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Kids and Money

By Bari Ross, LPC, M.Ed

Talk given to the Jewish Community Foundation on 8/18/10

There is much to teach children as they grow up, but as parents we often just assume they'll learn by example — and for many of the values we want our children to learn, they do learn by the examples we set. Our children may get a general idea of how we spend money when we are with them, like at a restaurant, the grocery store, or even the mall, but that in no way prepares them for handling their own money, or even teaches them the various ways we spend our money. They rarely see us give a check to various charitable organizations, nor do they typically see how we pay the bills. This would involve teaching and talking and demonstrating. Most kids get no instruction on even the most basic money-management skills, not to mention anything as advanced as investing with an eye to their future. And now that the economy has changed so many families' economics, how do you even begin that conversation with your children?

There are two typical topics of discussion most families have: "do I get an allowance" and "do I have to do chores?" These subjects are often discussed in tandem, but actually are very different from one another. They both involve responsibility, but are not necessarily connected. There is actually some controversy in the literature over these two topics. Most of the research supports both: parents should give their child an allowance and parents should expect children to help around the house with various chores. The debate is, do you pay the child to perform chores, or are the chores just an expected part of growing up? Actually, receiving an allowance helps children learn to manage money, and chores teach children how to care for their home. This is one of the many choices we get to make as parents, deciding how we want to raise our children so they grow up responsible, with the values we hope for them to have. There is also the decision of how much information our children should know about our own money choices, and economics within our family.

When we add homework on the top of the pile, and the increasingly busy schedules we and our children lead, it certainly seems challenging to get all these things organized and actively implemented!

So, do our kids really learn to manage money growing up? Research shows most children don't, and instead when they become somewhat independent of their parents, they start to learn by their successes and failures. As David McCurrach said in an article called Give 'Em An Allowance "There is usually no course at school, no helpful hints on TV, and observing parents can be confusing at best. Typically, parents' money management skills are often either not what we'd like them to be, or our finances are so complex that how we handle our money doesn't mean much to a child." So, the only way our kids will learn about money management is through their own experience, and the guidance you, as parents, will give them.

How and when should you start? Well, as soon as a child has an awareness of money, often at 3 or 4 years of age, is a good time to begin. How much allowance a child would receive can vary from family to family. One rule of thumb is: however old they are, they can earn that each week or each month; meaning, a 5 year old would get $5 a week and a 15 year old would get $15 a week. Part of this decision depends on what you want them to do with this money, and part depends on what you are comfortable with and can afford. Do you want them to be responsible for buying their own clothes, or pay for school meals? Certainly as they go into middle and high school this becomes a real possibility. Do you want to teach them that a portion of their allowance goes to charity or the community, and possibly another portion gets saved, with a balance going toward their expenses? It is easy to lead a child during your first discussion about allowance. Once you decide they will get an allowance, ask them "So, what do you think you want to do with this money?" Many immediately will say "save it," and then you can say, "That's great...where shall we put that part? The bank, or in a special box in your room?" Brainstorm these ideas with your children and help them understand that if placed in the bank they still have access to this money and it will also earn them additional money. If they are old enough, perhaps you want an account with a debit card. Also perhaps, again if they are old enough, they can learn about saving this money and put it toward a CD, a bond, or a stock...that's another whole area of teaching.

Then ask the question, "What else would you like to do with your money?" If they don't bring this up on their own, ask "Would you like to use any of this money to give to people who could use some help?" Or relate it to their own lives; perhaps if they love animals you can talk about animal shelters needing extra money, or to the zoo or desert museum. Or for example, if they have a grandmother who is sick with cancer, you can talk about donating money to help people with cancer. This can be a very meaningful discussion. Talk about putting some money aside each week in a special place, until perhaps the end of each quarter, and then it will be a more sizable amount they can donate. It is meaningful if they can take this money to these organizations themselves, and at the same time learn how this money can be used. A friend of mine used to have her family put money in a special box for "giving" each Friday night. One day they heard a news story on the radio about a mother who had cancer and many children and no money. They made the decision right then to donate their money to that family, and my friend, along with her children, went down to the radio station with their "giving" box, and donated about $85 to them.

