How Do You Teach Kids the Value of Money? (2006)
getrichslowly.org
getrichslowly.org
I grew up in a family without much money. I decided that the best solution to reduce expenses was to not ask for things. I didn't tell my parents about this because telling them might lead to them having more stress about money.
To give you some idea, everyone month or so we went out to dinner at a restaurant. That was so exciting for my sister and me. The restaurant? Burger King. Compare to the essay, where it says "we ate at McDonalds three times in two days" Jim Anthony's 6 year old is in a very different demographic than I was.
As an older kid, I might sometimes get a few quarters to play a video game (this was the 1980s), and I would spend 30 minutes watching others play, to make sure the quarter was worth it. I got my entertainment also by watching the screens and thinking about how it might be played.
I did get an allowance. It wasn't much. I didn't often ask for my allowance, since that would have been less money for the family. I recall I could get extra money for taking out the garbage or mowing the lawn. Perhaps not coincidentally, those are the two household tasks I now dread.
When I went off to college (full scholarship in a state school, including room and board, for doing well in school and on the PSAT - doing homework is free), I kept track of every single expense, down to a nickle used to make a photocopy. If any activity cost money, I avoided doing it.
I'm lead to believe that my viewpoint is not uncommon among those growing up without much money. It's not a fun feeling. My response still, when money is tight, is to shut down and do nothing.
Mind you, that's not the same as budgeting. Budgeting is spending for things that are worth it, and affordable. What I learned was to not spend.
Except for the parents mentioned in #11, I don't empathize with the comments.
Take #13. "It suggested an allowance of sorts, but it also required the children to cover the costs of some everyday necessary items, not just snacks, McDonalds or video games…more like clothes, shoes, haircuts, etc."
That wouldn't have worked for me. I didn't have the spending money for snacks, etc., and I would wear clothes and shoes until they had holes in them, and basically had to be ordered to get a haircut and new clothes. (See above, under "not spend money.") Actually, more like my mother had to drag me.
The essay starts with a strange observation about "blue collar", based on physical types. The entire essay can be seen as expressing a decades-old class-based upper-middle class anxiety.
Right now we make good money (gotta love computing), and because of my habits the money fight is nonexistent in our family. If anything, I find myself constantly fighting to buy our kids less crap. I saw both kinds of kids growing up, and it's a really interesting thing to see how they are now as thirty-somethings. Many of the kids like me are in my boat now - even those who don't have education and professional jobs. Kids who got everything are now suffering in the current economy. It's a stark and obvious difference, at least where I'm originally from.
It's a nice life this way. I like getting a bunch of money for Christmas, and splurging on a tea mug and a set of digital calipers. Everything else is invested in the hope of early retirement. I hope my kids can see what I'm doing and do the same.
On the other hand, you hear all these stories of lower-class lottery winners, that are unable to keep a fortune at least for a decade or two - so I guess thats an aspect of personality deep-wired within us...
Your writeup echoes my childhood really well and largely my approach to budgeting.
I will say though that I just remember it being a part of life and not something that was odd, or not nice. Even though we were poor my parents scraped and went into debt to send me to a private middle school filled with rich kids. So that was even more odd being the "poor kid" in the class and wanting to spend all my time at my friends' homes all the way across town.
I never had an allowance, but when I wanted to sell candy to my classmates my mom fronted me the 10 dollars for the initial outlay of candy. So in that regard my entrepreneurship started early as a result of just wanting to have some spending money as a kid.
I agree that the article talks about more well-off families since kids whining is mostly a tactic to get what they want. If the tactic never works it wouldn't be employed.
I learned that when you get money you spend it as quickly as you can on the nice-to-haves or mostly-nessicary stuff because money will literally disappear from under your fingers on paying bills and buying food.
My favorite holidays growing up were Christmas and Tax-refund day. That's how my family got our first, second and third computers.
When my dad was employed he used to give me a generous (for the 80's) allowance of $20/week, but it rarely lasted more than a couple weeks.
I'm only now getting my finances straight because I can afford to and I'm spending countless hours reading personal finance books and articles and I've had a friend that grew up learning the value of money and he showed me it's power.
