School days are full of subjects: language arts, math, social studies, languages, finance. Wait, what? Are schools in your area teaching kids about how to earn, save and spend their money wisely? If they aren’t, who is?
Several years ago, my daughter explained her future plan to “pay for everything with plastic, because you don’t have to pay it back.” She was eight years old at the time, so while my husband and I couldn’t hold it against her, we knew we had a lot of work to do. And since some studies have shown that money habits are set by age seven, the clock was already against us.
We set out with two top priorities: teach the value of money and provide tools for learning how to manage money effectively.
The value of money
There are so many ways experts have advised to teach the value attached to the dollar, but for us, tying it to work made the most sense. So, we “hired” our kids. Dishes, laundry, beds, you name it. Each task was assigned in a great allowance app (I tried about 20, but Rooster Money won out in the end) and they were paid a weekly salary. Funds from each week were deposited into their virtual “spend” pot and they made selections about how much to move to “give” and “save,” which had a high interest rate in an effort to show them the value of saving.
The most important key for us in all this earning and spending and saving was that we worked out the math for hourly salaries for everyone in our household. When the kids wanted to buy something with their money, we were able to say things like, “Is two hours of your time really worth that?” And when it came to larger purchases we would cover, they were able to see how much of our time goes to paying for basic things. Before long, they started asking for less and thanking us more.
Tools to manage the cash
Apps are great, but we wanted them to have more power when it came to spending what they’d earned, so when they turned 12 years old, we set them up with their own checking accounts and debit cards (the dreaded plastic…). Together, we installed banking apps on their phones, showed them how to pay with credit and debit, and to get cash from the ATM. They were responsible for managing their own accounts, and we didn’t question them about how they spent their money (man, was this part hard!).
We also wanted them to get the hang of credit cards, so we gave them each one (gasp, I know). They were able to use it for small purchases after talking with us and either pay it back immediately with their funds or calculate the interest and understand the true cost of financing purchases.
In the end, our now fifteen- and twelve-year-old daughters still overspend or skip a week of “work,” they still want possibly the most expensive gifts ever for any given holiday, and they still marvel at giant mansions wondering why we haven’t moved in there already. But, the conversation about money is ongoing, the communication lines are open and we make sure there are teachable moments in any financial moves we make. I’d like to think we’ve prepared them well for a life of making responsible financial decisions, but only time – and their bank accounts – will tell.