Written By: Jen Pieson
One of my favorite financial planning topics is “Money and Kids.” I’ve worked on the Agili team for 16 years and I have three children. My background in personal finance combined with the satisfaction I feel when our family budget is running smoothly motivates me to be proactive in teaching my children how to manage their own funds. My children are thirteen, eleven and nine, so they are old enough for money to make sense to them, but too young for any major mistakes to set them back. These are prime learning years, and I’m making sure to take advantage of that. The following are a few ways we handle money in our daily lives, what works for us, and what doesn’t.
Let it Go
It took me a long time to realize this, but feeling ownership over my kids’ money was a hurdle I had to overcome. We don’t give our kids regular allowances, but when they do jobs above their normal household chores we do give them some cash. They’re always squirrelling away money for some item on their wish list. The hard part (for me) comes when they are ready to spend the money. There are plenty of ways to spend money, and my kids’ choices often seem strange or wasteful.
In the moment, the practical part of me wants to tell them no: “Don’t buy that junk! Spend your money on something better.” But eventually, I realized that they need to spend some money on junk. They need to see flashy advertising, fall in love with a product, feel the elation of buying it, and then feel the disappointment when the thing isn’t quite what they hoped it would be. They need to go through this range of emotions now, when it doesn’t count, instead of when they’re twenty and they fall in love with a motorcycle instead of a stuffed animal.
Over time, I have learned to let it go. I don’t interfere with their purchases. I let them spend their money how they want to, and I consciously view their money as their own, not an extension of mine. I do coach them, sometimes. I will say something like, “Yes, you certainly may buy that bag of gummy worms from the gift shop for $9. Or you can wait until we go to the grocery store and buy that same thing but only spend $3.” Whatever they decide, I support. They need to make mistakes.
The Mini Budget
Whenever I can, I create mini budgeting opportunities for my kids. We’re big fans of the envelope system, so I employ this tactic on vacations and other special occasions. Last summer I tried an experiment that ended up working really well and I’m definitely doing it again this year.
Every Sunday all summer long the ice cream truck comes by our house. That tinkling, repetitive music is like the Pied Piper, luring children away from whatever they’re engaged in and making them come running. “Mom! Can I have money?” I’m happy to let them buy from the ice cream truck. But not every week, and not frantically.
Last year I put $20 in each of three envelopes, labelled them and explained: “This is your ice cream truck money. This is all we’re going to give you for the ice cream truck all summer. You may spend it whenever and however you want. But when it’s gone, we won’t give you any more, and if you still want ice cream you’ll have to use your own money. If you have any left over, it’s yours.” (See Let it Go, above. We have given them gifts of this money, and it is no longer ours.)
It worked like a charm! Every Sunday we’d hear that awful jingling tune and (I swear this is true) the ice cream truck slows down significantly in front of our house since we’re such good patrons. The kids run to grab their envelopes and they handle the transactions on their own. My husband and I, incidentally, are taken out of the equation, which feels age-appropriate and certainly promotes independence. We watch through the window while one of our kids buys two popsicles – one for today and one to freeze until tomorrow. Another decides to wait; he’ll save his money for next time. The third buys an ice cream sandwich and tips the driver a dollar. That part gets me in the heart – they take turns tipping, and make sure to tip every time. Then they put their envelopes away for the next Sunday.
Give Them Opportunities
Since we don’t do regular allowances, I make sure to give the kids options for money-making opportunities. If they are inspired to save for something they have ways to earn money. They handle doggy duty in the backyard, clean the bathrooms, and my oldest mows lawns. These are not fun jobs. If they want money, they have to work for it, but…. That’s life.
Of course I can’t tell whether my kids will be financially responsible adults; this experiment will take years to conclude, and all I can do is try. I’m hopeful that by guiding them in these ways they’re learning the value of a dollar while they’re young…while they’re years away from facing the kinds of money decisions that will have real-world effects for them. We all have to fall down and get up again, but that’s easier to do at 11 than 30.
My children and I talk more about money and kids in our recent interview with WFMZ.