As a hook for the article I thought it was clumsy and unnecessary.
I think it's reasonable to say that this introduction suggests a middle class snobbishness towards the lower class. The worry is that by not teaching the kids correctly, the kids will end up in the lower class.
On the other side, it's also teaching people that they shouldn't want to be in the upper class, because then they would lose this important sense of money.
A few small details are enough to generate immersion. The fact that you believe they were lower middle class in spite of the fact that he didn't mention it suggests you created a mental picture. I did too - in my mind the man was black, white t-shirt, a bit of grease on it. That's how the mind works, and writers exploit it.
A blue collar worker is lower class by definition. As phrased above, the "tall and muscular" bit is part of the writer's observation/stereotype that the man is a blue collar worker. "He was big and strong and (therefore) looked like someone who works in manual labour".
Teen and especially preteen girls tend to be really skinny until they put on their adult fat. I remember fitting into a size 0 at 12 and 14, same with my sister, we were both healthy.
Then I looked at my yearbook about last year and I notice something, many girls were very very skinny, just like I was at that age. Many seemed to have the same kind of body. They didn't have the more adult body I (and many others I'm sure) grew into. In an unrelated conversation I had with a friend, she was mentioning about how her body has changed since she was in high school.
You can't really compare a child with an adult.
We were always taught to respect money. Think before you let go of it. Challenge (not haggle) spending on something. My dad always said "if you don't respect money, it will never respect you". It is also important to show your kids that money does not come free and it has to be earned just like respect.
Overall, my goal is to teach my kids these important math/formulae:
It does not matter what you make but what you save.
(Cashflow IN > CashFlow OUT) = "Financially happy".I went first with a pizza lunch. When the waiter asked what we all wanted to drink, those $2 pops suddenly had a very real impact on my bottom line. Water would be fine for everyone!
My youngest sister opted for bagels the next morning, but it took a bit of convincing to get her to spring for cream cheese!
The other sister, being the sweetheart she is, sprang for a real meal and didn't give us too much grief.
Now we all look back and laugh at the experience, but it certainly had a very real impact in the value we place on a dollar.
In any case, I think you're missing part of the equation. Value isn't a stand-alone concept. It isn't "the value we place on a dollar" but in how much each of you values family meal time. Your youngest sister, at that time, placed a low value on it, compared to other possibilities that she could do with the money.
Let children be children, don't force them to work summers and holidays to teach them a lesson, that will come in its own time. They will have to work the rest of their lives anyway. It's better to teach them how to save instead.
Beyond these, however, I could perform additional chores in exchange for small amounts of money. My mom and I agreed on a price sheet. By doing a few of them I would have the equivalent of $10 a week or so. If there was, say, a computer game I wanted, I could do additional chores for a couple of weeks to earn the money for it. They encouraged this by helping me open a savings account early on.
Every now and then I approached my mom to renegotiate the prices (effectively to ask her for a raise). If I had been doing a good job, she would usually agree to small increases. Sometimes there were items that seemed too big for the return, and I would negotiate an increase by explaining this.
My first part-time job was at 15, but I helped where I could before that for odd money here and there. I paid for my first car with savings from that job, and I also paid my way through college (with some help from my parents for room and board).
I have never been afraid to negotiate on salary.
I feel like more than any of my friends growing up, and more than many adults I know, I understand the value of money, and I give a lot of this credit to my parents.
When you was positively incentivized to do more work, I only grew up a barrier around me, and learned to totally ignore their rules, punishments, screams and their authority as a whole. Also, now I really detest the chores I was tasked with most often (vacuuming, surface cleaning, dish washing), while have no problem with ones I never had to do, like laundry or ironing.
Like I said above, it depends on the kid's personality and the family's economic situation, but I think that an allowance along with an expectation of age-appropriate daily and weekly chores works better than paying for individual chores or hours.
My parents also didn't buy me much. I paid for many of my own toys after I was old enough to do chores. For example, I bought my own NES and every single game I owned for it. Each game represented perhaps a month or two of savings. Although I had fewer games than most kids I knew, I definitely valued them more. (Or tried to. I still distinctly remember the joy of buying the Teenage Mutant Ninja Turtles NES game and the subsequent crushing disappointment of actually playing it.)
