Giving Kids Control of Money (So They Don’t Always Need Yours)

I wish I could say this is an area where I shine. It’s not. But I truly believe in the message of this article in today’s Wall Street Journal, Teaching Kids About Money the Hard Way:  Have your kids take care of their own money — getting, saving, spending, even misspending it — gradually, starting as young as possible.

The current case on campus (soon to be law for anyone under 21 who cannot show a source of income) is that credit card companies try to get parents to co-sign on credit cards. That means that if you child abuses the card, you, the parent, are faced with the dilemma: Pay for your child’s mistakes. Or don’t pay — and watch YOUR credit rating take a hit. Hard to teach them a lesson when you’re personally on a spit over the coals.

Along with the other Free-Range lessons we give our kids should come some on earning, saving and spending. Of course, the fact is: it  is harder than ever for kids to get a job (for my book I called eight newspapers in North Carolina — none would hire anyone under age 18). This almost forces kids to rely on family largesse, at least in their younger years. So we all have to be creative about chores, allowance and finding tasks we’d normally pay someone else to do that we can pay our kids to do instead. We just had our youngest do a big, on-your-knees floor washing the other day for $2 — money well spent (since I closed my door, put on my headset and could almost block out the groaning).

If anyone has any tips or suggestions for helping kids learn to earn, save and understand the meaning of a dollar, these  would be most appreciated — especially by me! Penny for your thoughts? Or at least a Tweet? — Lenore

60 Responses

  1. I don’t often remember to have my kids bring their own money to spend places, but it’s interesting to watch them deal with their budgets as they do. I don’t give them more when they bring their own, unless that was a part of the original plan.

    My mother took us to Round Table Pizza last night, for example, and the kids remembered to bring their quarters. Then came the time when they ran out and wanted more. They were disappointed that they couldn’t have any.

    I also talk to my oldest about budgets. Our family is on a rather tight one right now, so the topic interests her quite a bit. She has the usual 7 year old’s impression of what a lot of money is, so we often shock her by telling her what things really cost.

    She wants to be like her Mommy and earn money online, which I’ve warned her is pretty hard. But I certainly don’t mind encouraging her entrepreneurial habits.

  2. I recently came across this piece during a search for ideas of how to help our three-year-old begin to have an understanding of money.

    Teaching a Three Year Old How to Save:
    http://www.thesimpledollar.com/2009/03/19/teaching-a-three-year-old-how-to-save/

    We are going to try the saving for something strategy, and we have begun to give him small coins for specific chores unrelated to his “cleaning up after himself” duties. For example, he earned a quarter the other day for spending 15 minutes putting cuttings from trees and hedges into the compost bin. We used a timer, and he had a great time. He then went off and played on his own, while I finished the job.

    We’re just starting on this ourselves. For now our focus is to help him understand “where” money comes from… he understands very well that you can exchange money for things, but up until now, he simply thought that money came from the “computer” at the bank. His favorite way to spend money has been to tip local musicians. Alas, I fear that local musicians may not be getting tipped quite as well as in the past.

  3. I wholehearedly endorse the idea of letting kids begin to manage money as early as possible. A few suggestions I’d add:

    Open savings accounts for your children as soon as they have a regular allowance and/or money from chores. I got one when I was about nine, and by the time I went to college, I knew all about managing a bank account and saving for large-ticket items.

    Get your children involved in your family’s charitable giving. You might allocate a small sum that each child can donate annually to a charity of his or her choice, or log your child onto kiva.org and let him pick out a small businessman or woman in a Third World country to whom he can lend $25. Some families tithe Christmas, Chanukah, and/or birthday gifts of money to charities of the child’s choice.

    If you have a teenager who is earning signficant money at a summer or part-time job, encourage him or her to open a Roth IRA. You might even offer some seed money. (IRA contributions can’t exceed earned income, but if your child grosses $4000, invests $1000, and you then give him $500 as a reward for fiscal responsibility, that’s okay with the IRS.)

    And finally, make sure that your child gets a credit card as soon as he leaves home, even if you have to co-sign.

    I’m very worried about the new credit card legislation that limits young adults’ access to credit cards– I started college at 17, was more or less financially independent from the day I left home, and can’t imagine how I would have managed my college expenses if I hadn’t had a credit card. The first year (before I turned 18 and could get one) was tricky, and businesses like campus bookstores were much more willing to accept checks 20 years ago than they are now. I fear this new legislation will push some American college students into an artificial financial dependency on their parents, when they are ready to manage, and should be managing, their own finances.

  4. Our allowance was directly linked to our chores. Failure to do them or doing them inadequately had a direct impact on our allowance. We could not get advances, though we could do extra chores for more (my favorite was cleaning out the fridge).

    One of the proudest moment in my young adult life was treating my family to dinner. It’s a tradition in our family that with a new job (or first job) you take every one out. I saved up my paychecks from Wendy’s and proudly took all of us to Outback. I paid for appetizers, dinner, and desert. The only thing I didn’t plan for (having no experience in the matter) was the tip. I was so proud.

  5. check out the MOONJAR website. There is a great new family Kit that encourages not just saving but Saving, spending and sharing – Getting kids to see money as a tool rather than a definer will allow them to manage their money in ways that satify teir individual needs and wants. The piece we seem to often forget is the Share piece – I love that Moonjar includes that from the start rather than waiting as though there is a magic amount that will make a difference.
    Great conversation!

  6. Our allowance had no connection to chores at all, because my parents felt that doing chores was part of being members of the household.

    Also, our allowances were small. How small? We got $5 a month, and that never increased. However, the idea was to teach us how to manage money, and it worked.

    Our parents bought us what we needed, but if there was something that we wanted that they didn’t want to buy, well, we had allowances. If we didn’t have enough money at the moment, we could save up. If we had already saved up, we decided whether we really wanted that item enough to dip into savings. (This was back in the days of passbooks, so you could easily see your deposits add up, and you saw how withdrawals affected your total savings.)

    Today, I would probably start with $1 a week for a young child and increase it over time. But I don’t think that an allowance needs to be large to teach financial responsibility, and it doesn’t need to be tied to anything other than opportunity cost (also a good thing to learn about).

