My oldest daughter turned 8 a week ago, and she really came into the money on her birthday. She’s now at that awkward age where she’s a little too young to care yet about fashion and things of that nature too much, but she’s too old to want more toys and childish things. Most people did the easy thing and simply gave her a card with money in it. Now she is rolling in the dough, and we figured we need to find a way to teach her a bit about financial respect and responsibility. She’s only 8, but she’s a smart kid and we want her to learn early that she has to be responsible with her finances.
She currently keeps all her money in her piggy bank in her room, but we opened a bank account for her last year and allow her to make a deposit anytime her bank is full. We were shocked to open it up and find that she had hundreds of dollars stashed in there from change she finds (I allow her to keep any change I accumulate in my car when we pay for things with cash) and the bills she’s gotten for her birthday, from the tooth fairy and as gifts. She also gets a bit of an allowance by doing things around the house – which we will get to in a bit – and she is a saver.
She never asks if she can take her money to the store to buy anything. She never asks for things that she wants right this second. Everything she asks for, she states she wants for her birthday for Christmas; it’s a great tactic. She gets what she wants because she’s patient enough to wait for it, and she also gets to keep all her money because she never has to buy anything for herself. Actually, I’m not entire sure she currently needs any money lessons – but we’re still teaching her since one day she won’t get dozens of people buying her Christmas and birthday gifts.
All kids need to learn good and appropriate financial lessons, and we know that there are plenty of people out there willing to teach their kids these lessons if only they know which ones to teach.
The first thing kids need to understand is how money is earned. Our daughter is 8, and we do not pay her to do basic tasks around the house. It’s just good old-fashioned respect and cleanliness and basic manners to put your dishes away, make your bed, pick up after yourself and keep your room and bathroom clean. I’m not paying her to do things she should be doing regardless.
However, I have no problem offering her a financial reward to do extras. She might occasionally ask us if she can earn a dollar by organizing the toys in the garage that go outside during the day, or by cleaning her little sister’s bedroom or by folding towels. Since those are not her jobs and she’s doing them, we will pay her for them.
When she learns how money is earned – by hard work – she then learns that it’s not so easy to just let it go. She had to work for that, earn it and do things she might not have wanted to do to get that money. Now she wants to spend it wisely because she worked really hard for it. People are more careful with what they work for.
One of the biggest lessons we teach our daughter is that savings comes first. Before she does anything else with her money, she has to save half of it. She currently likes to save all of it because as she says, “I have everything I want,” so that works for us. However, when she’s older and wants to spend her money, that’s the rule; save half and then use the rest for what you want.
When she’s a bit older and wants to learn to spend her own money her own way, we will first give her a budget. We will show her that her income is this, her savings is half and that she can use the rest for whatever she pleases so long as she has no expenses. All we plan on doing is creating an excel spreadsheet with her income, the dates she earns money and how many days in between getting paid she has to use her money. We will then make her learn either the easy way or the difficult way that you have to find a way to budget and make your money stretch.
Debit Cards, Checks and Balancing
Did you know that many adults don’t know how to use a debit card, credit card or bank account the correct way? My husband was with a bank for 15 years as an employee, and he constantly brought home stories of customers in the lobby crying and tellers and other employees sharing stories of how that person thought he or she had plenty of money because the internet or the phone system said so – and now they have nothing because they didn’t know that wasn’t a real time balance.
These are grown adults who have no idea that checks don’t automatically clear the second you write them and that sometimes they take a few days or weeks. They just don’t know; no one ever taught them. Our daughter will learn how all cards work, how checks work and how to balance her book the right way as soon as she’s old enough to use her bank account.
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