When children are small, money isn’t much of an issue. Sure they have wants, but they don’t easily make the connection between money and getting those wants fulfilled. And, usually, their wants are relatively simple — and inexpensive.
By the time they reach their tween years, though, the connection is clear: Money buys things, and the things they want often cost a lot. For most parents, fulfilling all of their child’s desires is not an option, nor should it be.
Most parents want to teach their kids how to handle money responsibly. But before kids can handle money, they have to get some. Since there are few real job opportunities for tweens — outside the occasional lawn-mowing gig — most parents use some sort of allowance and/or pay-for-chores system.
Web columnist Kathy Lynn (parentingtoday.ca) does not believe that allowances should be tied to everyday chores, such as setting the table. “If paid for chores, [children] don’t learn that everyone [in the family] has to do their bit,” she says. Instead, children can be offered extra chores, such as washing the car, to earn additional cash.
Financial life coach Kathy Jo Pollack agrees, saying, “Showing that everyone must pitch in and share the work — even the small things — is part of being a family.”
How much to pay and when to pay it are also things to consider. It’s important to determine ahead of time what a chore is worth and to set realistic expectations about job performance. A 10-year-old might not do a stellar job of vacuuming, so set the pay scale to her ability level. If you want the furniture moved, tell her so in advance.
Some kids are natural entrepreneurs and are eager to create ways to make money outside the family bank. If so, encourage them, but don’t invest too much of your own time/money to help them succeed. If a parent has to drive a child 10 miles to a job that earns him $5, it might not be worth it.
A popular blogger, CreditMom recommends setting a regular payment schedule. “Our kids get paid every Sunday,” she says, “forcing them to budget their money for the week so they have something left for the next weekend.”
Once a child has money, he needs to learn how to handle it responsibly. Dr. Robert Duvall, president and CEO of the National Council on Economic Education believes that financial literacy is essential and should become an integral part of school curricula. “The world we’re living in right now shows the terrible effects of financial illiteracy. The best place to start [teaching it] is while they’re in school, before it’s too late,” says Duvall.
Parents, as always, need to walk the talk when it comes to handling money. It’s hard for a young teen to learn restraint when the house is full of the latest gadgets and the parents cringe when the credit card bill arrives.
Set up a savings account and encourage your child to save for a big-ticket item. Teach her to fill out her own deposit slips and help her read her bank statements. CreditMom also recommends encouraging a child to always bring his wallet when he goes shopping with you to avoid the “I’ll pay you back” trap. If he doesn’t have his money with him, he doesn’t get to spend it.
Since many purchases are made over the Internet and require a credit card, Alice P. of South Seattle set up a virtual checking account for her daughter using a blank check register. “When she does a chore, I give her a voucher for the amount,” says Alice. “She records it in the register as a deposit. Then, when she buys songs on iTunes or a book through Amazon using my account, she has to deduct that amount from the register.”
A hard lesson
Cell phones are a major source of money woes for families. Each family must decide on their own system, but cell phones can be a great way to teach money matters and responsibility. If a parent wants a child to have a phone, say for safety reasons when taking public transportation, they may provide the phone. The child, however, may need to pay for extras, such as text messaging or Internet access.
Dana B. of North Seattle set up a system for her 13-year-old twin boys. Each got a phone with a $5 text allowance; they agreed to pay 15 cents per additional message. One son was frugal and barely used his allotment. The other met his allotment, but rarely went over — until a girl came into the picture. He was smart enough to realize he might be going over his budget and told his mom. They didn’t know how much overbudget until they got the bill with $150 of additional charges! The family decided to switch to an unlimited text plan, and had the boys pay for their portion of the additional monthly cost.
Kathy Lynn believes it was a good life lesson that the parents handled well. “Before they even started, they set up the rules ahead of time — very often parents are playing catch-up. This led the young man to understand that texting costs money. I think a lot of kids don’t get that — they never see the bill.”
Andrea Leigh Ptak is a freelance writer who lives in South Seattle with her husband and 13-year-old daughter.
National Council on Economic Education
A national nonprofit that specializes in financial literacy for children in grades K–12.
Web site for Kathy Lynn, author and Canada’s leading speaker on parenting issues.
A mom of three talks about life, credit and raising her boys.
Can I Have Some Money?
A Web site devoted to financial literacy for families.
A Seattle company that makes great money-education products for kids.