Christmas wasn't a lavish present shower that it is for a lot of kids. My parents didn't have a lot of money, so I'd usually receive a few action figures, maybe a small vehicle for them, a book, and some socks.
Getting paid for household tasks suggests that the household tasks are not part of your obligation to the family itself -- that if the child didn't really want the money then they could just quit helping to mow the lawn or wash the dishes.
Getting an allowance suggests that the money is theirs to do with whatever they want. For instance, my son (11) gets an allowance but he almost never spends it. It suggests that the child's finances are (at least partly) separate from the family's. And it represents "free money" earned without working for it which may or may not be a message you want to send.
The article described putting the child in charge of a portion of the family budget. The implication is that the family operates as a commune (which most families do) and the income may be earned by the parents, but is to be spent on everyone (as needed) and puts the child in charge of a piece of that. It happens to be the part that the child cares about (McDonalds and video games) because that is age-appropriate. An older child might get a larger budget and also be responsible for paying the electric bill -- assuming that they can influence it by helping to turn off lights and minimize wasteful use of electricity.
I personally use the same system as another HNer mentioned; kids have to do a basic set of chores regardless of money because they are part of the family and they have to contribute to it and then they get some money for extra work.
My plans for my own daughter are for her to understand the total family budget (and retirement plan), perhaps giving her control of a few line items would be a good entrée into the overall much more complex budget.
I remember going to Toys R Us to buy it and when I got there, for the first time in my life, I wasn't so sure about spending the money. There was so much effort tied to it that, even as a child, it struck me that I was trading all of this time and effort for this one product. My mom made me count out each $20 bill, teaching me that money was not some nebulous idea (looking at you credit cards). Every $20 bill I counted made me think more about what I was doing.
I eventually bought it, but because all of the time spent saving up for it, I took good care of it and found it to be the most beloved console I ever owned. I feel that this experience definitely helped me understand the value of money relative to my efforts.
Oh, and my mother bought me Starfox 64 specifically to nail the point home. If you are reading this, mom, I love you.
http://www.bbc.co.uk/programmes/b00jj0s5
I don't know how long it will be available for.
Some tradtitional kids-and-money activities are harder to do today. I submitted an article some time ago about in reased policing of lemonade stands.
Not being able to pay when faced with a large expense is one thing; most parents would help out if their child was in that situation.
Not valuing the expense is definitely another, and it's a difficult lesson to learn later in life.
There is also the fact that, in some cases, a child better knows how to spend money to make himself happy then his/her parent. Obviously this is not true for every type of expenditure, but if you are going to spend $X to buy your child luxieries like new toys, it seems reasonable that your child would be better informed in how to spend part that money. Or, you can decide what you think (s)he wants, and buy it for him/her on arbitrary dates such as Christmas or birthdays.
Not saying that was your situation, just remembering my annoyance at my friends dishonesty/innumeracy.
Nope, never. I never had cash, ever. Not ever a dollar until I started worked at 16. Actually, that's not true, a couple times I went on a field trip to a big city and I got $20 to spend there. My grandparents gave me savings bonds once in a while on birthdays which I still have, but I never cashed them in. The rest of my relatives were much poorer than us. A couple had their power shut off. They certainly weren't giving me money.
Even if I did have money, I don't know how I would have the ability to ever spend it. My parents hardly even went out shopping unless they were going out for something specific they needed. When kids have cash do they just get taken to the store once in a while to browse or something? Do people just go to the store aimlessly to look for things to buy? Do kids so "I want X" and get taken to the store?
Besides, once they get old enough to work (maybe throw in chores) they'll already have plans on what they want to do with the money that goes beyond drinking, games and consumer goods.
Our kids (ages 12, 11, 9 & 8) are required to purchase all of their own school supplies, clothes, activities, etc. They earn the money from us and can earn a lot, but they have to complete their chores without us asking and turn in their peg slips (like a time sheet).
They then have to decide, do they want the $80 jeans or the $20 jeans? If they buy the $20 jeans then they can make more trips to the skatepark.
