Responsible Little Spenders

Money is powerful.  I didn’t say money IS power.  I said money is powerful.  Money can bring good or evil depending on how it is valued and used.  As parents we have a responsibility to teach our children about every aspect of life – including money and finances.  My husband and I are well aware of this responsibility, and we realize that even the most financially responsible people can misguide their children when it comes to money.

We bought Kaden his first piggy bank a couple weeks ago.  Since that time, Kaden has accumulated nearly $15 – a lot of money for a baby’s piggy bank.   We throw dollars in it here and there, and collect change that falls out of Granddad’s pocket when he comes to visit – losers weepers!

The other day I suggested we take money from his piggy bank and add it to his savings account once he accumulates $50 or more.  That suggestion started a debate on money, the value of money, and how we will teach our son.  My husband thinks that he should save in his piggy bank and not spend a dime until it is time to purchase a car.  My thinking is that he needs to have short-term goals, like a toy or a bike.  A 4 year old can’t comprehend that he’ll want a car when he turns 16.  A 4 year old can’t rationalize and think that far ahead – that was my argument.  My suggestion was to save larger amounts in a savings account that he can’t touch, but to teach him to work for and save small amounts of money, that he can spend periodically, in his piggy bank.  Who is right? Maybe neither of us.  Maybe both of us. (if you are asking me, then he is wrong :)) 

Well, I did a little research for us and for you.  Here are some practical things you can do with your children from ages 4 on to teach them about the value of money.

Age 4: Dollars and Sense
Most four-year-olds can count, recognize letters and numbers; some have even started to read. What better time to introduce the concepts of an allowance, spending and saving? A couple of books, The Berenstain Bears Dollars and Sense and Alexander Who Used to Be Rich Last Sunday, illustrate just how quickly that weekly payout can burn a hole in your pocket if you’re not careful.

Age 7: Amortize Your Cherries
The next time you’re in the supermarket with your kids during cherry season, buy a pound without choking on the price. Then, when your hungry offspring start scarfing down the cherries, point out that they could either eat them all at once and have no more for a long while (with a gentle reminder of the price), or they could eat just a few cherries at a time and enjoy them for several days.  You can also ask your children to help pay for those things they really want out of their allowance. They seem to have a better understanding of the value of money when they’re spending their own.

Age 12: Future Entrepreneur
Encourage your child to start her own business. What better way to understand the ins and outs of cash flow? Some jobs for a 12-year-old include dog-walking, plant & animal care, mother’s helper, gardening and more. You’ll find that kids get more excited about earning money — and saving it for something special — when the enterprise and the earning power is theirs alone.

Age 15-18: Checks and Balances
Take your son or daughter to the bank and have them open their very first checking and savings accounts. Remind them to bring cash or a birthday check to deposit — half in savings and half in checking. And then remind them that when the checking account runs dry, they’ll probably be paying a monthly maintenance fee until they put more money into the account – just a little incentive to spend more thoughtfully.

Age 18 through the College Years: Don’t Pay the Way
It is fine to pay for large expenses if you are able and willing.  However, make sure your son or daughter is responsible for day-to-day items.  Don’t buy their groceries, don’t give them spending money, and don’t pay for clothes or shoes.  Have your son or daughter find a job in the community or on campus.  Make sure they have a checking account and make them responsible for small bills and extracurricular activities.  Part of growing up is making and spending money wisely.  Make sure they are financially responsible before entering the “real world.”

Be an Example
Kids can learn the value of money at pretty much any age. It just takes some thought, a little effort and plenty of credibility. That means we, as mothers, need to practice what we teach. If we expect our children to tread the path of good money sense and fiscal responsibility, then we have to set the example.

• Teach your child(ren) to live within their means by preventing or minimizing your own debt.
• If you are overcome with debt then work toward being debt free
• Communicate about money issues.  You don’t have to have an open book policy with your children, but they  can be familiar with your income vs. financial responsibilities. 
• If you have savings and extra money at the end of the month, make sure you are demonstrating wise spending decisions.  Don’t go on a shopping spree every month. Communicate that you have X dollars left over.  Communicate that you are saving X amount and spending X amount. Then let your children watch you make wise spending decisions.  Often times, children don’t understand that you are saving 50% of your discretionary income and only spending 50%.  All they see is the spending part, even though you are saving a good portion.  If they see you spending and don’t realize the saving part, then the message is lost. 
• Let your children watch you and your spouse discuss big purchases.  Do research, take time to decide rather than falling victim to impulse buying, weigh the pros and cons, and ask questions.    

That seems easy, right?  Okay, it may be hard. But the payoff will be a whole generation of kids who know how and when to save and spend.  Don’t even stress about doing everything, just focus on a few, wise monetary decisions – your children will be watching and learning!