I recently came across a Facebook post by the popular page Humans of New York in which a little kid was interviewed about how he used his allowance. The child was given several options for his allowance including save, spend, donate and invest. As the boy describes it:
“If I put a dollar in the ‘invest section,' my parents give me two extra pennies at the end of every month. I’ve only used my 'spend section' twice! I have way over $10 in my 'invest section.' I used to have more but I took some money out and put it in my 'donate section.' We used to it to buy food for people who don’t have much money in their 'spend section.'”
I love this approach and hope to employ something similar with my own children someday. What I appreciate is the simplicity of the setup, but also that the child is learning important lessons about saving and giving back to those less fortunate that will be incredibly helpful for him later on. I realize writing an article about how to raise financially healthy children without having any of my own could be viewed a premature, but I have awesome parents and am deeply grateful for many of the "cruel" lessons they taught me and it only feels right to pass those along.
Growing up, my parents made it a point to involve my brother and me in the family finances – especially as they related to each of us. One of the things that I think they did really well was easing us into it by slowly increasing the responsibility we each had. They started off by giving us each an allowance starting in elementary school. It was a weekly amount (something like $10) but it came with strings – in order to receive the allowance we had to complete daily chores such as making our bed or washing the dishes. At the time I hated chores (like most children), but in hindsight, I’m thankful for the lesson that there are few handouts in life and that if you want something you need to work for it.
At the age of eight, I asked my mom if I could take piano lessons. My brother played baseball. He was always the cheaper child. Music lessons of any kind can quickly become a very expensive endeavor. I stayed with it, and by the time I was in high school, we were easily paying $100 a week, not including the expense of an actual piano and all the extraneous music books and accessories. Luckily, my mom foresaw how expensive it would become, and from the beginning she made sure I was equally committed by making me pay a portion of the lessons whenever I didn’t practice beforehand. At the time it felt cruel (that seems to be a pattern), but in hindsight, I’m so thankful she did that. Having taught piano myself I know how pointless it is to try to teach a child who hasn’t practiced and what a waste of money that can be for parents. Whatever activity your child chooses to pursue, find a way to make them a part of the investment. Whether that is having them pay for some of the equipment with their allowance or having them chip in when they don’t practice and waste a lesson. Doing so ties them to the activity and encourages them to work hard and be self-disciplined.
When I turned 16 and acquired a driver’s license my dad decided it was time for me to get a job. He then made sure I got one by refusing to pay for my gas. Again, this felt mean and unfair at the time, but, of course, I am grateful in hindsight. With each passing year, my parents paid less and less of my personal expenses. When I turned 17 they quit paying for my entertainment. If I wanted to see a movie I had to buy the ticket. When I left for college they gave the car to my brother such that if I wanted one I was forced to buy my own. By my junior year of college I was responsible for all of my food and discretionary spending, and the second I graduated I was handed the bill for my car insurance. With each progression, I became less and less grumpy about how mean my parents were and more and more thankful for the lessons they had taught me in self-sufficiency. Unlike many of my peers, the transition to adulthood wasn’t nearly as painful because I already had a pretty good grasp of what my living expenses were and I was prepared to pay them because I had been eased into it. Even if your child is only 5 or 6, there are definitely lessons that you can teach them about how to be smart with money, and if your child is already in their teens, it’s not too late. It will probably be difficult. They will probably fight you, but by including them in their own expenses you’re giving them the gift of self-sufficiency and one day they’ll thank you (and you’ll thank you).
(This article was originally published July 21, 2016, on our sister site The Cupcake Club).
"Human's of New York Facebook Page." Facebook.com. Picture posted June 19, 2014. https://www.facebook.com/humansofnewyork/photos/a.102107073196735.4429.102099916530784/1280568135350617/?type=3&theater.