  7. I wrote a long blog entry about this a few weeks ago, here: http://childwild.com/2009/06/21/kids-allowances-whats-the-right-approach/

    The short version: I give all three kids an allowance based on their age. With the five-year-old, we break it out into jars for saving, spending and giving. The teenager is on his own recognizance about his spending, but is responsible for some of his own expenses. The baby just gets pocket change to play with because she sees the other kids getting money and wants to play.

  8. When I was 13 and in the 8th grade (spring, but still) I cam home and my dad informed me that he got me a job at the dry cleaners up the road. I told him I wasn’t old enough to work to which he responded, “Ya, I told them you’re 15.”

    As a carefree 13 year old playing soccer and softball, I was not very happy about this istuation. But I had to do it. I got $3/hour under the table and I LOVED IT! I loved having my own money, buying my own clothes, treating my brothers and sisters to ice cream at the mall. From that point on, I always had a job and was responsible for all my own spending – (most of) my clothes, going to the movies, going out with friends. It was tough to have to use my own money and not ask mom and dad but I think I was much more independent than most teenagers – especially noticeable once I got to college!

    I don’t recommend lying about your kid’s age and getting them a job, but maybe paying them to do work around the house until they are old enough? Also, when I was even younger, my sisters and I did yard work for people in the neighborhood – raking, snow shoveling, lawn mowing. We even scavenged for recyclable bottles. There is plenty you can do to earn money at young age.

  9. Our two sons have gotten a small weekly allowance since they were 8, to spend as they saw fit. This wasn’t tied to chores, as we look at chores as part of their basic responsibilities to the family. It was interesting seeing how they were different in their approach to money. My older son is a saver–he thinks long and hard before he’ll spend a cent. My younger son is a spender. He’s the one who will try to get an advance on allowance and he never seems to have a penny to his name.

    Both boys have their own savings accounts where they put their birthday and holiday money and have learned through that the value of saving for a larger ticket item.

    My older son is now a HS student and has a job. He has his own ATM/debit card and a separate account for his earnings. He is quite responsible with his money, now that he has to provide his own for discretionary spending.

    We taught both kids what my father taught me as a child: translate the price tag to how many hours you had to work to make that amount of money. It’s a simple and concrete way to understand value.

  10. We do the save, spend, charity strategy with an allowance they receive based on age. They can earn more money by doing extra things around the house.

    We also do other things. My son sold doughnuts and juice and coffee during our neighborhood yard sale. He had to pay his sandwich-board-wearing sister for “marketing”. We do the occasional lemonade stand.

    They wanted to go to an indoor water park, and we said they would have to help pay for it. When they did a chore, we offered the choice: you can have 50 cents for yourself or a dollar for the swimming fund (or “swimming fun” as the little one called it). They earned it in about 7 months.

  11. We started a system with my two children when they were 4 and 5. Beads!

    Our kids have a list of things they can do and the corresponding beads they can earn for doing them.

    They can then take the beads and use them to buy TV time/Handheld game time/rent a movie for a night – OR – they can trade beads at the rate of .50 each for an item at the store – OR- at the end of the month, they can trade in their beads to put them into their savings accounts.

    Amazingly enough, when you teach your kids about interest (as I told them in many more words, the bank likes to give you money when you let them hold your money), they tend to save.

    My kids have enjoyed seeing their savings grow, and when my son’s Playstation 2 stopped working, he had to decide whether to keep his savings or spend all 70 bucks to buy another… he eventually spent his 70, but not without sitting on the decision for a couple of days… and he’s 7.

  12. @ Rachel

    I have to disagree about the credit card. If your child has a checking account with an atm/debit card there should be no reason they need a credit card. A credit card in the hands of any young college student, even the most responsible of them, is just asking for trouble that no one should really be required to deal with. My boyfriend just got out of school. He never had a credit card and he never really needed one throughout his entire 4 years of school.

  13. Banshee,

    I second that. Credit card companies prey on college students and try to convince them they absolutely need a credit card but that is just not true. One exception may be a student who finds themselves in urgent need of money in an emergency and has nether friends nor family to turn to for help. But almost everybody has someone who will be willing to help out in a true emergency. For anything else, use your own money .

  14. Growing up we were responsible for certain chores as members of the household – cleanliness of our own rooms, preparation and cleanup of dinner during the time when parents were doing their changing of the guard (they worked opposite shifts), keeping our stuff cleaned up in common areas. But allowances were earned… by cleaning the bathrooms. Every individual task had a price – sinks, mirrors, floor/baseboards, toilet, tub, etc. – and work had to pass inspection before being paid. There were two of them in the house – one worth up to $2.75, the other $2.00. Officially we were to alternate weeks on who got which so things stayed fair, but we could give up our claim on one if we were feeling lazy and the other felt like doing it. You couldn’t earn money for cleaning more than once a week.

    When we got older, all money came from odd jobs. Babysitting sent me on an exchange program to France for a month after high school. There was also collecting scrap lumber from a neighboring construction site and selling it as firewood, participating in craft fairs with church, working as nursery care at church during service, collecting and recycling cans and newspapers, and jobs with friends of the family during summers. We were never just handed money for being a certain age. Heck, at some periods we were helping the parents with odd jobs (like gardening for church) just to help pay the mortgage. And we were never expected to pay for our own *needs*. But gas was out of pocket if we weren’t into taking the bus/riding our bike.

    I fully endorse kids doing odd jobs for neighbors on a regular basis. When my dad was young, the first thing he ever bought on credit was a lawnmower. I’ll let you guess how he paid it off.

  15. We just instituted a new policy in our family. Previously, they were expected to clean up after themselves (vague) and hop to it if I called them for some task (naggy). Occasionally, I’d pay one or both of the older boys for some large job, like cleaning the car, or cleaning out the refrigerator, but there was no “allowance”, per se.

    For the last three weeks, they’ve received a Chore Chart on Sunday evening. They sign up for the chore they want to do, with the understanding that each chore on the chart must be completed. They end up with an equal amount of chores. As jobs get completed, I check the quality of the work, and initial the box. Then, on Sunday night, I pay them $10 for the week.

    So far, so good. My house is cleaner, they make concerted efforts to KEEP it clean and thus lessen their own workload, they have money to spend and I’m not constantly nagging them.

