Money Matters

How do you instill in your children the value of a dollar? For me, this is huge. I watched my parents struggle financially for years, culminating in a bankruptcy when I was in high school. It was traumatic for everyone involved. And I swore I would never put my family through that. For me teaching my kids financial responsibility is high on the list, right behind providing a loving and nurturing home and providing them with a solid education. As I said, this is huge for me.

With Miracle Boy, I've been working on this since he was about 5 and started receiving an allowance. I know, the decision to give an allowance or not is a personal one. I chose to do it. Mostly because I wanted to start teaching him how to handle money. That and I'm a firm believer in NOT buying your kids something every time they accompany you to the store. Actually, I believe in gifts for holidays and birthdays and not in between. So, I thought a small allowance would provide him with a little disposable money of his own in which to learn about finances. And its amazing how quickly a child will decide he doesn't need a new toy when its his own money he's spending.

So, at age 5 he started receiving $5 a week in allowance, one dollar for every year. That sounds like a lot, right? $20 a month for a 5 year old. But, and its a pretty big but, he was required to put $1 into long term savings and $2 into short term savings per week which left him $2 a week for disposable income. And here is where the financial 101 lessons began. As he looked at me with those big, brown, puppy dog eyes he asked me what a saving account was and why he needed them.

I explained to him, long term savings are for big things you may need many years from now. For example a car when you turn 16, or to help pay for college (retirement was beyond his comprehension). Short term savings are for things like birthday presents when you are invited to a party, or Christmas presents for your family and friends. The money you keep in your room is for you. You may spend it how you choose (with mom approval) either every week, or waiting and saving it for something big. And thus, his financial education journey began. 

At 6 he saved and bought a huge Lego set. At 10 he bought a snowboard. At 14 he bought new golf clubs. At 16 he bought an iPhone. At 14 he also started working and was taught to save half of his paycheck. Since he was 5 years old he has purchased all his own gifts for others for all occasions, he has bought all his own electronics, he pays for his own entertainment, gas, spending money, etc. And he still has his long term savings for college which is coming in handy right about now. (OK, so we provided a car for he and the Quiet One to share. Its not like we were against providing anything)

Its not like there haven't been bumps in the road. There were years when he ran out of savings before buying gifts for everyone at Christmas (and many tears shed). There were times when he was invited to go somewhere, but he'd spent all his disposable money that week already (and more tears shed). There are times now when I look at how he spends his disposable money and I think to myself, "wow, I have failed miserably". And there are still discussions on how to handle money. He's working full time this summer. I think he should be saving 75% of his paychecks for when he's in school. He wants to continue saving half, spending the rest "enjoying his last summer with his friends". And I struggle with how much control to exert, and how much to just let go. He's now (almost) 18, leaving for college in 6 weeks. It's probably time for him to start learning his own lessons from trial and error. I just hope he's learned enough of the basics to get him through those lessons. It better be; he's not living in my basement when he's 30.