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We would like to teach our child money management at a young age. I never had any training and have made some really stupid mistakes. He is only five, but he knows a bit about money, coupons, saving, and tithing. I am thinking $5 a month: $1 for tithing, $1 for saving for college (long term saving), $2 for short term saving and $1 for things he wants. This way he gets used to tithing, saving money, and realizing he has $1 to spend.
I was not thinking of tying this to his jobs, because he is pretty helpful and does his jobs. The other suggestion I read about is to give him credit for each job he does and tying the money into this (same % as above). I understand both points of view, using allowance for money management and to teach them they need do to things for their money. Any suggestions on which way would be best? Thanks.
I commend you. Most people don't think or consider doing this and we have a lot of financially challenged kids in our country. Okay, to your inquiry, I think you are thrusting too much at him all at once. Let's break it down:
I am thinking $5 a month: $1 for tithing - this gives the wrong impression, start young with the understanding that the tithe is 10 percent and help him learn percentages early (note: I would also recommend if you are teaching to tithe you include money gifts as tithe-able income, including gift cards)
And please explain tithing to him completely, make sure he understands that by tithing the Lord will bless his income. He is not paying for salvation. I don't know your religion so I won't preach, just make sure "your" understanding of tithes and offerings are passed on and understood to your child.
$1 for saving for college (long term saving) - too early for the child to understand but you can start doing it for him, wait till he is a bit older and explain what you have been doing and let him know it is time for him to take over OR you can do what my parents did and bought a life insurance policy for me, at a young age it is very cheap and has potential (or at least it did)
$2 for short term saving - I think you have this one and the next one backwards, $1 short term saving and $2 spending. Only because the child needs to learn the purpose of saving money, my parents always told me to save for a rainy day, so I thought when it rained I could spend that money, be clear that you save money for items you can't quiet yet afford and it is their choice to save even more to get a specific thing.
$1 for things he wants - like I said above I think this should be the $2 amount, give him the option of saving more of it
You could also give him $1 to save for gifts for others (birthdays, valentines, Christmas, etc). I personally think the allowance should be weekly and thinking about it you could move it from monthly to weekly later in age. You are starting earlier than I think anyone I know of.
Another idea is a quarter reward for doing chores or $1 for really big tasks. (and don't forget tithe). It's a bit early for your child but I give my kids a $1 for every A on their report card. My youngest only gets +'s on her report card so I give her 50 cents for each because they are numerous and seem too easy to acquire.
It sounds like you are thinking well and doing a good job at an early age. I have 3 kids myself but did not get them until they were in early grade school so I did not have the opportunity to start these lessons younger.
I had to start with this is money. Here you go every week. Then I progressed to this is your chore, now here is your pay for doing the chore. The next step is that is your pay and if you want to buy something pay for it with what you have or do not get it.
I am currently on the step of learning about credit this past Christmas they bought what they wanted for their presents with the money that was given to them from different family members but like any modern teenagers they want more, so at times I will pay for the item for them and then they are now in debt and have to owe me (the bank) back . Someone suggested to me that I should charge interest just like a regular bank [maybe that can be the next step].
When they start to understand the value on money and debt I will then progress to a savings step (since at this time they are unable to keep anything in their piggy banks)
my plan is to offer my kids a choice of helping out with the bills of the house or to place the same amount into a saving account for when they become 19 year old. I think they will all choose the savings account.
As for your tithing; I wish I could have started that at an early stage and it would be a habit by now. Good luck
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The best lessons learned in life come naturally. Try to include children in daily activities not only to be your helpers but also to teach them free lessons about how to manage their lives and their money more efficiently.
A trip to the bank can be the most beneficial "field trip" you can take with your children. Open a custodial bank account for each child. Often banks offer childrens' programs that host parties or offer rewards for deposits. If they don't, create your own reword system.
Talk to your child about how the bank account works and why it's important to maintain a healthy account. The earlier you start to impart the wisdom of saving and spending within reason, the easier it will be for your children to manage their money later. After holidays, require that children put a percentage of any money received into the bank. It can be as little as 10%, but it will impart the wisdom of saving.
While grocery shopping isn't always a favorite outing, it can be a valuable learning experience for children. Keep them busy with a task as you shop and your trip will be much easier.
Older children can bring a calculator and keep tabs on the total of the trip. By realizing how quickly prices add up and by seeing how much the snack she's begging for costs, your daughter may ask for less in future trips (or at least finish the entire bag before begging for something new.)
Smaller children can help find items on the list. I created a picture list for my son when he was small. We put pictures of items we bought weekly on heavyweight paper and laminated it. He had his own picture shopping list. Coupons become a matching game; match the coupon to the product. Now is a great time to talk about the differences between store brands and national brands.
Another great place to teach the value of a dollar is the store named after the item. Dollar stores (those that price every item in the store at $1) teach a basic principle: I have three dollars, so I can get three items. Prioritizing and advanced thinking soon follow.
I know many adults who need to learn the same lesson we try to teach our children: for every new item bought an old item must be discarded.
Teach children to organize and keep their belongings in check. "If I buy a new doll, I need to get rid of one. I don't want to get rid of any of my dolls. Then, I don't need the new one." Hopefully, this is what will run through young minds.
Let kids take part in discarding their items. Have them help while dropping off items at the Goodwill store, and take them inside to look around. Talk about the purpose of the store and the value of reusing items.
Similarly, children enjoy selling their items at yard sales and even online. By putting them in charge of their profits, they are more willing to part with old toys that they have outgrown in favor of the funds to buy new ones they will enjoy. Based on the replacement principle, my son enjoys helping me to list in online auctions the toys that he's outgrown. We usually set a goal; for instance, he can use his earned money to buy a street hockey stick.
I try every day to think about the lessons I want to teach my son so that he will grow into a responsible adult. Even though I'd much rather get in and out of the grocery store as quickly as possible, it's hard to pass up the free education it offers.
About The Author: Kelly Ann Butterbaugh is a freelance writer who regularly contributes to a variety of magazines and has written a history book for middle readers.