  16. My husband never taught his kids about money and now, as adults, they are all in financial straits. All of them spend more than they have and then can’t figure out why collection companies call. Of course, they give those goons our phone number. I get so steamed! One of his kids who is 23, actually lives with us. I don’t like it, but I’m not the mother. He finally has several jobs and we have made him start saving money, which he never did before. He finally got his license, so is actually somewhat motivated to get a car, but then he got a ticket driving our car. He still hasn’t paid his back taxes that he owes the state and hasn’t paid that ticket or signed up for the city’s all day class that will wipe the ticket out.
    Basically, all my step kids are lazy and constantly asking for money. Thank goodness my husband is finally getting ticked off. It helps that we don’t have the money to give them like we used to. I am very happy to have a one income household at the moment.

    The big problem is that my hubby has always bailed them out in the past, so now they expect it. Let your kids learn the hard way, folks. It’s a good lesson.

  17. We start the children on allowance at 5. They receive money that equals their age every two weeks.

    They have to save half their money and this is routed to a savings account in their name.

    The rest of the money is divided among spending and charity.

    This money is not tied to their chores, it is the money that they need to live and we as their parents provide to them. However, each child has a list of chores that they are required to do as members of the family. We are doing our part, and they need to do their part.

    As members of the family, they are responsible to clean their rooms. They each also have one daily chore and three weekly chores for which they are responsible.

    Daily chores include things like loading/unloading dishwasher, wiping tables and counters and sweeping.

    Weekly chores include cleaning bathrooms, vaccuming, dusting, etc.

    They can also earn extra money by doing chores that are above and beyond.

    They are allowed to spend their money however they want…and sometimes it’s painful. I have one child who is frivolous and finds herself constantly disappointed that she doesn’t have money to do and buy things the other kids who save their money can.

    But…we don’t bail them out and we require them to live with the consequences of their choices.

    And…they are learning.

  18. About kids attending University, I think an emergency only credit card is a good idea. Remember debit cards are good for the amount in the account only. Of course you need to define emergency – but if the kids have been raised Free Range they will get the concept.

    I had an emergency only credit card co-signed by my parents. I used it to call home because of how the phone system worked, other than that it was for emergencies only.

    So when I landed in the ER for a potentially life threatening allergic reaction, I could pay my bill. I was on my parent’s insurance still but it was a weird policy because of Dad’s boss. You paid, submitted the bill, and got a check for 100% of the costs.

    My sister also had an emergency card. She had to use it to pay for a motel and part of the car repairs when she broke down in the middle of nowhere of the Panhandle of Texas and a trip to the hospital when she spiked a 104 fever.

    Both of us went to school close to home about 4 hours away,still that can be a long time in an emergency.

    We both also carried our parents cards on high school trips. If something had happened and we needed to get home on our own we could have. One of the conditions of our being allowed to go on these trips -was we had to prove to our parents that we could get ourselves home on our own if we needed to. Our parents didn’t trust the chaperons for good reason – they were mostly idiots. One of mine nearly started a brawl when he accused some Greek kids of trying to blow up the sophomores. (It was holy week they were setting off firecrackers)

  19. Starting when I was, oh, 13 or 14, I received a clothing allowance each fall and spring. My mom budgeted an amount (I can’t remember how much–a couple of hundred dollars, I think) that would be enough for me to get enough of all of the basics if I purchased things that were not too expensive (designer jeans and Benetton sweaters were big at the time).

    Theoretically she had veto power if I’d picked something inappropriate, and I think that she’d usually cushion it a bit by buying me my winter coat and giving me one church-worthy outfit in my Easter basket, but basically, I was on my own.

    I loved it, loved feeling in charge, loved the freedom, and it was less aggravating for my mom, I think, to just split up at the mall rather than shop together. The first time I pretty much fell under the spell of a saleslady and wound up with some not-too-fabulous choices, but I wised up pretty quick.

  20. These are all amazing methods and means of teaching kids about responsible money handling! As my little guy is not quite three and has no concept of money (except when he finds it to put it in the special box in his room) I’m keen to start implementing ideas soon. I especially like Sierra’s jars with money given out per age. When Gabe turns three I think we’ll start giving him 3 loonies a week (We’re Canadian, eh?), one for saving, one for spending and one for giving. He understands at the very least that when I say “I don’t have the money for that” we can’t buy it, whether it’s a quarter for jellybeans out of a machine or a bottle of juice at the grocery store. We’re really strapped right now but I think we can manage 3$/week.

  21. I don’t give my children an allowance because I believe doing chores are part of being a family. However, I do pay for extra-big chores, They also earn their own money. My daughter has been a mother’s helper to 3 families in our church since she was nine. They both also clean houses sometimes to earn money. As soon as they started earning money we introduced a savings system. They have to tihe 10%, 30% is spending money, 30% goes to savings for something special and 30% goes into long-term savings and cannot be touched. It seems to work.
    I think the best thing is to be honest about money with your children and let them watch you. My 11yo and 9yo are aware of our budget and go shopping with me. I discuss things with them so they know how much things are. I have no problem telling them that we are eating a lot of pasta this week because the mortgage is due. They also never see me use credit, we use cash or nothing.

  22. @Stacy: How funny, I thought we were the only family working and handing the moeny to our parents. We had a paper route and a Pennysaver route that all of us kids were expected to help with. We never saw that money. Our parents explained that it was to help with our upkeep! I thank them for this now as an adult. It really helped when I became a single parent at 18. I never expected any help, I just got out there and did what it took to support my little family. In fact, when I told my parents I was pregnant the only thing they said was, “You chose to have this child so don’t expect the government to pay for it. Get another job and take care of yourself.” I love the work ethic they installed in all of us and we are all very responsible adults now. Thanks Mom and Dad! Love ya!

  23. Dave Ramsey has a kids’ system for teaching money. He advocates using the envelope method. He has books and such written for kids to understand stories about money.

    One I liked was the kids going to the fair and they had envelopes for food, for rides and for games. They made mistakes and realized that if they overspent on games that they didn’t have money for rides. I try to do like that and not tell my kids that we don’t have the money for something, but that we have to purpose and prioritize and that if I spend extra money on something that I have to take money away from somewhere else.

    I also follow Dave in doing different levels of chores. My kids have a list of things they do to take care of themselves and things they do as part of the family. These don’t get extra money. These enable us to live well and means I can pay for us to go out to eat or to the amusement park or such.

