Interesting article in today’s WSJ. WHat do you think
http://www.wsj.com/articles/whats-the-best-way-to-teach-financial-skills-to-children-1456715769
One of the best parenting moves we ever made was giving our oldest a clothing budget when she started middle school. We direct deposited $40 a month into her bank account that she had an ATM card for. She was responsible for all her clothing purchases from that point on. The amount was large enough that it was possible (with sales shopping and thrift stores) that she was able to cloth herself the way she wanted to but small enough that she had to consider her options very carefully.
$40 a month? In middle school? That seems incredibly low.
When my kids were in middle school, they would discover each spring and fall that they had completely outgrown all of the previous year’s clothing for the upcoming hot or cold season. Even if they had saved up six months of a clothing allowance of this size, I don’t see how it could have provided them with everything they needed.
Three piggy banks at a very young age. No matter how much you start with.
Savings–everyone needs a reserve.
Invest-- Make your money grow! a learning opportunity on how the financial world works.
Spend–do what you want. Gotta have some fun along the way.
Save, spend, invest. Hold a percentage out for charity. But decide where it goes.
Teach investing and compound interest and how it works. Show how money can grow.
Saving now is vital to future wealth.
Save and invest piggy banks (bank accounts) will meld together as they get older.
Spend will meld eventually–the more I invest (if it grows) the more I’ll have for fun stuff.
Charity grows also with age and investment–the more you have to give the more you can give.
$40 a month was very low. DH wanted to set it at what I calculated I had been spending and since I shopped thrift stores a lot that was the amount I came up with. I fully expected to be regularly supplementing that amount by purchasing big ticket items like coats, shoes, gifts, etc. It turns out D was even thrifter than I was plus she pretty much had her adult size at that point.
Sounds like it worked out well for you (and your daughter).
We are making car payments on three used cards that we set up on a pretty fast payout, plus a house note and all the other monthly expenses that a family has. My wife told the kids just how much we had to spend each month before we ever bought the first sack of groceries and they were just amazed at how much it was. They had no idea.
Nobody ever bothers to tell kids that the house costs $1,600 a month, the utilities are $400 in the bad months, phone and cable another $150, plus car payments, plus car insurance, ect., ect., ect. I think it helps them understand why we fuss about money sometimes!
@EarlVanDorn Good conversations to have. I cant believe how much it cost to live these days!
If I’d have given my boys a clothes allowance they would never have bothered to buy clothes at all! I do remember we refused to buy our son (in 5th or 6th grade I think) a video console. He and his best friend down the block got together and pooled their birthday and holiday money and bought one together. It would spend a week at our house and a week at their house. I thought it was a great solution. Neither of my kids were into much stuff except computer games and books. Still aren’t.
We didn’t give our kids any money. We did buy them clothes, stuff they needed for their sport, an adult size bike for transportation when the time came and we fed them. 
We paid their tuition, room, board and books for their undergraduate degrees. Everything else was on them. Before they picked up jobs at 16 if they needed money they asked for it and if it was reasonable we gave it to them (money for a movie, that sort of thing). They all seem to do well with managing money especially after their first job when they realized how little you really earn compared to what things cost. Ironically the one who couldn’t save a nickle pre-college is the one post-college who is the best saver.
i started working at 14 and paid for most things on my own after that. My parents helped out a lot with college. I saved those first two years to buy my own car, paid my insurance, gas, etc. i even paid the internet bill at home starting in 10th grade when i wanted to upgrade our internet, paid for a 2nd phone line each month since the internet was dialup, haha, , paid for my cell phone (back then it was like 20/mo for like 20 minutes… oh how times have changed), etc. I remember buying a 50 dollar sweatshirt at american eagle when I was 14 - my mom took me to the store and asked me multiple times if i was sure i wanted to spend a week and half paycheck on one sweater. Funny thing is, almost 20 years later I still have that somewhere and it still fits!!! best clothing investment ever!!
we did go clothing shopping once a year to get new clothes for school - $100 to spend on whatever we wanted, plus a pair of sneakers. anything beyond that was on me.