It works really well. Our system was derived from the book The Entitlement Trap: http://www.amazon.com/The-Entitlement-Trap-Choosing-Ownershi...
In general, we do have to tell them what to buy sometimes.
When we get into electronics, the school list specifies which graphing calculator to buy. Will my kids find a used one on ebay? Probably. Will a used one perform worse?
It is an interesting concern, but we haven't had a situation where their frugality has gotten in the way of their education. One of my kids likes fancy mechanical pencils, another one uses wooden pencils until they are nubs. It's their choice :)
It's not that you need to buy expensive stuff, but the cheapest of the cheapest is usually only good for occasional use, not daily school work.
We haven't run into those issues. They tend to order their supplies off Amazon, but I don't know much about what they choose or why.
What seems important is the willingness to let your kids make mistakes. When I was a kid, my parents had a set budget for each of us for clothes. My sister was super interested in clothes from an early age so they just gave up and handed her the money. She'd shop sales and make extra money to get everything she wanted. On the other hand, my parents basically dictated the clothing I would buy. (Every fall I got three pairs of Levi's jeans, four new shirts, two pairs of dress pants, two dress shirts, one pair of shoes.)
I never got the chance to buy one pair of $100 jeans instead of three pairs of $35 jeans and then have to figure out how to get through the week with one pair of jeans that fit. I learned to handle money in other ways, but I think my parents missed an teachable moment.
How about just making/letting kids work, and not make such a big deal out of how hard it might be? (work in general; some people think that 'kids should be kids', but I'm not so sure that is optimum. Maybe it would be great if no adult had to work, either, but that is impractical.) No wonder how many people have such a hate-relationship to work when we try to shield children from work\* all the while complaining about work ourselves.
People say that you should do work that you like, work that gives you a purpose etc. But who can blame them for having a hard time with that when all they've heard growing up is how miserable work (in the general sense) is?
I don't know psychology, so this is just a theory I have.
*\ I'm not a proponent of child labour
I think there will be enough opportunities for the kid to learn about having to work (like household chores, school homework).
And actually even setting up for enjoyable work will probably have some less enjoyable aspects.
And also, creating your own business isn't easy.
How early? The child in the article is six years old.
My guess is that most kids would rather play than sell lemonade, so he was probably pushed by his parents to do this.
Or maybe he was just entrepreneurially minded.
When I was 6-10 I sold lemonade probably once every week or two during the summer. I liked to make money, and it was fun especially with friends; my parents never pushed me to do it.
Age 9/10, in the winter before it snowed I used my saved money to buy a new snow shovel and for card stock which I used to make business cards. I walked around and gave them to neighbors, when it snowed I would usually get a couple calls and then would pick up a few more walking around.
It sounds counter-intuitive to me. Teach them the value of money, but then completely negate any value by forcing them to give it away?
Responsibly managing your money in my world means: spending it wisely, saving and investing it wisely, and giving it wisely.
i dont think its a great way - teaching indirectly via worrying - but it has some value in that they know spending it has to be done with some thought because there is only a finite supply and we like a nice warm house.
i try to counteract the negativity of 'not spending by worrying' by occasionally making small purchases that are purly for enjoyment - a toy, a dinner out, a weekend at the beach.
When I was a kid, my dad hired me to do jobs on the clock around the house for $10 an hour, or whatever minimum wage was at the time. We had a set schedule, we had a fake tax schedule. We wrote everything out, calculated it, pretended to invest it into things like real estate etc.
When I was younger I used the money I saved up, around $15,000, to buy the shack outside our house. My first "investment". Rules were it was completely mine and my parents couldn't touch it. Insulated, spacious, my own little lofty apartment type. It was great, during high school I basically turned it into a smoke shack.
I kept it until college, at which point my dad pulled out the original $15k I gave him for it and used it for my college fund and said "you now know how to value money". He wasn't a man of many words, so when he says something like that it really means a lot.
I was taught this from a super young age, I didn't even bother to beg or throw a fit about anything because I knew my dad would just stare at me until it was over, and if I didn't have the cash, I didn't get the cookies.