    My 8 yo son has bonus chores on top of that. These are things he can choose to do and earn money or not do and he doesn’t get money. He gets his money weekly and divides it 50% long-term savings (bank acct), 10% giving, 20% short-term savings (piggy bank) and 20% spend (wallet).

    He has 5 chores and gets $5/week. In the beginning, he had to do all the chores to get his money. He has recently renegotiated that so that he gets $.75 per chore if he does part of them and the full $5 if he does them all.

    My daughter is 5 1/2 and just beginning to understand money, so we will probably start her on the bonus chores when she turns 6. For now, we occasionally put change in her piggy bank or she earns extra money for random chores (for example, the neighbor was out of town and she collected his mail every day and delivered it to him at the end of the week).

    I am also against the general idea of a student having a credit card of his/her own. I had my first credit card in college and have only just recently (almost 20 years later) gotten out of the debt cycle. They teach us to live beyond our means and to go for instant gratification rather than saving and planning.

    In this day and age of instant communication, I probably wouldn’t even give one to my kids in case of emergency. They can call me and I can pay for the bus ticket or car repair or whatever with my debit card over the phone. (I’m speaking from all the wisdom of NOT having college age kids, of course. LOL)

    It is exciting and interesting to watch kids make more thoughtful choices when they have to prioritize and use their own money. They whine less (eventually), and they really USE what they bought, rather than quickly tossing it aside, already wanting something new and different. On our recent vacation, my kids took their money and bought their own souvenirs. At the end, they decided to pool their last couple of dollars to buy a better item than each could get separately.

    As I said, I only recently got out from under the debt monster. I feel so free. I hope to teach my kids better financial habits.

  24. @kherbert

    I have to agree with DJ, an emergency card might have been a good idea before everyone had cell phones, but as long as your kid has a cell phone and emergency contact numbers with their school and so on there’s no real reason to have an emergency card. Any medical emergency gets treated at hospitals whether it can be immediately paid for or not, so even if the kid is unconcious(sp?) when they go in and the ER staff has no idea whether they have means to pay, they’ll still get treated and then they can figure out the bill later. Any other emergency situations can fairly easily be dealt with by calling home. The emergency credit card just makes things marginally easier in emergencies at the risk of the kid getting drunk or something and then going on a Walmart shopping spree at 3am and walking out with 4 carts full of nerf guns.

  25. Re credit cards; having one my first year of university saved my butt so many times when my funding hadn’t come in yet and I had expenses; books were $300, buspass was $120 for the year and there was 0$ in my account after tuition. I’m not a kid who could just call up her mom and dad and say hey, can I have money for school? Like many here I had to earn it and cover the rest with gov’t assistance. (OSAP: Ontario Student Assistance Program. I have a heavy debt load from that now but at least I have my degree and one more on the way.)

    Having savings is great, but when those run out or there’s a real emergency (car breaks down, need to get home asap on a plane, etc) a credit card is a very handy backup. Teaching your child that it’s for REAL emergencies, and not just for something you want right now but don’t have the actual money, for is the key. My dad always said to me “If I don’t have the money for it right now I’m not buying it.”

  26. Having to cosign till they’re 21? Geez can we ever cut the cord these days? Guess 18 is just becoming more and more meaningless. “Oh hey, you can smoke cigarettes now…and vote. That’s it.”

    Fantastic.

  27. My parents killed two birds in one stone. From the age of 6 I received 10c every time I brushed my teeth. That made 1,40 per week. Pocket money, but I had to do something for it. If I did not brush my teeth, my pocket money was reduced accordingly.
    From the age of 11 I had my own bank account and had my pocketmoney was deposited into the account bi-weekly – to learn how to plan
    And until I worked (from 16 I had a job) my parents always told me with large things I wanted, but did not need. If you manage to save up 50% and you still want it we’ll pay the other half.

    Once I was 16 my parents told me that they would dress me and feed me, all other stuff was my responsibility. Both my brother and I found a job in a store and worked 10 hours a week max.

    I still have great money skill and a perfect credit rating. Lovely to see my brother doing the same with his boys and the 50% plan rubbed off. My boss loved it and is now using it on her two sons as well.

  28. My husband and I have not given our kids a regular allowance, but when an event comes up we give them a few dollars as needed. We have five kids so allowances could break us. This doesn’t mean every event they can think of is funded by us, if it is frivolous they may have to dig into that birthday money or Christmas money which makes them think twice about spending. Our two oldest kids have become very hard workers. The other three are still too young to work. At 15 my daughter helped my mother clean houses one day a week for $50 and was a ballet instructor for $10 an hour. Not bad for a high school girl. By 16 She had $1000 in the bank, a professional camera she purchased her self and scads of clothes. I think not having a steady income from Mom and Dad made them appreciate that pay check. Also seeing us live debt free and talking about it with them when we purchased large items set a good example for them.

  29. Personality plays a big part of it. Some kids, like some adults, really enjoy saving their money and watching it grow. Some like nothing better than to blow it before it even reaches their pockets. *shrugs* I think setting a good example, teaching them to keep track of their accounts and lecturing endlessly about the risks and benefits of credit is about the best you can do.

  30. @Jen

    I’m more against the parents advocating and facilitating their college age kids getting credit cards than against the idea of college kids having them at all. In a situation where the parents can’t even help with books, and the kid is responsible enough to only use the card for what they absolutely need, and the kid is the one making the decision to get the card after thinking on it and trying to figure out alternatives- then yea, ok, it might be a good idea. However, I still do not think it’s absolutely necessary. Using my boyfriend as an example again, he lived on campus all 4 years and did not work during school. He funded this by working a job over the summer and putting every bit of his earnings into a savings account except for the little he used on gas and the occasional book for pleasure reading or fast food. He would save a couple thousand over the summer, supplement that with earnings from going back to his summer job during school breaks, and he always had money for school expenses and occasional small splurge items.

    Now, I’m not saying this will work for everyone. Obviously if you can’t live rent free with your parents over the summer or if there are other various extenuating (sp?) circumstances then it might be better to get the card. I just think that there are ways to work around it most of the time. Plus, on a site like this, I kind of assume that the people discussing these issues are either parents or people with opinions about parenting who would be willing to help their child in any way possible during an emergency situation.