Children should have some spending money for their own choices, and depending on their age a decision can be made about how that is to be spent. But they should be able to make their own mistakes here — be able to blow the whole amount at the grocery store check-out line, and then later when at the mall running an errand with you, they won't have anything left. So they can see they might need to choose more wisely. To learn when the cost is minimal is a good experience, so don't try to rescue them; this teaches them valuable money lessons. It will help them think about how much things cost too, so they can develop an appreciation for money spent. Have you ever noticed that kids will spend unlimited amounts of money when it isn't their own? When it's their own money, they'll make more informed decisions on spending. One child says from The Kid's Allowance Book, "My allowance helps me realize I need to be careful and not blow my money." Now, isn't that a great value for your child to learn?

Its very good idea if you decide to institute an allowance that you as parents pay on time. Just think how you would feel if your boss was arbitrary about when they paid you! It is helpful to keep track of when and how much you have paid too. Perhaps buying a little ledger book will work best. Otherwise, trust me, you'll think "did I pay them this week?" My youngest son always wanted to debate whether he was paid or not, and keeping track in some formal system really avoids those discussions and doubts. Find a day of the week or month that allowance gets paid, and as you pay it have your child record the amount in his or her ledger book. Perhaps you'd also like them to track where they are spending their money, and how much goes into the various categories of spending. This really helps prevent allowance breakdowns!

Teenagers and Work

My teens always told me that the busier they were, the more they were able to organize their time, and they actually accomplished more too. They all were required to have summer jobs at the age of 16, and some chose to work during the school year too (after all, having a car can be an expense!). It helped teach them responsibility, dealing with a boss, learning how to handle money (both cash registers and their own their own earned money), and juggling their schedule to still get their schoolwork done. Teens are expensive! Cars, computers, cell phones, clothes, dating, in my case musical instruments, college, transportation to and from all adds up to a lot of money. Letting them help contribute to their expenses actually feels good on both ends! You want for them to get a sense of what things actually cost, and to understand what a paycheck means. These are valuable lessons that are very difficult to learn any other way. Even working in college helps them at least pay for their entertainment expenses, and again gives them the feeling of being able to contribute. Some college jobs can even be fun! One of my sons got a job listening to rock CDs, to make sure there were no problems with the recordings, to the tune of $10 an hour! My middle son worked at an office supply store in their graphics department, and got to improve his skills as a graphic designer. My youngest son worked at his college's TV station...he was getting a degree in electronic media and film, and learned all about production and editing while working!

The first step we should take for any of this to happen is to develop a household with trust as well as expectations. As parents we try so hard these days to be "friends" with our children, yet we do expect them to listen to our authority. Hopefully your child already has lots of friends. Don't confuse "being friendly" with being your child's friend. It's great to raise your children in a home with a friendly atmosphere, but this is very different than being your child's "best friend".

Besides working outside the home, teens have so much to learn! Before they leave home, they need to learn how to cook, do laundry, deal with finances, and get to class without their parents pushing them out the door! So, having them be responsible for some of these chores before they leave home is important. Not that they should be cooking for the family every night, as that would be unfair. But doing laundry is an important skill, and helping with the cooking or occasionally cooking for the family are great skills. Learning to get to school independently is important too. Try to see that your teens have time to reach these developmental milestones. And of course, it is reasonable to expect that your child will keep up with their schoolwork and maintain decent grades.

