by Siobhan E Brown
I recall my first apartment after University, when I was truly living on my own and responsible for my own finances without any parental oversight. While the money I had was plenty to live on, I was woefully unprepared to manage it. I lived in downtown Boston, rent was expensive, I still had student loans, and I was entirely too quick to pull out my credit card. Once the bills started coming in I realized I had a lot to learn about being truly self sufficient. My boyfriend (now husband) recalls the first time he saw my file drawer labelled “bills.” My organizational system was..ahem..non-existent. He was horrified to see the number of completely unopened envelopes residing inside the file folder. Why he didn’t run for the hills then, I will never know.
Many decades have passed since that time, and now that I have a child of my own, I hope to give him the tools to manage his money so that his money does not “manage” him, and his emotions like it did for me. Unfortunately this completely essential life skill was not taught in the schools of my youth (why Shop or Home-Economics were deemed more essential still remains a complete mystery to me). For the most part, it is up to us parents to teach our children how to be financially independent and savvy while they are under our roofs.
I thought perhaps my son was too young to discuss finances. At 4, he does not exactly comprehend the difference between “wants” and “needs.” At his age everything is a “need” and the concept of delayed gratification is a completely foreign and unwelcome one. Once I started researching however, I realized there were skills I could teach him about money-management even though he was only a pre-schooler.
I began receiving an allowance at the age of 10. Each week I had to put my laundry in my basket, keep my room tidy, make my bed, help with chores. Truthfully there was nothing sophisticated in this system, and it seemed, despite my best or worst efforts, the money came regardless. I was also free to spend it however I liked and there was never any discussion of “savings.” The convenience store up the street from our home collected the majority of my earnings. I decided with my son I would lay things out a little differently and track using a tool I found on Pinterest (oh how did our parents survive without it) called a “job board.” This way my son and I could have ongoing, discussions about his progress each day. I also decided I would start giving him allowance at the age of 4 so that he could make mistakes early, when there was nothing at risk. Deciding to spend all his allowance in one go on candy would have less repercussions than a child blowing tuition money at the local pub or on a spring break vacation. I decided to make the tasks small, “blanket over your bed in the morning, get dressed without complaint, brush your teeth with help” to get us started.
Once a task is completed children can go to their job board and collect the index card with the task written on it. Even young preschoolers can bring the card to their parents immediately or at the end of the day and collect allowance (for young children 1 RMB is most likely sufficient). Children also can be given the option to earn extra money for completing additional tasks, one my son really enjoys now is filling up his own water bottle in the morning. I decided to pay my son daily as his ability to wait 7 days would be unrealistic at his age and I knew he would loose sight of the goal quickly without daily motivation. Older children don’t require daily rewards (although they will test us), and often have a greater ability to focus on the long term goal. Decide together what the tasks should be and how often financial compensation should come. Don’t forget to have fun perhaps by designing and decorating the board together.
Wants vs. Needs
Determining the difference between a need and a want happened early when talking with my son about money management. The very first time my son requested something outlandish he learned what the word “expensive” was. I felt this was important because as a child, I received most of what I requested and I had no concept of what it meant to wait or to save. Far too often in our privileged expat society we see (or unwillingly encourage) children who demand much and value little. How many times have we seen a child with a full playroom complain they are “bored” or have nothing to do. When my son and I shop together we play the want/need game, where I ask him if something is a need (toilet paper) or a want (gum). He now knows the difference. It doesn’t mean that he has stopped asking, or trying to convince me otherwise, but I’m always proud of him when he decides he wants to buy one of our friends (looking for money outside City Shop e.g.) a meal, instead of requesting a chocolate or a toy. We hope we are teaching him not only to make distinctions and assign value, but also to think of others when making these decisions.
Something I didn’t have until late into adulthood was a financial “cushion.” When I lost my job due to downsizing I was immediately put into a state of panic, questioning how my monthly expenses would be covered. After an extended period of financial comfort at what I thought was a predictable job in a stable market, it hadn’t occurred to me the rainy days would come. I immediately found myself in arrears making minimum payments. It would have been of huge benefit if I had known about and practiced the 60/30/10 rule. Sixty percent of earnings should be for purchases and expenses, thirty percent for savings and long term goals, and ten percent for charity or giving. Pinterest is filled with savings/giving/spending bank ideas for kids, many fashioned from simplistic materials like jam jars. I realized that my son’s piggy bank is cute but completely impractical. I needed to change the system as very few coins fit in his metal piggy bank and he cannot see his progress. There is also no way to make divisions between the three categories we are trying to educate him on. It doesn’t have to be complicated or expensive, but it needs to be visible and comprehensible.
Some families may already be involved in a philanthropy and choose to give their time as oppose to giving money, an equally valuable contribution. Giving money is important, but encouraging children to give their free time to the service of others allows them to see first hand exactly how their efforts make a difference to those in need. Making meals for the homeless, playing with disadvantaged children, assisting the sick or elderly, are all acts that will teach our children to be grateful and present in their own lives. Signing a check is a simple act requiring nothing more than a financial commitment. Teaching our children to commit their time to others, is as important a lesson as teaching them to save money for their own future. If a family chooses to give their time, the 60/30/10 can be changed with ten percent more going towards either savings or spending.
I can’t tell you how much I use to loathe this word and fear this concept. I questioned how I could possibly teach my son these skills when I had failed at them so miserably in my youth and was continuing to make mistakes in my forties (Taobao is my new nemesis, I did not need half the stuff I ordered this year.) With practice however, I realized that by being a good role model, asking questions, halting before purchasing, saving for the long term (we focus on birthday and christmas) and giving to others I was not only teaching him, I was enforcing these concepts and learning along the way. Our jam jar piggy banks are a new concept that require some tweaking but it’s a start and it has us talking. We have a piece of paper where we will write down what it is we want to buy, what it is we are saving for, and who we want to give too. As a four year old understandably I won’t ask him to dedicate his savings for college just yet, but I did tell him he is responsible for budgeting his Star Wars birthday party, which he is more than thrilled about.
“Smart Money Smart Kids” by Dave and Rachel Ramsey.