I Discuss Youth Financial Literacy on "The Intentional Parent"

Helping kids control money...not the other way around

I ran into a friend of mine at the local flea market recently.  She is trying to do the right thing.  She is giving her two kids a weekly allowance.  Check.  She's not tying it to chore AND giving them the opportunity to make extra money on the side with "over and above" chores.  Check.  She's having them set goals using their share jars.  Check.  But she's giving her 7-year-old two dollars a week.

Pfffft!  The air went out of the balloon.

Kids need to get enough money to allow an allowance to work effectively.  Giving them a paltry amount is going to frustrate them as they try to achieve goals for anything substantial.  A 7-year-old should be getting six or seven dollars a week and, if you've started setting goals earlier, he can be saving up for items that are in the $50 - $100 range.  Doing this on a two dollar allowance will be incredibly frustrating for a 7-year-old.  Remember, you're trying to empower them and make the understand that money is simply a tool.  We want to help them develop "positive" feelings toward money and to understand that it's something that they can control...not the other way around.

I was happy to hear when she decided to alter her allowance amount.  Her 7-year-old is now getting six bucks a week and is saving for big Harry Potter lego set.

Note - this family is doing fine financially.  I understand that many of us are hurting and if you're circumstances are such that you must give a smaller allowance, that is perfectly fine and understandable. It's more important to do something than nothing.  If necessary, find an opportunity to discuss the amount and why it might be lower than you want to provide.

Good luck and please, please send me your stories as you try and help your kids become comfortable with money.

Guest Post by Raine Parker

Raine Parker approach me about doing a post on youth financial literacy.  We agree a some things (setting goals, starting early and the importance of allowance) and disagree on others (chores vs. no chores).  Have a look and please comment to let me know what you think.  Enjoy!

5 Lessons Children Can Learn from Getting an Allowance

I'm a firm believer in giving a child an allowance even for children as young as four and five! Why? Because it teaches them the concrete value of money as well as effective money management techniques at an early age. Allowances also provide many opportunities for teaching children specific lessons about money. Here I will discuss five key lessons your children can learn from getting an allowance.

1.) "Money is something you work for." 

I don't condone giving a child an allowance without giving them some sort of age-appropriate chores or responsibilities around the house. This way they learn that money doesn't just appear out of nowhere. Four- and five-year-olds can make their own beds, pick up their own toys, set and clear the table and even feed pets. With help, they can even do more "grown up" chores like sweeping, unloading the dishwasher or drying off dishes with a kitchen towel. You might even send them throughout the house to gather any trash and dirty dishes to bring to you. Older children can do more difficult chores, like taking out the trash or vacuuming. The key is that they associate doing these simple household chores with the money they receive at the end of the week. If your child doesn't want to do chores one week, make it clear to them that they will not receive an allowance that week. You'll really drive the point home when they beg for toys or treats at the store, and you tell them, "You haven't earned any money for that toy or treat this week."

2.) "You save money to get the things you want." 

Speaking of saving for toys, giving a child an allowance is a perfect opportunity to teach young children about saving. You may even want to give them an incentive to save at first like matching dollar-for-dollar every little bit they save in a jar in your child's room. When your child points out a toy that he or she particularly wants, ask them how much they have in savings (when they're old enough to count). You don't have to make them pay for the whole thing at first, but at least encourage them to pay for half of the toy out of their own savings. As they get older, they can pay for certain toys in their entirety.

3.) "It's important to give money too."  

Allowances are also a perfect opportunity to talk to your child about charitable giving. If you are a church-going family, train your child to give a little of his or her allowance to the offering plate and explain that the money helps the church pay its bills. You may even want to encourage your child to use the money to support a child in a third world country through a nonprofit organization such as World Vision or Compassion International. To make the giving lesson more concrete, you can take your child to your neighborhood food bank or other local nonprofit organization and explain how giving some of the money from their allowance helps people in need.

4.) "You can save money toward a big goal." 

Let's say your child wants something a little pricier, like a certain Wii or PlayStation game. You can talk to them about saving their allowance toward this big purchase. You can print out a picture of the game on your printer and tape it on the wall above their savings jar so they can keep their goal in mind. This will encourage them to save little by little until they can afford their big-ticket item.

5.) "Money is something to be grateful for." 

When it's the day your child gets his or her allowance, teach him or her to ask politely for their allowance and to say thank you once they've received it. Explain to them that not all children receive allowances and that it's something that mommy and daddy have to work hard for. Encourage them not to brag about their allowances at school and to share their allowance when necessary by buying little things like snacks at a convenience store for a friend.