But chores shouldn't begin in the teen years; they can begin even in pre-school. We need to find another name for them...chores sound like a burden! Chores should feel like a part of participating in family life. Everyone contributes...adults and kids. Sounds great in theory, right? I know from personal experience it isn't quite as easy, but if things are put in place at a young age and children see that family participation at home is just part of the structure of the family, they are more likely to be agreeable. Children aren't born knowing how to make their beds or clean their rooms, especially to your specifications! Often you might feel it would be so much easier just doing the chore yourself — faster, and more to your liking. But this is a great disservice to your child. There are so many long-term, character-building benefits in their learning to help with the chores. Learning with you helping initially is a great teaching opportunity; show them how you dust off a dresser, how to put away their laundry, and so on. Make it something fun initially, something they do alongside you. Put on some fun music, and sing along with the work. Then as they master the tasks, you can step back and let them take over, while you take care of other chores (there always is a long list, isn't there?) Even if you are fortunate enough to have a housekeeper, it is still important for kids to be able to contribute to the family with chores. I remember when I was a counselor at Sunrise Drive elementary school, I'd be teaching students about responsibility and some students would brag, "Well, at my house I don't have to do any chores!" like it was something special. That attitude of entitlement can lead to problems later on. As I said earlier, you are doing your child a disservice if they can't contribute in some way, whether it is emptying the dishwasher or making their bed. It is part of what we can teach our children so they can get along in their future.

Even if you make allowance separate from chores, if your child is saving for something very special and expensive, you can give them opportunities to earn extra money by doing some "extra" chores. Perhaps weeding the garden would be worth a certain amount of money. That's okay as an incentive to earn a bit more, for a short period of time.

Children like to have some choices; it helps them want to participate more. There are lots of choices with chores...having a list of 10 things and letting them choose 2 per week or per month works. Another fun approach is to place the chores in a bowl, and let them pick some; it adds the element of surprise! Each child should pick from a list of what is age-appropriate. But if a younger child wants to try something that is harder, but not dangerous (like I wouldn't have your 3-year-old mow the lawn), let them try and evaluate. Appreciate their efforts — we all like to know what we are doing right and none of us really like to hear what we are doing wrong. If you have at least two children, it is helpful to have weekly family meetings. At these meetings, in addition to discussing family fun, getting a grasp on the calendar (for school projects, sports, and other calendared items), you can discuss the chores. Ask how a particular chore is going. If there are too many complaints, maybe you can process how it could work better for them, or perhaps that's an indicator that a different chore would work better.

Let your children learn to juggle their chores, their activities, their social calendars and their homework. It's a gift to learn young, as they'll be doing this all their lives. Try not to tell them what to do, but ask them, "What do you need to make sure you finish tonight?" and then "So, do you have a plan for how you'll accomplish that?" We tend to micromanage our children, which don't teach them how to manage themselves. We are so worried they might fail, but if they don't experience some safe failures, how will they learn to handle some of the bigger disappointments in life? This is true with so many areas of their life...we can't live their lives for them. They are our sons and daughters but they have their own thoughts, and they need to learn from their experiences. If we rescue them at every turn, how will they learn these valuable life lessons? Imagine they've decided to complete their empting-the-dishwasher chore on Saturday morning. It's okay to say, "As soon as you empty the dishwasher we'll go to your soccer game," or "Have you considered emptying the dishwasher early today so you won't be late for soccer?" But you don't want to nag them..."Empty the dishwasher right now or we'll be late for soccer!" If they don't complete the chore and you're late, they'll learn that (1) you mean what you say, and (2) if they didn't like being late they'll need to start earlier. Remember, kids live in the house, eat the food, are provided with clean clothes and share in the benefits...they also can share in the to-do list! Children do chores because they contribute to the family welfare. They earn allowance because they share in the benefits.

Positive Parenting has this formula:
opportunity = responsibility = consequence
So for every opportunity, there is a responsibility. The consequence of not wanting the responsibility is to lose the opportunity. Perhaps your child has the opportunity to play with a ball. The required responsibility is to play with the ball outside. The consequence of playing with it in the house is to lose the use of the ball for that day, and they can try again tomorrow. Experiencing the consequences of their choices can help them learn valuable life lessons. It is okay to make mistakes, learn from mistakes and try again. This is like the dishwasher and the soccer game...opportunity / responsibility / consequence.

Dr. Phil says: in a healthy, interconnected family, everybody has a role and everybody has a purpose. In fact, everyone should feel and know that they have a contribution to make to their family, and that it would matter terribly if they weren't there.

Thank you for the opportunity to share this information with you.