save faster.
ME: How does it feel to have saved money for a bike vs. just having your parents buy it for you?
NELL: Well, I feel pretty good about it. I also feel like other kids are lucky because their parents end up buying most of their bikes. But I’m also lucky because I’m able to save a lot of money because I get an allowance.
ME: Why do think we didn’t just buy you a bike, Nell?
NELL: Because once you heard I was saving my money for a bike, you wanted me to have the experience of having to save up money for something big.
LIBBY: Instead of just saying, “Ok, we’ll buy you a bike.”
NELL: (joking) “Oh, ok, we’ll buy you all your bikes until you turn 87!”
ME: Why is it good that you had that experience?
NELL: Well… it’s good for me so I can experience making a long-term investment, or something like that.
ME: So, are you glad that you bought your bike?
ME: What or who are you sharing your money with?
LIBBY: Charities. Like… I don’t know the names of many charities.
NELL: I usually donate to some kind of a charity, like Heifer International which gives animals to people who need them across the globe.
ME: What have you learned about money at age 6/9 so far because you get an allowance?
LIBBY: I know how to tell coins apart. And… That I have to do chores to get it. That I have do more to get it raised. You have to see that I’m responsible.
NELL: Well, I think I’ve learned about getting good spending habits and stuff like that. And also not becoming the kind of person who just sees something in store and thinks, ‘Ooh that looks nice, I’ll buy it.’ Like if it’s a shirt, even if it doesn’t fit, or candy that tastes bad, and I’ll get ripped off. ‘Ooh, I have enough money here- it’s only $6- I have $7.’ ‘Oooh I see chocolate over there, I’ll get some of that too.’”
ME: What makes you irresponsible or responsible with money?
LIBBY: Not spending it on candy and stuff. Spending it on candy makes me irresponsible. Because you’re not supposed to have so much candy that it makes you sick.
NELL: Well for one thing, whenever I have money in my pocket, I feel the urge to get myself a pack of gum in the store. But I’m not really a big spender either. Like, I don’t usually have money on me for stuff. I save most of my money, which makes me responsible with money.
On digesting the interview transcript together, my husband and I came up with the following parental take-aways:
- The allowances have been good for the girls
- We seem to be doing ok in our efforts to teach financial literacy so far. That is, the girls seem to have some sense of the value of money & its uses
- 9 year olds are definitely wiser than 6 year olds when it comes to money
- As parents, we could show more that spending money is sometimes a responsible act (e.g. when your refrigerator dies)
- It looks like we should talk about charitable giving at other times besides the holidays. Also, we might be bad people
- Candy purchases loom large in the minds of my children
- They’re still too young to learn about the power of compound interest
- We may still be at risk for financial vampires…