Maybe your kids were lucky enough to get a few gift cards or even cash over the holidays. Now what? January is the perfect time to get a fresh start in talking with your kids about money. Encourage your kids to be good savers, and this can be the start to their financial independence (or at least, less dependence on you).
- Teaching the difference between needs and wants
When the kids were little we started them out knowing that mom and dad don’t just buy stuff for them. Aside from food, clothes and necessities, they were on their own. We paid for needs, we didn’t pay for wants. A want has to be earned with hard work, or waited for patiently until Christmas or a birthday (which all happen to fall just after Christmas in our house). If you haven’t had this talk, think about asking your kids to lists some needs vs. wants- their answers can be quite entertaining. Last I checked Xbox games are not a need. It’s always a work in progress here.
- Earning their own money
We don’t give allowance (regular chores and keeping your room clean are expected) so this means creatively coming up with special jobs that will bring in a few dollars (organizing the mess of a Tupperware cabinet at our house brings in prime cash of a buck or two). As our kids grew older, they began to think bigger and started baking pies, holding garage sales, cutting lawns and making lemonade stands. They quickly learned that saving their holiday gift cards and cash was a lot easier than trying to earn new money.
- Deferred gratification
We did reward thrifty habits early on, especially when it comes to the grey area between needs and wants. Each year for school the kids would want new backpacks, even though the old ones still functioned. During back to school shopping, we would offer them cash to spend on a bookbag or save for themselves. We did this with pop in restaurants too (they usually picked ordering water when money was to be earned). We have offered them the difference between buying new and used. It’s easy to pick new when it’s not your money. This was a way to give them choices about how we spent our family money, and reward them for making thrifty ones.
- Keeping records
We had elaborate charts of who owed who what taped to the walls, as they would work to earn money for special items (I remember a Barbie table in my closet for months until it was “paid off” ). The kids usually kept track of these debits and credits themselves. I’m sure they forgot transactions once in awhile, but the concept of earning to pay for “wants” has stuck with them.
- Savings accounts
When the kids were 9 we opened accounts in their names (separate from the college savings accounts we had started for them when they were born). We found IH Mississippi Valley Credit Union was very kid friendly, and will allow kids at age 11 to have their own accounts, checks and debit cards in their own names. At a younger age, they can have an account but the debit card has to be in the parent’s name. It only takes $5 to start! (Bonus, this card also gets them BOGO offers at places all over the QC – swimming, concerts, bowling!) I wish we would have opened their accounts sooner.
- Debit cards
These were revolutionary in our family. The kids thought having their own debit card with their name on it was amazing, and revered all the spending and saving power that came along with it. The day they opened their accounts with their own piggy bank money was a BIG deal. I always had their cards ready, so when there was a “mom I want…” at Target, my answer could be “sure, here is your card.” Wow, did that make them think. Ninety-nine percent of the time, it just didn’t seem worth it. When it was worth it for them to make the purchase, I didn’t have to fund it or keep track of what was owed!
- Long-term/short-term/charitable giving goals
The debit cards gave us a great opportunity to talk about percentages to allocate to long-term investment, short-term spending and donating to charity. Some use the rule of thirds for this, but no matter what percentage your family uses, it’s a great way to get your kids thinking about what their financial goals are.
Now that our oldest has entered the teen years, she takes her debit card wherever she goes. It is up to her if she wants to buy ice cream with her friends, a new shirt at the mall, or whatever her heart desires (as a teenage girl it often desires a lot!). She gets her statement every month and sees how quickly these purchases add up. She is already looking forward to her first job as she sees that it is difficult spending less than you earn. Hopefully she will be in a better position when that first paycheck does come, as she has been working towards financial independence for years. Is it bad that I’m secretly hoping that first job is at Whitey’s?