Might Be In Over My Head…Maybe?

What do you mean I’m out of money? I still have checks!”

Teaching Kids Good Money and Money Related Habits www.wifemomhouseohmy.comIt’s sad but even in today’s modern world, I still hear and see this statement in action. I don’t know what your experiences are with respect to money but I have found that many adults never learned as kids about good money habits…often because their parents didn’t know.  It’s somewhat taboo to talk about money and its something that in the past has not been taught. I think it’s awesome that schools are starting to offer personal finance as an elective. But I see two problems with that. First, its an elective. Not everyone will take it since it is not required. Second, since many kids have been earning money well before they reach their last years of high school, its a little too late to start the process. As a society, this is a real problem for all of us.

The following are my thoughts and take on the various techniques that I have encounter for teaching kids about money and some topics related to money. You may agree with me and you may not, but hopefully it will get you to consider how you handle money and kids.

Method One: See No Money, Hear No Money

Really what this means is to never discuss money or bills or budgets in front of your kids. I have heard and witnessed people who refuse to tell their kids, “No, its not in the budget.”. They don’t pay bills in front of them. They never talk about budgets or money or the cost of things in front of kids. If they have money challenges, its a secret to the kids. When it comes to Christmas gifts from kids to others, they pay for them.

I personally feel this is the worse thing we can do for our kids. They grow up with unaware view of money and its relationship for life. Kids who are never exposed to money and how to manage it, are the very kids that max out their first credit card, that have no clue about overdrafts, and the like. They are the first to go out and buy new cars, clothes, and other toys that they can’t really afford because the sales clerk told them they “qualified” for it. There is a great episode of Army Wives where Hector and Gloria are the embodiment of what I am saying.

Its easy to think if we don’t share our challenges or talk about these things, we are shielding our children from the negative. But, the opposite is true. They don’t learn the value of money, the value in earning it or good habits in managing it.

Method Two: Allowance Please

This is a pretty common one. The idea is to give children a set amount of money every week, every other week, twice a month, or monthly. I see some positive and some negative aspects to this method.

On the positive side, this method could teach kids how to manage or budget their money. However, this assumes that this money is given with the understanding that it is the child’s to use for the extras that you are not budgeting for such as the iTunes card they want so they can purchase something for their app, or the latest and greatest thing they see in the grocery store they have to have. If they want something, they have to use their money. If they use it up, then they are out of luck until their next allowance. If something costs more than their allowance, they have to learn to save.

On the negative side, it does not teach them the value of money or the value of earning their money. When something is just given to you, it becomes disposable. Like the Miranda Lambert song Automatic says, “It’s only worth as much as the time put it“.  What value is in something that all you have to do is wait for two weeks to get it.  It can lead to a sense of entitlement that moves from childhood to adulthood. Having done hiring and sadly firing in corporate positions, this is a sad trend that is quite prevalent in the upcoming generations. They are use to everything being instant and handed to them. For now anyways, when they hit the work force, they can be in for a very rude awakening as jobs, well, expect you to earn your money.

Method Three: Paid Chores

I know a lot of people pay their kids for doing chores instead of giving them an allowance because they want them to earn their money. Again, this has its positives and its negatives too. Kids are definitely learning that money is not just handed to them. You have to do something to receive compensation. If you demand kids do the job right and not just a quick fast job, then you are also teaching them work ethic. However, this can be at the expense of reality.

In my opinion chores or tasks designed to keep a household functioning are apart of being a home owner and someone who lives in the home. If you pay children for chores, you don’t teach them that this is just the expectation of being a person who owns (or rents) a home. Think about it. When is the last time you got paid for doing laundry or mopping or cutting the grass or taking the dogs out. Never. As adults they won’t either but they have been taught, mow the lawn, get paid.

Method Four: Earning a Paycheck

If done right, I think that this is the best method for teaching children about money. In fact, because I feel so strongly about it, I am doing a follow up post that outlines this method.  Essentially, it mimics what getting a paycheck from an employer for actual work done is like AND then teaches kids smart money management habits with the criteria associated with it.

It teaches them that they earn money for doing their job. It teaches what happens in a paycheck – in other words that taxes are taken out. It teaches that money is earned. It teaches the value of money and how to manage it. I will outline it all in my next post.

Regardless of the method you choose for teaching your kids about good money and money related habits, their are things you do with your money that teach children both good and bad habits.

