Teaching Life Skills: Money Management 101

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After denying my 6-year old’s request to download yet another $10 book onto his Kindle, he replied, “But, Mom, you have lots of money in the bank.” At that moment, my heart started pounding and my face turned red: Kids who take money for granted push my buttons. It was at that moment that I realized we weren’t doing a very good job teaching our boys the value of money.

My big boys are now 8, and since that moment we’ve taken our job of teaching our kids the life skill of money management more seriously. Yes, we want to avoid raising spoiled brats who expect to be given most things they want regardless of cost. But, more than that, respecting money and understanding how to manage it is, in our opinion, one of the most important skills we can teach our children before they enter adulthood. Money is one of the greatest causes of stress and the number one cause of divorce. We think that if we can help instill a money value and management system when our kids are young, we stand a good chance of them bringing it with them into their adult years.

We’ve tried a few different approaches, and we think we’ve settled on one that has some staying power.

Weekly Allowance

Like many families, we decided to give the boys a weekly allowance. Here’s how we do it.

Make it Visual

We realized that if our system wasn’t one we could literally see everyday, everyone forgot about it. So, I borrowed this glass jar storage system from a friend of mine. I simply bought 3 small mason jars . I labeled one for each of the 2 boys, and use the third one for the “holding tank.”

Because I wanted all of us to be able to see the allowance jars on a regular basis, I decided to put them in the kitchen on the ledge above the sink. This is premium real estate, so vertically stacking them made sense. To prevent them from toppling over, I used strong self-stick Velcro on 2 of the jars’ bottoms, and 2 of the lids. The finished result saves space and is pretty cute to boot.

Super strong Velcro enables the jars to stack vertically.

Super strong Velcro enables the jars to stack vertically.

Determining the Amount

We think little kids need little amounts of money. So, when they were 6, they received $3.50 a week, and at 8-years old, they now get $5 each week. How much money you give your kids is largely determined by 1) the age of your children, 2) how much you expect your children to buy with their own money, 3) how many kids you have, 4) your family income.

We earn a middle class income, so $40/month on children’s allowances works with our family budget. We buy the boys’ essentials (clothes, shoes, school supplies) and occasionally splurge on fun little extras every now and then. If they want to purchase things that we deem unnecessary (packs of gum, more baseball trading cards) or are simply nice to have (like a pair of new sneakers when they have perfectly good ones already), we encourage them to save and use their own money.

Using the Allowance Jars

Each week, we put $5 in a combination of $1 bills and quarters in each of the boys’ mason jars. We keep the top jar, the “holding bank,” stacked with as many $1’s and quarters as we can. This ensures we always have cash to replenish their individual jars come the next week. We are a debit card family and rarely have cash, so stocking that top jar helps ensure we never run out of allowance money.

Using the Allowance as Rewards and Consequences

There’s lots of controversy over using allowance as a means of rewarding good behavior and punishing bad choices. Money is a very powerful motivator for my boys. We have very few things we can take away from them when they make poor behavioral choices that truly matter, and money is one of them.

So, in our family it works like this … as a member of the family, the big boys receive $5 each week. And as a member of our family, they have certain expectations to meet such as doing chores, showing each other respect, obeying their father and me, etc. If they choose not to meet those expectations, the consequences can include 1) losing .25-$1 from their weekly allowance, 2) doing an extra chore from the chore cards (see this post for how we manage chores) , or  3) going to bed early. We find that using these three consequences interchangeably works best — using just one consistently seems to lose it’s motivating power.  When they lose money from their allowance, we immediately take it from their individual jar and put it in the “holding bank”. Again, “seeing” the money being taken away increases the impact.

So far, our boys are proving to be respectful kids who generally make smart choices. So this is working for us. Figure out what consequences/rewards work for you. If the allowance is part of that equation, go for it. After all, adults work for their money and if their performance isn’t up to par, then a pay cut may result.