  31. I give my two kids $3 per week. I buy everything they NEED, school clothes, lunches, and whatever family entertainment that we are going to do. What they are to use their allowance for is a few things.

    1. If they are invited out with friends, like to the movies or something, they are to pay their own way

    2. Birthday parties, they are to save enough money to buy the presents to take to their friends birthday parties

    3. If they carelessly break something, not accidentally of course, but like kicking a soccer ball in the house when they know they are not suppose to and they break a candle, well then they buy it

    4. Anythings else they want other than food. I don’t let them buy food

    We got to a point where the kids were constantly out of money, good lesson to learn. I opened a bank account for both of them and the rule became, you keep at least $20 in the bank for the above items. If you need it to cover one of the items above you can take the money out, as soon as you take some of that $20 out you save your money until it is back up to $20. Once they get $20 they can do as they please with their allowance. Right now my son has saved about $80 (from $3 per week and he is 8 years old), and my daughter is up to $40. It has taught them both about spending and saving, and understanding the value of objects.

  32. My first year I lived at home with my parents and worked and was able to save some money towards the following year’s tuition but with how expensive university is and how low our minimum wage is (though it’s gotten better the past few years) it’s become next to impossible for someone who’s not living at home to work all summer and do more than just get by. There’s no money left over in the fall for school, no savings. 😦 It’s been really really difficult. The only way I’ve been able to finish my degree is through the OSAP program and now I have nearly 50k in debt to pay off while I try to start my teaching career. My parents couldn’t save money when I was growing up for my schooling and my sister’s so we were on our own.

    Having a credit card now and then has been very good but you’re right that not every student needs one. Students who are fortunate enough to be living at home probably don’t as they’re lucky enough to have mom and dad helping them out.

  33. the only thing we ever learned about money growing up was that we (family) couldn’t ever afford anything and that money & bills was the root of all tension in my family. I vowed that I would never be in that position and would teach my children a healthy respect and responsibility for money: giving, spending, planning.

    OK, granted, my (twins) kids are only 15 months (TODAY!), but I have a checking account for them already – mainly because they’ve received gifts in the form of a check written out in their names.

    But HELLO! check out this video of my boy’s gusto in doing stuff around the house! TOTALLY TAKING ADVANTAGE OF THIS! http://www.vimeo.com/5501268

  34. There are some really excellent ideas here, some of which I am adding to our program. This Monday, we will be going to the bank to open accounts for the older boys.

  35. We started allowances when each of our boys were 4. Half their age every week, but we only increased it on the even years…$2 at 4, $3 at 6.

    Even at 4 you can teach good money habits. At first my older son would spend his entire $2 on gumballs out of a machine. Eventually he would want a toy at Target that cost about $6…and I would say “hmmm, that will be about three allowances, so you’ll have to save up.” and HE DID!! We still use this analogy often “If you play baseball near the kitchen window and the window breaks. $250…that’s about 50 allowances (he’s up to $5 per week now).”

    We also made deals when they wanted bigger ticket items like a Nintendo DS. I told them I’d go in half if we could find a good deal on eBay (or GameStop, or whatever). So they’d save up their money and we’d go shopping for bargains.

    My 10-year old is now quite the business man. He researches the game system he wants, goes to GameStop to determine whether he’s willing to pay full price for new or buy used, gets a price from GameStop for selling his old stuff, then he usually sells his old stuff to his little brother for more than he’d get at GameStop but less than little brother would pay at GameStop.

    He also occasionally opens a lemonade/golf ball stand near our house (live on a golf course). He has “employees” (even “fired” our younger son for spilling lemonade), uses his cute younger brother for marketing, and divides up the profit based on how much each kid worked during the day. The last time they had a stand they made $30!

    The other day we were at a Lake and out of the blue he says “if I had a house at the lake I wouldn’t live in it…I’d rent it out because I could make a lot more money that way.”

    So, I guess my advice is to start young and just be realistic and honest with them. They learn quickly that saving adds up, and you don’t get what you really want if you spend all your money on gumballs.

  36. When my son started getting an allowance–$3 a week, when he was maybe 8 years old–he had a spending jar, a savings jar and a charity jar, and he put $1 in each. The spending jar funded the kid stuff that comes up, like candy at the grocery store. The savings jar was for bigger purchases–anything $2 or more. And the charity jar paid for the offering at church and some big donation at year-end, such as buying 50 Hot Wheels and taking them to a local women’s shelter. Gift money or any other windfalls went in the spending jar. And we used glass jars, so the money looked like it was piling up.

    Though he once spent all the charity jar on something for himself, and he had to put all his allowance against the shortfall for a few weeks, this system worked pretty well. Now that he’s babysitting (great work for a 14-year-old boy!) half of what he earns goes in the bank, and half he’s free to spend as he sees fit. He makes the occasional bad decision, but he also continues to donate to church, buy gifts for his parents and grandparents, etc.

  37. My boy, 10, has had his own savings account since he was 5. Last year he decided he wanted to save up to buy a flintlock kit. So, he started saving his birthday and holiday money. Slow going. THEN, he accidentally shot an arrow through the back window of our car — whoops!– and although it made us squirm and other people gave us a hard time for being so “hard-nosed” — he paid for the window out of his own account. (He came in crying to tell me what had happened and before he said what was wrong, he prefaced it with “I’ll pay for it…” which seemed fair, really…) Anyway, that set him back some so a few months ago he put a sign at the end of the driveway advertising for odd jobs. The neighbors have snapped him up — he has raked leaves, stacked wood, dog sat, cat sat, mowed lawns, planted trees, watered gardens… and he’s seeing his account grow and grow. And he hasn’t had any more mishaps with the old bow and arrow, either. : )

  38. Last April, while running a marathon relay in Big Sur I met a fellow runner named Denise who started a company called “Money Start Here” in which she facilitates workshops for people of all ages and financial situations in an attempt to teach individuals about handling money. She was so affable and passionate about the subject and brings a wealth of banking and practical experience to her work. I couldn’t help but love her. The website for her business is here:

    http://www.moneystarthere.com/

    Under “workshops” are a variety of courses conducted for kids w. parents, teens, newlyweds, etc. Good stuff!

