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One day while I played dress-up, I had decided that I needed to go to the "store", so wearing one of Mom's white tee shirts, a scarf, and my mom's tennis shoes, I grabbed her purse and proceeded to put my play food in a little basket. I ended up dropping the purse, and since it was my mom's, it was fairly full and several things fell out. I started to pick them up and found mom's checkbook.
When I grabbed it, I saw that in the checkbook mom had a register just like the one that she used to teach me to add and subtract, so I asked her what it was for. I knew that she already knew how to add and subtract, so I didn't see why she had one. So she told me that she used it to pay bills. Then I asked the question that all parents seem to dread: Why? "Well", she said, "because we used the services the company offered and we had to pay them for it." Being confused, I asked why again.
Seeing that I wasn't going to let the topic go, mom sat me down at the table and went through her checkbook with me. She showed me what her paycheck was, then she went down the list: Electric Company so that we could turn on the lights, watch TV., and have the air conditioner in the summer; Gas Company so that we could cook our food and heat the house in the winter; House and Car payments, plus insurance; Gas for the car; Doctor bill; etc; etc. I remember getting scared at that point because I didn't know if mom made enough to cover everything. So she showed me her math and explained that not every bill was due to be paid at the same time, so I was less scared.
Then I asked her what I could do to help, which surprised her greatly. So she explained that if I and my brother would turn off lights and the TV when we didn't need them or weren't using them, it would save money. She also explained that to save money was why we only used the AC (a window unit) to cool the living room and bedrooms, and why we wore sweaters in the winter to help us stay warm. Then with a big hug and kiss, she sent me back to my room to finish cleaning the mess I had made while she started to make supper. After I was done and went to help her, I made sure to turn off the light! ;)
So the lessons I learned from my mom?
By Krystal from Newton, IA
My mom used to get me to come grocery shopping with her, and only place things in the cart that were on the list. When I got older I used this same method shopping for her, and can remember once why this was so important, I had to only use the money on the check she sent me with, and how embarrassing it was to put something back due to me adding to the grocery list! I still shop this way.
If your eight-year-old daughter receives $50 from her grandparents, allow her to spend $25. Help her to make a wise spending decision, but let it be her decision. She might opt for the toy she didn't receive at the holiday, or she might head to the movies. It's her choice. Feel free to save another $25 for spending on the family vacation or later in the year. Either way, you're teaching her to save half of her money.
The benefits of the account aren't monetary. It's a safe house for the money, and it will allow your child to see the money accumulate. The small amount of interest earned won't impress anyone other than your child.
Savings bonds seem to be an antiquated way to save, but right now they're earning more interest than CDs. Pay attention to the penalties for early withdrawal and watch your rates. You can cash out bonds in a few years if CDs offer a better return. While the bond won't give it's advertised rate (most are purchased for half of the amount that they carry when mature) it will give more than the original investment. However, for extremely young children, these long standing savings are easy and guaranteed. Antiquated or not, they still work.
My kids each get $100 dollars for their birthday from my grandparent's estate. We have them use the money for their birthday parties (including activities, cake, snacks, and party favors). They get to plan whatever they want and keep what money is left over. We have a few rules for example, if your party is during a meal time you must provide food.
This helps us because otherwise we wouldn't be able to afford the big skating party or whatever it is they want, but it also helps them learn to work within a budget. They plan and calculate deciding what is really important to them and get excited about finding pizza coupons and sales. They've really toned back the number of people they want to invite and how "much" they want to do now that the cost means something to them. Some years they decide to go for the big expensive outings, other years they've planned smaller parties at home with fun activities, either way they've always had a blast. Instead of throwing the money away on toys they'll forget in a few months, they are buying themselves an experience they'll remember forever.
They also get money for Christmas and always agree to pool it toward a family gift or activity. This year they're taking us to Great Wolf Lodge for two days at the water park we agreed to pay for food and their combined $300 will pay for admission/hotel room and the wand game. They had been begging to go, but we just didn't have the money to take them but they were able to make it happen by working together. One year, we decided to go without any Christmas gifts (except Santa) and pool all the money we would have spent, plus their gift money and money we saved over the year, to buy a hot tub. Another year they purchased a video game system.
We also put half their allowance into savings. This amounts to about $20 a month. This money is used for major expenses we approve, like new bikes or a DS. Hopefully this will teach them to save, plan, budget, and work together to pay for the things they want.
My daughter looked at me like I was a little weird when I suggested she should not use a 39-cent stamp when a 24-cent stamp would suffice. So, does 15 cents really matter?
Children are great at breaking a budget, but it's important to set boundaries. What do you do when your child asks for something that is financially out of the question?
We have tried to prepare our daughters for the real world in terms of finances and here are some of the strategies we have employed.
If your kids were to get jobs where they'll be running cash registers. Help them. Gather up some cash and change, sit down with them. Give them an amount of your pretend purchase, you pretend to "pay" for something and let them count out what change they'd give you back.