In conclusion, children can learn many valuable lessons by receiving an allowance. These are only a few examples. What lesson has your child learned in the past few months?

By-line:

This guest post is contributed by Raine Parker, who writes on the topics of online accounting degree.  She welcomes your comments at her email Id: raine.parker6@gmail.com. 

Build Good Habits Early - Why to start now!

It's gratifying that more of my friends are asking me about starting their kids on an allowance program at the ages of five or six. I think those are great ages to start (even four for younger siblings as they like to mimic the older ones). More and more of them are getting the message that building good habits early will help them avoid having to break bad habits later.

I thought it prudent to share some of the ideas I've been sharing with my friends. Here are five really practical reasons for parents to start teaching kids about money that I've learned from personal experience as a parent:

1. A Strong Foundation - Building good habits early (which includes making some minor mistakes along the way) will help you avoid having to break bad habits later (or REALLY big mistakes).

2. Have Mall Fun - A good allowance program will make trips to the store or mall so much easier. When your kids ask you for something, you can tell them to save for it. You might get a few tantrums when you first start doing this, but if you stick to your guns your kids will get it.

3. Goals are Good - Setting goals is essential to teaching kids about money (that's how they deal with #2) and is an incredibly valuable life skill for them to learn. Set goals together. Note to self - follow your own advice more often on this one.

4. Confident Kids - Money is subject to so many taboos, not the least of which is discussing the stuff within the family.  Set an allowance, give them cash to handle and discuss making choices, needs and wants and other essential money concepts.  It will help make them more confident consumers when the subject is brought out into the open.

5. Visible Dough - So much of the transactions that kids witness involve invisible money. Make sure there is a physical component (cold, hard cash) to your allowance so that kids can count, transact and get confident with real money. Sure, money is already largely virtual and is only trending more in the total virtual direction, but young kids have tremendous difficulty with abstraction.  Handling actual money is essential to early money learning.

I hope these tips help you.  Let me know if they do or if you have anything else to add.

First Video Podcast - Saving for a Goal!

Around the World

I recently had lunch with a friend just before she was about to take off on an around-the-world journey. I was envious. We had talked previously about goals, something she knew I believed was important. But, more importantly, goals were something her Dad believed in. She put it simply, "It may seem cheezy, but this 'goal' thing works." I found it interesting that she had to include the "cheezy" disclaimer to me, a reader and listener of those same books, as if to say, "you know, I'm not some crazy, self-helf zealot."

That encounter made me realize two things:

First, having goals and putting them out there for the world to hear (I'm thinking of Gary Vaynerchuk's claim that he WILL buy the NY Jets) is a something that I believe can work for anyone and that more of us should embrace (I'm telling myself to be more vocal as I write). None of us should ever feel they need to defend our desires to strive for difficult goals with a line like, "I know it sounds cheezy, but..."

Second, we parents need to model goal-setting for our kids to really make it stick. This is important because modeling is how kids learn. They "do what we do, not what we say" (unless of course we do what we say). As I've noted in this blog many times, goal-setting for kids is a path to learning to save.

So put your goals out there for all to see. Have your kids to the same.

See where that takes you.

Around the world, maybe?

Take Advantage of Opportunities to Teach Your Kids about Money

One of the biggest benefits of beginning money talk with your kids when they are young is that there seem to be endless teaching opportunities or "teaching moments" afforded to us by them. Kids love to ask questions and providing them answers to such things as...

• "Why can't we go out to dinner again tonight?" (discuss the family budget or the cost of doing so)
• "I really want that American Girl doll. Can you buy it for me?" (talk setting goals and saving)
• "Why do I have to put money in my Share jar?" (it's time donate those dollars - make it tangible for them)

...will help them feel more comfortable with money and money choices. Money is a tool with which kids should be comfortable. Talking to them about it will keep it from becoming a "taboo topic."

By not talking to your kids about money, you'll miss the chance to engage with them in these ultra-important teaching moments. It will increase the chance that money will move into the realm of "taboo topic" and that can lead to misunderstandings and, worse, financial illiteracy when they get older. Talking to them about money doesn't guarantee money smarts, but not doing so carries tremendous risk.

Are you worried they might not understand? You'd be amazed what they can understand at a young age. Check this out:

Choose to Save

Thrive by Five

-John