Raising Financially Savvy Kids
by Dawn Scaniffe

“Mooooommmmeeeeee, can I have a toy, puhleeeeze?” Their little faces are both begging.  I sigh and tell them no, watching the disappointment crumble their eager expression.

 As a single parent of two, it is difficult to balance all of our needs, wants and desires.  How can I raise financially savvy kids is the question most often on my mind.  The methods are unique to each age group, gender and even each child.  So where do we begin.  There are many great resources available to help guide parents thru this topical minefield.  A child’s views are directly affected by the parents spending, borrowing and saving habits.  Don’t for a second think they miss it or won’t pick up the same habits.  If you fail to share, invest or save your kids will imitate you.

 Many times finances are a topic parents do not broach until it is much too late.  My own mother never really discussed it with me and now, (after years of hard lessons, and after becoming a single parent myself), I’ve learned some facts and truths.

 One of the greatest stresses to families and marriages are finances.  My hope is to educate kids and more importantly, parents, so they may avoid the blackhole of debt and insecurity.  Where can you start when the costs are rising and the pay is not?  How can you even consider sending kids off to college when there has been a 25% increase in costs since 2001?

 It begins with something as simple as an allowance.  No more herds of elephants thundering through the house at the first notes of the summer ice cream truck route, no more tantrums in the store.  No you have not stepped into the twilight zone; you have entered the road to financial independence with your children.

 There are five main points to how children learn about money.  Firstly, they see it indirectly from their parent’s examples.  Either how you handle or mishandle funds teaches them their first lessons.  They get their first glimpse of bills and responsibility, of saving and of spending sprees.  Secondly, they learn through direct play and interaction.  From something as simple as playing store, to something more involved, such as setting up their first lemonade stand.  A third example is by allowing them, albeit in a controlled manner, to take part in family discussions and decisions involving expenditures. Making mistakes is all part of their learning process and allowing them chances to choose how to spend Birthday, Christmas or other gifted money give them the opportunity for early, relatively danger-free spending habits.  Lastly, sitting with your children having frank honest discussions regarding family finances will give them a more realistic viewpoint.

 The sources children receive money from tend to fall under one of the following categories; handouts, gifts, rewards, allowances, and earnings.

 Handouts have the main disadvantage of teaching a child lack of planning.  If each beg, whine or plead has a parent handing over money, they never learn to budget money for the things they need as well as want.

When holidays or birthdays roll around, the mailbox is flooded with cards from out-of-state relatives.  This past birthday my son netted $65 in Wal-Mart gift cards.  Add that to the $30 the month before that Santa brought him (thanks grandma) and you have a 7 year old with more money than his mother even had on hand.  I immediately sat him down and spoke with him, persuading him to put the cash in the bank and to spend some of the gift cards on clothes.  I let him decide what toys he wanted to buy with the amount we decided was for that specifically.  It is best to let them make choices but very important to place guidelines on spending the gift money.

Often parents use money as a motivator for good behavior, or good grades.  This is one of the biggest mistakes a parent can make.  It places the focus on behavior and achievement having a monetary price.  Truly this is not a lesson to pass down to your children.

 Having an allowance is one of the two best ways to teach children good financial habits.

Giving a child a specific amount of money on a regular basis helps them learn realistic expectations such as how hum things cost, how to set goals, how to budget and when to splurge.  Allowance should generally be used to cover extra things like the gift shop on a field trip, things they want for themselves as well as learning to save for the future or larger items.  Allowance should not be used to motivate a child to do chores that are a normal part of regular family life.  They will lose out on other important life lessons if this is the case.  Children naturally receive a portion of the family income through food, housing and clothing as well as things like music lessons, extra curricular activities.  When you give them a portion in the form of an allowance you are teaching them to be money smart.  Keeping is separate from chores shows them they have responsibilities that need to be fulfilled without being paid that are part of normal life. 

 Here are some guidelines I found in “Money Wise, Helping children learn to manage money” as to what some age appropriate expenditures might be:

 Under 6: candy, gum, ice cream, small toys, gifts for others, books, playthings, paints, crayons, blocks, dolls.

 Ages 6-9:  movies, amusements, toys, books, magazines, hobbies, club dues, special savings for sports equipments, lunches at school, school activities, school expenses, gifts for birthdays and holidays.

Ages 9-12: fees for skating rinks, pools etc., club dues, hobby materials, sports equipment and repairs, games and special events, lunches at school, trips, school supplies clothing and upkeep.

 Ages12-18:  the above plus money for dates, grooming, cosmetics, jewelry, clothing, school activities, savings for special purposes such as travel and a future education.

Plan to give your child an allowance regularly on the same day of the week and in the same amount.  This allows children to learn, as we do as adults, to make the money last until the next “payday”.  Don’t run to the rescue if they blow it all the first day.  They will only learn through trial and error.  Wouldn’t you rather they learn before them having a house depends on them having the money for rent at the needed time?  Establish this allowance as a firm, contractual agreement with guidelines for both parties to adhere to.  Don’t add to or detract from every time there is a bump on the road to financial bliss.  Sit down, decide what the normal expenses are for your child every month or week and then give them an amount a little over that but still small enough that they must learn the fine art of stretching the dollar.  It is helpful to keep track of the money they (meaning you) spend and then set a trial amount.  It will take some finagling on both parts to make this happen smoothly.

 Lastly, try to keep your voice silent when they are out to spend this money and you disagree, of course unless it is dangerous or against the rules.  I will never forget my son was about four and he had birthday money to spend.  Thirty dollars was a lot for the little guy and I took him down the toy aisle at Wal-Mart.  I had my heart set on a board game and I tried to wheedle him into being interested.  I was intently reading the back of one of the games and I hear his little voice behind me.  “Hi buddy, how are you today”.  I turned around and the “don’t talk to strangers” lecture died on my lips.  He was sitting on the floor with a giant 4 year old child sized care bear, just chatting away.  I heaved an inner sigh and went over to inquire if this was how he really wanted to spend his money.  Those shining blue eyes turned up to me and he said, “I love my care bear buddy mommy”.  And so that giant bear, silly as it was to me, became his best buddy for the next few years.  And even though he sits lurking in the closet now, I keep in mind that the most important thing was allowing him that life lesson.

 So, get those piggy banks, play store, make a game of grocery shopping, whatever it takes parents.  And keep those little feet firmly on financially stable ground.

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