By Dr. Judy Bin-Nun Ph.D., LMFT
“Mommy (Spoken beseechingly), buy this toy or food for me! I need it now! (Spoken stridently) My friends have this toy and I want one too” (Spoken demandingly). I know you have heard these requests, demands and sound bites; what do you do to teach your children about money and how to develop appropriate money habits early in their lives?
Now that it’s a New Year, you and your spouse can begin to plan sound money habits and it is never too early in your child’s life to start teaching your children. You can start the concept of giving allowance so that children learn natural consequences of using money. Allowance affords a hands-on, direct approach to the use of money that your words can’t teach; money requires teaching by show and tell.
Here’s a positive plan I have used through the years of working with children and families. I have read some excellent educational books on money and children by Neale Godfrey, noted author of seventeen books, such as “Money Doesn’t Grow on Trees: A Parent’s Guide to Raising Financially Responsible Children” and “Ultimate Kids Money Book” and a great CD-ROM called Money Town for children Pre-K through High School. Ms. Godfrey, the Chairman of the Children’s Financial Network, Inc., is an educator whose mission is to educate children and their parents about money. She has been working in this field for over thirty years and is a pioneer in the teaching of values, confronting money issues and improving life skills in a curriculum called LIFE, INC.: The Ultimate Career Guide for Young People which serves over one million middle and high school students.
The plan is simple – give allowance weekly by paying your children $1.00 each week for each year of how old they are. Begin the allowance process at age 4; please read on because you and your child(ren) will learn how to place the allowance money in specific chambers – to learn intensely where this money will go. You can buy “Money Savvy Generation’s chambered piggy bank” with 3 or 4 compartments or (use three jars or storage containers): that are designated for Spending, Savings and Donations (Charity) and teaches children how to save, spend, and donate and, if a fourth chamber were used, that would be for investing (teach about the future). Remember to give your young child his/her allowance in quarters and dimes so they can divide the coins and learn their importance.
Lori Mackey, author of “Money Mama and the Three Little Pigs” is the founder of Prosperity4Kids and she uses at 10-10-10-70 system for teaching kids to budget. “When your child gets their first dollar, we suggest that you teach them to save 10%, invest 10%, give 10% to charity and live from 70%. When you give them a dollar, you give them two quarters and five dimes.”
Your child will divide (early on with your help) his/her allowance into these three containers on a weekly basis. Only the Spending jar can be used to buy something that is desired and parents can make rules in this area. If, for example, you do not permit allowance to be spent on sweets, your child must abide by family values and limits. This process of having spending money and finding out how much desired purchases cost reinforces good money habits: we can buy it, if we can afford it!
Savings are for future desires that are hopefully attainable within two months for the youngest of the allowance recipients; older children can learn more patience and longer range goals. As for Donations/Charity, it is never too early to begin teaching your children the values of helping those less fortunate or donating to a cause that is important to them, such as saving wildlife, helping the zoo, helping their community with green projects and environmental clean up campaigns. Charity is about helping people and these lessons must be part of learning at home and having them modeled by parental involvement.
Money skills MUST be taught to kids, just as your will teach them to “Say NO to drugs” and about the “Birds and Bees”, necessary basics should include the teaching of money habits. The allowance plan is the basis for raising fiscally responsible kids and they must begin learning at an early age. The “4 Money Lessons for Children to Master” by Sheyna Steiner for Bankrate.com are a must to complete before sending your child to college: 1. Learning how to budget 2. Making and dealing with spending decisions 3. Understanding the rewards of work and 4. Delaying of gratification.
Another educator in the field on money and children is Greg Karp, author of “The 1-2-3 Money Plan: The Three Most Important Steps to Saving and Spending Smart” who recommends breaking money down into three components. Greg says, “I give my kid three Tupperware-type containers. One is labeled ‘save’ and one is labeled ‘spend’ and one is labeled ’give”. Every week, I started them off with $5.00 so two would go to ‘spend’, $2 would go to ‘save’ and $1.00 would go to ‘give’ and the $1.00 would be the amount they take with them for charity to church (or to Sunday or Hebrew School or their classrooms for caring projects),” he says.
Bottom line, no matter how you give allowance (easiest is by corresponding to age) make sure there is a component breakdown that reflects good values and good money sense. The allowance is not given for chores completed or grades earned. It is a valuable and expectable component that should be given on the same day every week to develop expectations for the future when a paycheck will be anticipated and put to good use. When kids are about 12 or 13 years old, encourage them to have neighborhood jobs such as baby-sitting, yard work or dog walking. You can wean kids off of a portion of their allowance by the time they are sixteen years of age when they can work part-time or have summer jobs.
I hope this review gave you a background to build money-smart kids and to eradicate poor money skills. Please take the time to read some of the recommended books with your spouse and create together a money plan that reflects your values and a weekly allowance plan for your children. Meet with your kids to review your conscious approach and to create a starting date for allowance implementation. Good luck on impacting your childrens’ future as financially savvy teens and adults.
Dr. Bin-Nun has her doctorate in Clinical Child Psychology and has a Masters’ Degrees in Education, Psychology and Marriage, Family and Child Counseling. Dr. Judy is an Educator and Artist and has her private practice in West LA and offers Teen Therapy Groups, Experiential Art Therapy and “Food For Thought” Cooking Therapy in her Venice Studio. Delta Pet Partner AAT dogs are part of her practice. drjudithbin-nun.vpweb.com or http://www.castoffz-artfulrecycle.com