  39. I will strongly deter my children from ever having a credit card. I learned the hard way. I got my first credit card at 26yo. I thought I was responsible enough to handle it by then. Thank goodness I only had $400 credit because I maxed that thing out SO FAST. I’m mortified to even think about it. I cut it up, paid off the bill and have gone back to cash only. I’m not saying that all teenagers can’t handle it but it’s hard. It’s so easy to buy things you don’t need or in some cases don’t even really want but you have a credit card, why not use it? I am now a big advocate of cash only.

  40. http://www.loveandlogic.com/ecom/p-332-now-available-millionaire-babies-or-bankrupt-brats.aspx

    Millionaire Babies or Bankrupt Brat. This is a book published by the Love and Logic Institute. It is amazing and will solve most problems with money if the plan outlined is adhered to.

  41. We have just started this issue at home, and I got some very good ideas from you folks! Thanks.
    Our first attempt for an “extra” chore they can do to earn some money was to wash our car on Sundays. The eldest (6) vacuumed the upholstery while another (4) wiped the windows and the yougest (3) used the hose with Daddy´s help. A great time for all. Even the baby got hold of a filthy rag and started to wipe the plate (yuck). They got a little too carried away, though: when they were done, the battery was dead because the stupid vacuum cleaner had to be plugged in to the lighter!!

  42. I feel compelled to contribute with a suspicion that I’ve had about credit cards since I got one at around 20 years old (after my mother insisted that I had to have one). I think the reason credit card companies are able to take advantage of college students and young adults is because those same credit card companies took advantage of their parents — and their parents still don’t understand the credit system. It’s a game and you have to learn how to play it.

    I had a savings account from the age of sixteen, something my parents had set up at my birth and contributed to it until I was old enough to exact a little responsibility over it. I can remember in 5th grade, we learned how to balance a checkbook as a part of a math project (we were split into teams of companies and had to manage a construction project). From about sixteen, I’ve always had a job and I’ve bought the majority of my possessions with my own money. Prior to that, I earned money through babysitting and chores (that I now do just because I feel they need to get done).

    At eighteen, I opened a checking account and my debit card was a baby step toward a credit card. A year or two later, I had a credit card under my father’s account. A year after that, I got a credit card for myself through my bank. I have a CD and a money market account, in addition to savings and checking. Through it all, my parents encouraged and explained everything to me.

    They also always impressed upon me a very important life lesson: Live. Within. Your. Means. If you don’t have the money now to purchase something, don’t go putting it on your credit card and just brush it off like you’ll find the money for it later. Furthermore, don’t buy crap that you don’t need! Few people my parents’ age do that, how can we expect their children to grasp that concept??

    @MaeMae: I disagree. Maintaining good credit and being responsible with a credit card is not hard. But the key to that statement is “being responsible.” It’s not the credit card part that makes things hard, it’s the responsibility (and even then I personally don’t find it challenging). Furthermore, people my age (heck, and older!) can’t seem to differentiate between a “want” and a “need,” which is something that you learn -at the very latest- in Psych 101. Cash Only is actually almost as poor a choice as maxing out credit cards. A good credit score will help with getting home loans and car loans, as well as lower interest rates over all. I’ve managed to save enough money that I even earn interest on my checking account of all things! It’s just a big game.

    My family didn’t take big trips, or have the newest, fanciest whatever. I can appreciate it more now. I grew up aware of the importance of financial stability and with the values of delayed gratification and freedom from materialism. I’m 24 and I have no credit card debt. My only debt is in college loans and those are under $15,000 now. I really look forward to passing these same values on to my children when I have them. (I don’t even have a boyfriend and I’m already thinking about ways I can save for sending future offspring to college!) I especially like the idea of breaking their allowance up into Spend, Save and Charity. Charity!! LOVE it. I wish my parents had done that with me.

    And somehow none of this registered with my younger brother. I think my parents make subtle, unconscious changes with how they raised him. They’ve consistently been more lax with him (which is to be expected with the younger child). HE should not have a credit card. He just turned 21, most of the money he makes goes to himself. The kid can barely make doctor’s appointments by himself. After he graduates college he plans on enlisting in the USAF as an officer — we’re all hoping that helps him learn a little more responsibility.

  43. @Hayley: I agree that the responsibility is the hard part. That was my point at 26 I still was not responsible enough. Had I kept at it and worked on it I’m sure I would have been fine but I was too afraid of getting sucked into debt like my friends and family. I had absolutely no problem acquiring a mortgage with my credit score. I had financed a vehicle before and all I had to do was get statements from prior landlords that I had made my monthly payments on time. I admire people that can manage credit but in order to live within my means I think I’ll stick with cash only.

  44. I think there are a few key lessons in the various posts:
    1. teach children to distinguish between need and want
    2. teach children not to spend money they don’t have
    3. stand by your word, do not give them money when they have run out
    4. model the desired behaviors (children learn what they see)

    I thought I’d share how my parents handled these issues with me and my brother, now 37 and 40.

    When we were 6 or 7, we started receiving an allowance of 41 cents. Why 41 cents? That is the total of one penny, one nickel, one dime and one quarter. We had savings accounts, but I don’t remember going to the bank very often, mostly the money went into our piggy banks. We used the money for special treats and minor purchases. And we were not paid for chores or our grades. Helping out around the house was required of all family members and trying your hardest at school was a basic expectation.

    At seven or eight years old I learned about sales tax when I tried to buy a Barbie doll at Woolworth’s. I had saved up the $6.99 in coins, but didn’t have the extra for tax. My brother, who must have been 12, was walking back from the grocery store (yes, we were allowed to cross the busy street to go to the grocery store and Woolworth’s without a grown up, definitely Free Range), saw me and gave me the money to cover the tax, which he also explained to me.

    Our allowance increased as we got older and we had to pay for movies and other extras. If we wanted to do something with our friends, we had to pay for it ourselves. There was no point in asking our parents for the money or for a loan. We knew the answer would be “no, that’s what your allowance is for”.

    When we turned 14 we got “The Clothing Allowance”. My parents calculated what we would need for a year’s worth of clothes (at the lower end, Gap, not Guess jeans), reasonable gifts for immediate family members and divided that into twelve monthly payments. We also had to buy birthday presents for friends and all of our entertainment (movies, amusement parks, snacks, etc) from these funds. My parents would buy us our winter jackets and one pair of good shoes. They also continued to support school activities, such as soccer cleats, because they could and felt it was important (and didn’t want funds to prevent us from doing it). I babysat to supplement my allowance a bit.