If your adolescent seems to have no idea about money and budgeting issues, set up a monthly or quarterly clothing allowance. When it's gone, that's it.
In a time when materialism is at a high, the task of teaching children the value of a dollar becomes difficult. Someone recently told me, "What you teach your children in the first ten years of their lives is what molds them into the people they become."
Mum gave us weekly pocket money which was about double what we needed and used to tell us "Right, this is your money for the week. It's up to you how you spend it. Don't come asking for more before the week is up because you'll get nothing."
I give children money: a dollar bill, 4 quarters, 10 dimes, 20 nickels and 100 pennies. I then teach them about money, showing them that the change is equal to the dollar bill. By Jean Sterling
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They can also learn the value of money if they have to do chores before they receive an allowance.
Mum used a very simple rule when we were schoolchildren.
She gave us weekly pocket money which was about double what we needed and used to tell us "Right this is your money for the week. It's up to you how you spend it. Don't come asking for more before the week is up because you'll get nothing."
We never did and I remember actually saving from my allowance!
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This is for those with kids in the 'tween years.
My daughter couldn't understand why daddy's pay while it sounded like a lot when you said the total, really wasn't.
Say the total is $300. 'Well, MOM! that Jesse McCartney CD is only 16 dollars!' she may say.
This is what I did:
I got out the Monopoly money, made $300 in 50's 20s and 10s. and one 100.
I told her the weekly expenses, groceries, gas, water bill, electric bill etc. I told her to give me the amount for each bill, taking away from the $300 she had.
When I got done, the amount that remained was considerably less. I said, 'Now, the rest is for your lunch money, and things we don't figure for. I explained that incidentals almost always come up, and what was left had to last until next pay day.
She was at the age at that time (14) to understand what the point I was trying to make. She did not like it, but she understood it.
Seeing is believing. Just telling them sometimes just isn't enough, but SHOWING them often pops that light bulb of understanding.
This tip came from a parent who is a financial planner.
She gives her two sons, ages 6 and 8, $4 a week as an allowance. They each have three piggy banks. One dollar goes into the bank marked "Saving," one dollar goes into the bank marked "Charity," and the other two dollars go into the "Spending" bank. The boys may do whatever they like with their money in their individual spending bank. When the "Saving" bank has accumulated $10, she takes them to the bank to deposit the money into their college account. Every Sunday, the boys empty the "Charity" bank to bring to church. On occasion, they bring it to the animal shelter instead.
This was a simple, yet powerful way to teach children how to budget their money. We develop good money habits at a very young age.
One could also increase the allowance to $5, putting the extra $1 into a bank marked "Government" representing the taxes taken out of a paycheck.
DO I LOOK LIKE A BANK? TEACHING KIDS ABOUT MONEY
"Mom, all the guys are going to the go-cart track and bowling on Saturday. Can I go? And can we invite Josh, too? Pleeeeeeze?"
Money doesn't grow on trees. It magically appears in your wallet. At least, that's what some kids seem to think.
Kansas City parent Tiffany Chapman and her husband, Merv, don't just hand over the cash. "We might have the money," she says, "but rather than just give it to our kids (Megann, 14; A.J., 13; and Sam, 10), we ask them to come up with half the amount, then we'll give them the rest. That lets us know whether they want to sacrifice their own money. If they don't want to sacrifice, why should we?"
Good idea, echoes Matt Schoenfeld, executive director of Heartland Financial Counseling in Countryside, Kansas. Schoenfeld warns that young people also often misunderstand basic credit principles. "They see that little card as an unlimited source of money instead of a loan," he says.
Schoenfeld encourages parents to start early in teaching their children about money. "The principles are the same regardless of age; it's just the way you package them," he notes. "For instance, with ages four to seven, you might use the typical piggybank idea, but as they get older, you'll move into a savings account. Then they hit the teens, and you can introduce things like mutual funds so they can get a broader spectrum of
ways to save."
The key is to explain financial concepts simply. Some ideas:
Borrowing from the concept of employee savings plans, Chapman also matches the amount her kids accrue in jars, dollar for dollar. She cautions them against spontaneous purchases, saying, "Let's hold off. If you still feel like you want it next week, we can come back.
"We tell our kids not to get into debt, because what you want now, you'll have to pay for later, and later you'll want something else that you won't be able to get, because you're still paying for the other thing."
GET THEM HOOKED ON SAVINGS
We opened them a checking account specifically for kids at our bank that paid about a nickel of interest each year. That just wouldn't do. I discussed it with my husband, and we decided that we would pay them 10% interest on each dollar saved, so the kids could really watch their money grow. Combined with the fact that we charge them interest for loaning them money beyond their normal allowance, they can see the difference in saving $1 (which automatically becomes $1.10) versus spending a dollar they don't have (they owe $1.10).