January 22, 2020
Sometimes I feel like my children are the monsters of my own creation. This is for a myriad of reasons that has evolved in varying degrees of complexity as they have aged. Children are so impressionable and usually look up to us as parents to give them direction on how to develop good habits, stay humble and be kind. And like many of us parents, I fell into the trap of life was too busy to take the time to teach them about money earlier in their lives. The universal truth about kids is when they are younger, they often don’t have an appreciation for the cost of things or money in general (sometimes I think my kids still don’t!), but as they age their needs and wants tend to get much more expensive. Setting a good example and teaching money skills sooner rather than later is something you will never regret doing.
A couple of weeks ago my son had a birthday. He loves this time of year because he gets the one-two punch of Christmas and the celebration of his arrival on this earth. He is also at the age where gift cards trump everything and cash is king! The shopping bug bit him earlier than I anticipated. With a pocket full of plastic and moo-lah burning a hole in his pocket I thought that it was a great time to use this as a teachable moment on how to save for something bigger that he wanted and not just spend his money because it was there.
Now, all three of my kids are extremely motivated when it comes to earning money because I find myself constantly telling them that the National Bank of Mom has closed. If you want something that’s not a necessity in my house you are going to have some skin in the game. It doesn’t matter that my kids are 15, 13 and 8 – they are all capable of doing chores! My son decided two nights before Christmas that Santa should bring him a laptop (*insert eye roll here*) and that’s what he focused on with the loot he collected over the past few weeks. He didn’t quite have enough to make the purchase and started asking what chores he could do to fatten up his wallet.
According to a recent report I read children between the ages of 4 and 14 earned an average allowance of $471 during 2018. This equals approximately $9 per week. If I made that much when I was a kid I would have been in heaven! In the same report nearly half of these kids (42%) saved some portion of it. It got me thinking about when I was a kid and although I had a savings account, I did not have a great understanding of money. I know – ironic given what I do now for a living! As parents we are the source of learning and information that children seek, and these are some additional ways that we can teach our kids how to save responsibly at any age and in times that are constantly evolving:
- Talk about money in front of and with your kids. Now I’m not saying that you want to have them know all your personal financial details. The last thing I’m sure you want advertised is the annual salary you make and the value of your portfolio. But kids are sponges! They may not understand everything you talk about when they are younger, but as they age the more they will absorb and hopefully retain. Kids don’t always understand the words in stories when they start to read, but that doesn’t stop us from still reading with them because we trust that they will pick up more with repetition and age.
- Lead by example. Try to break out of the instant gratification world we live in and have some self-discipline. I think all our checkbooks would benefit from this. I can’t stand it when I hear my kids say “I want…” because it makes me feel like they don’t appreciate the things they already have. I love, LOVE, LOVE grocery pick-up now because when I take my kids to the store it seems like I spend so much more than I intended to because too many things not on the list get purchased. When you are at the grocery store don’t let them randomly throw things in your cart. Find items that are on sale or buy the generic branded item that you need versus the one that costs almost twice as much. Retailers now have coupon codes for everything so find the apps for your device and show your kids how to become a bargain hunter.
- Make a game out of it. This applies to all ages! As a child of the 80’s I was personally obsessed with the game called Mall Madness – you know the one where you got to go through your cardboard mall with your fake plastic credit card and shopping till you dropped? It was fun, until you overspent and your card was declined. Play Monopoly, The Game of Life, or any other game that reinforces the concepts of saving, investing, and making good financial decisions.
- Use age–appropriate spending and savings apps. Let’s face it, money makes the world go around and technology rules the world. My kids know how to use their phones and devices far better than I do. Leverage this! We don’t have to recreate the wheel here to teach our kids about financial responsibility and we can leverage technology to make it fun for them. There are a ton of apps that do this, but my personal favorite is Greenlight. Greenlight brands itself as “the world’s first smart debit card that enables parents to pick the exact stores where their kids can spend.” It allows you to credit them for chores or other jobs done, gives you real time notifications of when the card is used, and provides a platform to give kids the benefits of utilizing digital spending while keeping them safe and showing them how to spend in smart ways.
- Teach other money management skills early. It shocks me how many kids graduate from high school and set out into the world without knowing how to read a bank statement or balance a checkbook. If you have teenagers, please do the world a favor and teach them about these things! Let them sit down with you when you pay your bills, show them how to actually write a physical check (even though it’s becoming obsolete) because they will at some point need to do this for something. Teach them about Bill Pay systems and how not to use debit cards on certain internet shopping websites. Talk to them about credit so they are not vulnerable when they go off to college and are offered every credit card under the sun and teach them about the importance of a good credit score.
I often find myself saying that my clients do not fit a mold and there is no one size fits all approach to wealth management. The same goes for kids – they are like snowflakes. Each one is different and the way that we teach our kids about financial matters will be different too. There is not a right way or a wrong way, but there is a way in between that will get kids thinking about money and how they interact with it. Not all of this advice may appeal to you, but I think the universal appeal to us parents is that we want our kids to be happy and set them up for financial success. Let’s not forget that it is in our long-term interest to help promote this so we can get them off the payroll at some point in the future. Teach your children early and teach them well!
And lastly, my little guy did earn what he needed to buy his computer with the gift cards and cash he received thanks to his mother finding a ridiculous bargain using a coupon code from RetailMeNot.com. All is good in his world.
Iris Buczkowski is the founder of Birch Wealth Management (birchwealth.com). Original content provided by Iris is for educational purposes only and should not be construed as investment advice.