    With The Clothing Allowance we opened a minor or student checking account, which had an ATM card. We each received a credit card on a parent’s account with the understanding that we would pay for our credit card purchases in full at the end of the month. At 14 it was hard to write checks in stores because we didn’t have driver’s license and clerks had no idea what to do with a passport. When I was 18 I applied for and received my first credit card in my own name. I still have that account.

    I remember sitting in my room and figuring out what I needed and how much I could spend on each item before I went shopping. And I wanted the Guess jeans, I would have to spend a lot less on something else, or do without something entirely.

    I did not love the clothing allowance, because it was not as generous as I would have liked. I really couldn’t buy clothes as nice as my friends’ clothes and I couldn’t go to the movies at the drop of a hat. But I learned a lot about need vs. want, saving, and also determining the quality of an item. Some things are worth more because they last longer, both in style and in durability.

    As for “needing” a credit card, I think today’s society does require one. As an example, many rental car companies will not accept debit cards for the deposit. It is important that parents teach their children that a credit card should be used as a charge card (remember those?) and the balance should be paid in full every month. Don’t spend it if you don’t have it.

    We will be starting an allowance soon for our daughter, who is now 4. I am intrigued by the ideas of save, spend, share. We were always left to our own decisions on what to do with the money, but I think it would be nice to practice a plan. I also like the idea of a minimum balance in the savings account. It is kind of similar to having 6 months salary available should something happen.

  45. @khm: The way I get around not having a credit card is by using a bank issued “check-cashing card”. It’s a Visa card but it only allows me to make purchases if I have the money in my checking account. I can use it to make reservations. I have used it to reserve train tickets, hotel rooms, flights, rental cars, etc. I can also pay bills over the phone and order on-line with it. I love it.

  46. @khm: I too loved the idea of “save, spend, share” when I read it, but I also feel that a kid isn’t *really* learning to save if it’s mandated by the parent, and it’s not *really* charity if it’s not voluntary. What I chose to do was introduce the concept, and see what she chose to do with the idea. She splits her allowance between the three, now 50% spending, 25% savings, and 25% sharing. (she would allocate a higher percentage to savings and sharing, but she really can’t afford it… I only give her $2/week, which we all know doesn’t go far!).

  47. […] Posted by jaystile on July 17, 2009 This post is in response to Lenore (America’s Worst Mom) Skenazy’s request: Giving Kids Control of Money (So They Don’t Always Need Yours) […]

  48. By the time I finally got around to writing a response there were quite a few comments! I believe the first step in teaching children about money is delayed gratification. Be open and honest about the value of money. Make them earn the things they want. And be open about your finances with your offspring.

    Here is a link to my response: http://jaystile.wordpress.com/2009/07/17/parenting-children-and-money/

  49. When I was little, our family had a meeting. My parents were tired of everyone complaining about never getting to do anything fun, so they taught us about money.
    Dad cut out tiny dollar bills, one for every dollar he earned in a month. We were so excited to see all the “money” we would get to play with! Until he started taking it away. So much for the house payment, so much for car insurance, the phone, utilities, gas, groceries, etc. Until there were only $20 left.
    I tell you what, we quit complaining after that lesson. I don’t know if this is what you’re looking for, but I plan on doing it with my kids when the time comes.

  50. I find it interesting that those who object to college students’ having credit cards assume that parents will be paying for most large-ticket items, and that the students will immediately phone their parents to bail them out in any emergency (even minor ones like, say, blowing a tire or needing to take an injured pet to the vet). Do we want our 18 and 20-year-olds to stay children for so long? A young adult who has been raised to be a responsible with money is absolutely capable of handling purchases like a semester’s worth of textbooks, a new futon, or a plane ticket home for Christmas vacation and should be expected to do so. Likewise, he should be capable of taking his car to the shop or taking his pet to the vet NOW and calling you about it in the evening. Ultimately, one learns to deal with adult financial responsibilities by performing adult responsibilities– there just isn’t any substitute for doing.

    It is absolutely true that some credit card companies prey on college students, and unfortunately many college students fall into irresponsible spending patterns. But to me, at least, that’s not an argument for overprotecting young adults. Saying “I hope my child never has a credit card” seems a bit like saying “I hope my child never has sex”. It’s just not a realistic or healthy goal. Talk to children frankly about money, model responsible financial behavior, and accept that, at a certain age, they’re just going to need jump in and start making their own decisions. And remember that a new college graduate who has already established a credit rating has a big advantage over a new college graduate who has no credit rating at all . . .

  51. You mentioned calling newspapers in North Carolina and asking them about hiring. I guess it was the North Carolina connection that has prompted me to reply. My three children are in their twenties now and out in the world working. While they were young we were fortunate that they had jobs, most of which began in the summer before their first year in high school. One of them worked in a hot dog stand at the beach. One worked in a sailing club where we were not members. One worked in a hobby store. The common denominator of their jobs was the owner or manager of these small establishments. These adults hired teenagers and paid them more than just minimum wage. They made it a part of their hiring practice to meet the parents of the kids. These small business owners responded to what they saw as a responsibility to the community in their hiring practices. They did not take advantage of the teens although I can not say that about every job my children had in their high school years. But the best jobs, which were also the ones where the kids worked the longest, had an owner who respected them and wanted to hire and train teenagers to be workers. So if you are hoping to help your teenager into the work world help him find a small business that needs him. Big franchises and big corporations don’t seem to have the same sense of responsible participation in creating a good community as the people who work and live there. And, no, I don’t own a small business. My family has just been the recipients of their good will.

  52. Catherine’s post made me think back to my first job. I, too, was hired by a small business owner. My parents actually got me my first job and drove me there my first day while I was crying and yelling that I didn’t want to work. I was fifteen. My first night I called home to see if I could stay late, I was hooked. I loved it! My first boss hired almost all teenagers and taught us all how to be good employees. I remember one time I was in the bathroom crying because he let someone else do the job I thought should be mine. He caoxed me out and told me gently but firmly that I worked for him and if I expected to get a paycheck that I would do as instructed. He took the time to train us and understood that we would need guidance. I learned so much from that job and am grateful for it. I hope my children have the chance to learn from someone willing to be a mentor to teens.