Budgets

Do you have a budget? Do you stick to it? Do you let your children see you planning your monthly budget? This is important. Our children learn from watching us. If we live barely making ends meet because we didn’t plan in advance of what our needs would be, then odds are our children will too. However, if you plan your expenses each month, allot money amounts for each, stick to it, AND let your children see you doing this, odds are they will too.

Its also a great learning opportunity for them. As they grow, teach them and share with them what you are doing. Let them see your paystub and that money being added to the register. Then let them watch as you pay your bills.

And while I truly believe that saying, “We can’t afford that.” creates a scarcity mentality, it’s okay for kids to hear, “That’s not in this month’s budget. We are choosing to put our money elsewhere.” That in and of itself teaches kids that how you use your money is about priorities.

Are you a SAVER or a SPENDER?

Again, kids watch us. If they see that each month you put money aside, then they will grow up doing the same. Do they see that you systematically put away money for retirement, for emergencies and for future purchases? Or do they see you spending all the time? Are you paying for things in cash or putting it on credit? If you do purchase something on credit, is there money to pay it off at the end of the month? Or are you financing smartly for things? For example, we just purchased new windows for our home. We have the funds, however, when you do the math, between the rebate and the savings in energy, we will actually make money over the life of the loan. (It’s actually ends up being a negative interest loan.) That makes sense to finance as it cost us nothing, in fact we make money. Or do you charge the VISA for the latest pair of shoes and will pay it and the interest off in three to six months? Whatever you do, they most likely will do the same.

Do YOU buy your kids’ gifts to give or do THEY?

I really feel strongly on this one. I know many parents who will take their children shopping, will let them pick out what they want to give the other parent, or siblings, or grandparents, and then pay for it. This may seem like a good thing to do, especially when children are too young to “have a job”. However, I believe this can cause a lot of problems.

First, by doing this, I feel you really don’t teach children the meaning of gifting, rather you teach them that gifting is an obligation and a “thing” to do. It loses its meaning. Gifting is the act of giving…of yourself…because you love and want to do something for that person. That “giving of yourself” does not have to be financial. If you don’t have funds, then you can “give” your time in making or doing something for that person. If you don’t have time, then you can “give” of yourself by sacrificing some of your finances. Either way, when you give of yourself, you are truly gifting the other person.

And regardless of age, this can be done in so many ways. When I was younger, I saved some of the money I received throughout the year from birthdays and holidays for presents. I also asked my mom and dad if there were extra things I could do to earn cash for presents. (I even did this with my dad when I was four because I wanted to by my mother a purple banana necklace – which she loved and wore, yes in public, because I had given it to her.)  I made a whole lot of homemade cards and coupon books for a car wash or extra hug when mom or dad needed it that cost me time and supplies laying around the house.

And that brings me to my second. There is an amazing joy that a giver feels when they truly give of themselves in some manner. When, as parents, we buy gifts for our children to give others, and there is not effort on their part, then we rob them of that joy. There is an amazing commercial that aired around Mother’s Day that totally embodies this. A little kid is in a jewelry store and sees this necklace he wants to get his mom. He lays every cent he has on the counter (and its obvious to the sales lady that he doesn’t have enough). But the dad shows her, unbeknownst to the little boy, his credit card to pay for the balance. But the joy on the little boys faces is priceless because HE bought that necklace for his mommy. The joy would not have been the same if dad had just paid for it.

Lastly, when do you stop? Do you stop at 5? They are technically still too young to work. How about 10? or 16? Problem is by any of these ages, children have learned to expect this and it can create a really selfishness and stinginess with their own resources. Mom and dad buy my gifts for others, why should I? Ultimately, there is no sense of wanting to do for others.

Do you give in to the “I Want…” or “Buy Me…”

I know as parents we want to be able to and to actually give our children everything their hearts’ desire. It can give us great pleasure to see them happy. However, it is good for children to hear “no” every once in a while. It teaches restraint. It teaches them to value and be appreciative of the things they do get.

On the other hand, if they do pretty much get everything they ask for, then it really doesn’t have much value. It becomes an expectation. And as parents, we run the risk of becoming pocketbooks to buy them stuff, not parents. I’m remind as an extreme example of Dudley from the Harry Potter Series.

Again, these are my thoughts and opinions. I hope, if nothing else, it makes you think. As I said, I am a huge fan of the paycheck method because, while it takes work on your part as the parent, it can really teach children about so many life lessons and develop amazing positive money habits. My next post will outline this method fully.

 

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