Last year, I realized that I was not spending enough time teaching my two older boys about money. My oldest is 8 and my middle is 6 and we also have a baby. I figured out that I was not being a good Dad, because I was not teaching them a great life lesson on how to handle money like my Father taught me. My Dad taught me about saving and investing from a very early age. I think that I am the way I am about wealth creation because he taught me. I also observed what he did as I grew up. We didn’t take lavish vacations, didn’t have brand new cars, we lived in a modest house and eating out was a treat. However, we never went without anything we needed and his lessons in money management was one of the greatest gifts he had ever given me.
When I began to feel that my boys did not know enough about money, my wife and I decided to compare our observations. After spending some time talking about it we agreed that they did not know how to handle money and we decided to change that. I think that they started to go askew when we lived the expat lifestyle; money was good, we had a full time maid, we vacationed a lot and we ate out 4 to 5 times a week. They didn’t realize that this is not how most people lived. When we moved back to the States our life needed to change back to reality.
You can tell if your child does not know how to handle money if……..
- They don’t understand the value of money. Not the denominations but the purchasing power of money.
- They expect something every time you take them to the store.
- They spend their money as soon as they get it.
- They treat money as all powerful (they show it off, complain that that a birthday gift of $10 is not enough)
- They want, want, want.
They had all these traits and more. We needed something to change so we put a plan of action into place.
- We told them that we would not give them allowance any more. Their chores were something that they had to do to be part of the family. We did give them money each week but did not call it allowance. We separated it from doing chores.
- We set up an envelope system for them. When they get any money they must divide it up between their envelopes. Their envelopes are: 1) college savings(we match them dollar for dollar), 2) saving for a car, 3) saving money in the bank and 4) spending money. They do give some away, especially at Christmas in the form of toys they have purchased for underprivileged children.
- We do not buy them any toys outside of birthdays, special occasions or Christmas. If they want something then they must save and buy it for themselves.
- We stopped giving them snack money everyday and treat it as a luxury. Now, it is a special treat to them.
- We asked that people only give them one small gift for their birthday or Christmas. If they want to give them more then we ask that they give them money for their college. They both now have over $4K from this method alone.
- We got them involved with coin collecting to learn more about money and the value of it. They always want to see what coins I have when I come home from work. If I have one they want then I sell it to them.
We keep adding to the list. I am not going to say it was easy. There were many tears, but things have gotten much better. They don’t get everything they want, but when they do purchase something for themselves they take good care of it. I’ve noticed they even like to treat Mom and Dad to an ice cream once in a while. I guess that is a perk.