Q: My middle school children do not have jobs and are asking for money all the time. How do I teach them about money when I am buying them things?
A: Money management is one of the greatest skills that we can give our children. A study on credit card use among college-age students revealed that the average student had 5.2 credit cards with an average balance for the most recent month of $1,423. Children are leaving home where they have been given everything.
And, they have gotten used to nice homes, cars and vacations – expecting they should have these things in college as well. You can see how easily the debt can build up.
Here are some things to consider:
- Make sure you talk about HOW you created your wealth, home, retirement fund etc. Explain what it was like when you first started off. Were you driving the nice car you have now or were you in a “beater” starter car?
- Describe how you save money and what is important to you.
- Don’t make money a taboo subject.
- Start the conversation early.
If your child is asking for money you may want to consider an allowance. There are different schools of thought on allowance, but here is one that many families have used successfully:
- Allowance is not tied to chores. It is given to teach children about money. Not as a punishment or reward.
- Children get half their age (even numbered years only) in money. For example, an 8-year-old gets $4 a week.
- That $4 is divided into $2 for them to keep and $2 to put into their savings account — which you can do easily with automatic withdrawal from your bank account to theirs.
- Things they want can be purchased with their own money. You still buy the things they need.
- They can use their savings, but make sure you show them how the money goes down each time or it becomes a “magic account” that always seems to have money in it.
- Have them choose a charity of their choice in January to which they will donate 10 percent of their savings. Watch how happy this makes them!
- The trick here is to make sure they are using their money and you do not interfere. Let them buy that plastic toy you know will break. It is the best hands-on learning experience you can give them.