Teaching the Skill of Money Management

If your kids are anything like ours, cash in-hand burns a hole in their pockets. They can’t wait to spend it, and the quicker the better. We are working hard to help them make good spending choices and to save and give a portion of their earnings.

Learning to Save and Give

Because we think that making a habit of saving and giving money now increases the chances they’ll be savers and givers as adults, we require that they set aside a percentage of their cash for both.

Ten percent of their allowance every week goes into their long-term savings and to charity. We purchased My Giving Banks with three compartments: Spend, Save, Church so they can literally put their money into each of these “pots” and see it grow over time. While this particular piggy bank is good in theory, it’s super hard to get the “plugs” out to retrieve the money, and the slots are so small that it’s challenging to slip cash inside. We think that Moonjars would have been a better choice, but we’re too cheap to replace our current ones!

Now, .50 isn’t a whole lot of money to give and save each week. But, we think that, at 8-years old, it’s the principle that’s most important. Sure, we could require they save and give half of their allowance — that would certainly add up to a whole lot more much more quickly. But being left with a mere $2.50 to spend each week is kind of a killjoy. In today’s marketplace, it would take them a long time to save to buy even a small toy. And we think that risks discouragement and will result in them concluding that saving and giving is too costly. Besides, saving and giving 10% is a realistic habit they can make now and carry into adulthood. Hopefully it’ll simply be a no brainer by then, and they’ll automatically assume they live off of no more than 80% of their earnings.

Learning the Benefits of Delayed Gratification

Maybe it’s just me, but sometimes I find it so hard not to just go out and buy that thing that my boys want so badly. Maybe its a silly $10 toy that wouldn’t put much of a dent in my own budget. Or, harder yet, was knowing that if I bought the boys their own computer for schoolwork I wouldn’t have to share mine with them. (Imagine how much I could get done!) But, encouraging them to earn and save their own money for these nice-to-have-but-not-necessary items teaches them that being disciplined with their money can reap big rewards. O’ and we don’t buy the item and allow the kids to pay us back over time. That’s a bit too much like a credit card. And goodness knows we don’t need to teach our kids to rely on credit cards.

True, $4/week isn’t going to buy them a Chromebook anytime soon, and saving every cent they earn for a year might be too much for even the most disciplined 8-year old. So, we offer ways for the boys to earn extra cash. Doing odd jobs around the house, bunny sitting for the neighbors, and using their birthday and Christmas money are ways to build their cash stash faster.

Using this strategy, and a whole lot of self-restraint, the boys saved for an entire summer for a Chromebook. They learned so many great life lessons through this process, the most important being that they could actually do it. They can earn the money for what they want and have the self-discipline to save. And, maybe just as important, I notice that they take extraordinary care of that Chromebook. Apparently having to work and buy your own stuff makes it just that much more valuable.

All that saving was worth it when our UPS guy delivered the goods.

All that saving was worth it when our UPS guy delivered the goods.

Freedom Within Limits

When I know how hard the boys have worked to earn their money, it can be painful to watch them buy a piece of crap toy I know will break after a few days of boy abuse. But, that’s part of learning how to make good buying choices. I can tell them until I’m blue in the face that the toy is cheaply made, but they won’t really learn that lesson until they spend their hard-earned money on it and it busts. So, while we advise the boys on what to buy, at the end of the day, it’s their choice.  Of course, it has to be appropriate, but that goes without saying.

So that’s how we do it, for now anyway. Like most of our parenting strategies, this one is likely to flex as our boys mature. We’re hopeful that teaching them how to handle their cash will prevent them from making some of the mistakes we made as adults. Today’s temptations are baseball cards and remote control robots. Tomorrow it’ll be big trucks, big houses and fancy electronics. Here’s to hoping that the self-restraint we build today will lead to secure financial futures down the road. (So they can take care of us when we’re old and gray.)

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2 thoughts on “Teaching Life Skills: Money Management 101

  1. Pingback: Why I gave up money for Lent (and what I’m learning in the process) | Jax in the Box

  2. Pingback: Teaching Life Skills: Cleaning 101 | Jax in the Box

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