Drop them off in West Virginia with nothing but a $20 bill and a copy of Oliver Twist, and let them figure it out?
I see many kids who's parents pay for everything including luxury cars, designer clothing and entertainment
expenses, fancy phone and much more. It is only natural to want to provide our kids with “the best”. I certainly have not always held my kids fiscally accountable, but they don’t always get what they want or the “best”.
My parents paid for everything and I wanted for nothing. I’m extremely fiscally / financially responsible.
Like most everything else, modeling behaviors we want to see reflected in our children is the best way to"teach" them. Your spending patterns reflect your priorities in life (“Where your heart is, there your treasure will be also”).
I think being open with your older children about how you allocate your money is helpful, because things like savings, insurance, retirement, investment expenses aren’t “seen” by them in the way that tangible goods are, but they are extremely important.
My parents, who were very generous and paid entirely for our college educations, gave us three very basic pieces of financial advice which I think are pretty good for young people:
- pay yourself first out of your paycheck (i.e. a certain amount of every paycheck must be saved/invested);
- do not use a credit card to buy something you couldn’t afford to buy if you had to pay cash on the spot;
- do not borrow money to buy a car, furniture etc. ( or any other depreciating asset).
To that I would add: don’t spend to the top of your housing budget. You don’t need the nicest apartment you can afford. Get some roommates. The less you’re obligated to spend monthly (“the nut”), the more choices you will have about what to do with that money.
Recent grads need to understand that they can’t expect to enjoy the same lifestyle it took Mom and Dad 25 years to build.
We did not teach any financial skills, kids are doing fine on their own.
Wise usage of credit cards is financially beneficial. We have used them all the time and receive great checks from them at the end of the year for usage. We never ever carry the balance so we never paid any interest on them, we pay the balances when they are due every month. It makes sense to us from financial point.
How one can buy a car without borrowing money aside from buying junk that you will be constantly putting money into which, again, makes no sense? When things start happening to your car, it makes a perfect financial sense to get rid of it and buy the new one. However, our family policy is to never buy a brand new car. We have been buying the low mileage car that has all little problems taken care of by previous owner. As far as I know, this is the only advise that we communicated to the kids.
I believe that high schools should teach a required finance class that honestly teaches a kid to understand yearly finance. This should include understanding of household budgets, debt management including credit cards,car insurance, health insurance, 401Ks, IRA’s and investments. Make it relevant.
Most importantly they should teach how to find this information on line and how to understand the terms used in describing these things.
Our kids are so lucky that they have all these on line calculators for EVERYTHING and the explanation of terms etc at their fingertips.
With many more Americans being in charge of their long term finances ( directing their own investments and not having pensions) it is our duty to make sure every kid REALLY understands what they need to do. The govt cannot afford to fund all these people in their old age.
Made me smile when my daughter shared a conversation with her brother about being on their own financially.
“This is really hard.”
Yeah, they get it.
@NJSue I believe in all those financial principles as well, but have to admit for the first time in my life
paying myself first has been a challenge with 3 kids in college:) I also pay cash for cars:)
A great read for anyone interested, and a great college graduation gift.... national best seller
" DIE BROKE" Steve Pollan and Mark Levine.
Our kids had theoretical allowances, but we often forgot to dole them out. We did talk about money. At some point when our income came up and our kids wondered why we weren’t rich we explained about car payments (and why buying a used car with zero percent interest made sense), mortgages, just how much food actually costs and the like. I remember once I told every one I could easily spend $100,000 on a kitchen renovation. And I went through the numbers with everyone.
In economics, in our HS, the kids have to do a complete and accurate budget based on what they want to be. They have to find how much a job would pay and all expenses - housing, insurance, taxes, food, car payment, clothing, entertainment, etc. It is eye opening for them.