  53. My parents offer a lot of money earning opportunities to my sister and I, and they didn’t teach about saving very much either, but my grandparents did! We spent many summers with them, one I remember in particular. When I was 14 their house needed painting, and I was all for it. My best friend and I spent weeks on ladders painting from the eaves down, and they paid us both a fair amount (looking back I know they were excited to get such a great deal!). A few years later my little sister took on the garage. Then they taught me about savings accounts, ect. and a portion of money went into a CD. 4 years later I was able to purchase my first car with that money, it was a great feeling to do that all on my own.
    Now that I’m ‘grown up’ with a kid of my own on the way, I am looking back on those lessons and deciding the best path for work and savings and responsibility. I’m sure glad for what they taught me when everyone else would have considered us too young.

  54. @ Stassja:
    And go to war. Explain that one to me. You’re old enough to kill people but not old enough to make financial choices?

  55. Starting when my daughters were in 7th and 8th grade, we calculated how much money each needed in a month for school lunch, entertainment with friends, clothes, gifts, etc. I wrote them each a check at the beginning of the month. Then I tried to stay completely out of how it got spent. This prevented all the mother daughter arguments about the outrageous price of designer jeans, sports shoes or whether buying the expensive food at the movies was a good idea.

    It was the best thing I ever did as a parent. One daughter, who really liked clothes, saved up her money for special and expensive things. My other frugal daughter graduated from high school with nearly enough money to buy a car. They learned to be judicious and independent. They are both independent adults now.

  56. Hello! speaking of money… this doesn’t have a whole lot to do with kids, but then again it does. I’ve been attending a series of classes called “Financial Peace University” taught by Dave Ramsey, and he devotes a LOT of time to how to teach our kids about money and how to use it. he too said to start as early as possible- give them a list of chores and tell them how much money you’ll give them for completing each. later on, in their early teens, he suggests similar to what Sherry does above– to open a checking account for them, or something of that sort, and give them an allowance per month of what you would usually spend on them for clothes, eating out etc. and have them keep the check book. I don’t have any kids yet, but when i do I hope I can raise them to be smart and independent!

  57. I totally agree with Rachel about how expecting kids to call the Bank of Mom and Dad runs against the very idea of free-range kids.

    I too was 17 when I went to college, and there were definitely times when my bank account couldn’t cover things I really needed to have immediately. You can save up for expenses you can anticipate, like books and tuition, but when the car breaks down, you’ve got to have it fixed ASAP, not wait five months until you can save up the $500. I was lucky to have parents who could help me out if I really needed it, but they wanted me to learn to be independent, and to pay for things myself. Sometimes that meant using a credit card in emergencies, and paying it off over a few months as I could afford to.

    As an adult, I have an emergency fund to cover unexpected expenses, and we actually don’t use credit at all now, even for things like cars. When I was a teenager, though, I didn’t make enough money to be able to establish a respectable emergency fund, so I used credit to cover the shortfall in emergencies, and paid it off ASAP. I also graduated with a respectable credit rating, whereas my husband never had a credit card or any other form of debt, and has no credit score at all. This landed us in the interesting position of being unable to acquire a mortgage, despite having six figures’ worth of assets, because we were too responsible with our money!

    Credit isn’t bad if it’s not misused — the problem isn’t that young adults have credit cards, but that they use their credit cards for non-emergency items. If we make it impossible for that age group to have credit cards at all, we penalize the responsible ones with legitimate needs, in order to save the irresponsible ones from themselves.

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  59. As someone who is still a college student (working two jobs for the past two years, with a full time class schedule), I don’t think I could survive without my credit card. Not because I’m living beyond my means– my credit score is perfect and will stay that way– but because big bills are due all at once, and paychecks come gradually once a week or once every two weeks. When I have all my monthly bills due at once, followed twice a year by tuition and hundreds of dollars worth of books, I just don’t have the money to use my debit card for all of that at once without overdrawing or dipping into the savings that I’m hoping will help pay for a wedding and a house sometime in the next year. And I’m certainly not about to ask my parents for money. So I use the credit card on some of the big things, and pay the bill for that when it comes the next month. Yes, I probably could budget out the money beforehand but honestly– it’s so much easier to live off Ramen noodles for a couple of weeks AFTER I’ve used the credit card, because that bill is just a bigger motivator than the others for me. I vowed when I got the card at 18 that I would pay it off every month, and I have. In fact, I pay it back as soon as I have the money to do it, usually within a couple weeks, which results in my paying it sometimes twice or three times a month.

    As far as allowance goes– I got paid for some chores when I was about 7, but that system collapsed pretty quickly when my father realized he didn’t think paying for chores was really fair since I should do them regardless. He also didn’t believe in handing me money for not doing anything at all, though, so… not allowance. There were a few times he paid me for bigger jobs, or for helping him out when he worked (he was a photographer, and the work consisted of carrying bags and taking pictures with a 35mm at wedding receptions). Most of the time, though, my parents simply bought me what I needed, I did without bigger things that I didn’t want to badger them into buying, and they’d give me spending money for school and church trips (unless they were chaperoning).

    Personally, I think that I was lucky to learn to manage my money in high school once I got a job and my own bank account, and that I’m a fairly level-headed person. My boyfriend is not so much, and he’s maxed out two credit cards and had to pay them back. He’s paying for it too– I don’t trust him to have one now, and won’t for a while. Our children will be learning the value of paying for things themselves a lot earlier than I did, with systems tailored to their personalities. I could have earned more money as a child, but I chose not to, usually, because bigger chores weren’t worth the effort for me with my parents paying for everything anyway.

    This business of parents cosigning on credit cards is ridiculous. I wouldn’t LET my parents do that even if they wanted to, nor would I expect them to bail me out if I messed up. Some parents say they WILL bail their child out once, but I think that even that is too much. Yes, maybe pay the bill and then let them pay you back rather than be hounded by creditors, but not simply give them the money. That sets a terrible precedent, and one that I don’t think should be encouraged by credit card companies.

  60. “The current case on campus (soon to be law for anyone under 21 who cannot show a source of income) is that credit card companies try to get parents to co-sign on credit cards.”

    I’m all for free-ranging kids, but why would a kid need a credit card? Parents should teach their kids to use money responsibly. Number 1 rule: don’t spend what you don’t have. If you don’t give them a credit card, they can’t.

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