A Three-Part Series to Help Your Child Learn The Ways of Money
Teaching your kids about money – Pre-adolescent thoughts
Gaining responsibility about money – Adolescent thoughts
Paying for college and being an adult – College and beyond
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Pre-Adolescence
What is money to a child? If not told, not trained, and not experienced over an early lifetime, a person might walk the road to ruin with lack of understanding about money and its successful use. What follows are 3 decades of trial and error techniques, and eventually our family’s strategy, to bring meaningful and prudent ownership to earning, giving, saving, money management, debt, asset accumulation, and behavior management relative to money. Money plays a multidimensional role throughout one’s life, so leaving the education to society may not fine-tune your family’s values in your child’s character. We believe it’s a 3-decade effort to bring a good understanding about money to your adult child. In these Letters, we’ll provide you with some of our thoughts which represent our values, though this won’t be comprehensive. We hope these Letters will inform your efforts in raising a fiscally responsible adult.
What is money’s role? Money serves as a medium of exchange, a store of value, a measure and accounting of value, a motivating promise of reward, a means for fun and adventure, a reserve if times get tough, and a fantasy pot of gold at the end of the rainbow. Money is a currency. Like electricity, blood, air, and water, money is most valuable when it moves. You can store it for a while, but it expresses its value when it moves from one place to another. Stored savings is about collecting one’s earnings for some desired thing, which is the starting point to teaching a child about money. To harness money’s power, a person must harness their own character first.
Like getting your child to say “Please” and “Thank you”, you require the behavior before they acquire the understanding. As with learning those pleases and thank yous before the mind can understand the principles of an appreciative heart, so too with money – it takes years of education before one understands that labor and time are stored in money which can be spent later on a desired objective. Now, the point here is that work earns money which is a Marr family value. However, it’s important over the course of a young life to encourage the internalization that work brings its own rewards.
Alternatively, some families may have different values, maybe because they can afford to, where they unyoke money from work. In our opinion, by just giving money to kids and not tying it to work-effort weakens the relationship between material things and value. A child who does chores to earn enough money to buy a desired toy might take care of that toy more than a child who receives the toy unencumbered from work effort. Of course, that isn’t always the case, but it’s not a stretch of human nature to believe that working for a goal increases the appreciation of that goal attainment. The parenting objective is long-term child character development, not keeping up with the Joneses.
What kind of work is appropriate? We’ve seen chore charts work well. Chores, life maintenance items, are tasks that keep the house straightened up and operating smoothly. Making one’s bed is a chore, but as a personal maintenance task shouldn’t be rewarded with money. Taking out the trash or doing the dishes are family functions in keeping the house working well. Mom and Dad aren’t servants to kids’ untidy habits. Once a child is old enough to do a family task, they should be given that responsibility. When they do extra “work”, helping in the yard, pulling weeds, helping clean the garage, cleaning or straightening beyond the norm, they should be paid something. We’ll talk about amount of pay later. Brushing one’s teeth is a hygiene requirement and should never be rewarded with money. Getting good grades should be encouraged with praise toward internal satisfaction and shouldn’t be rewarded with money. Chore charts should list personal or family tasks that need to be done every day or week and allow places for check marks when the tasks are completed. The end of the list can itemize tasks that are above and beyond family requirements that can earn money. And lastly on this point, it is perfectly appropriate to “require” work with the promise of pay. At age 5 or 6, there should be regular tasks a child is responsible to handle that earns money (make sure to read about the Bucket Principle below).
Allowance: What’s it for and how much should it be? Allowances should start when they start school, roughly 5 years of age. The point here is that kids will increase their desire for material things as they begin to see what the world has to offer. And allowance is the early mechanism to teach that limitations exist to getting stuff. Every week, a small amount of money should be doled out to learn the lessons of Giving, Saving, and Spending, in that priority. Make sure giving and spending are prioritized. If your child doesn’t want anything, then saving won’t pack much punch. But certainly as they grow they’ll learn that in depleting the Savings jar with a candy bar today denies the opportunity to get the toy later. Using money to experience delayed gratification is a key lesson on how money stores value. The Giving jar, that portion of allowance that goes toward donation to a needy cause, is a key family value that says, “No matter how much or little we have, others are in need and so we must give to help others.” This idea stretches little minds to look outside their own self-interest and begin to see the larger world. Lastly, at this early age the Spending jar can be used on weekly rewards like going to get ice cream or going to a movie. The older they get, the more desires they will have to spend money, therefore, the Saving and Giving jars become more important opportunities to teach about money and family values.
How much should kids get in allowance? Not much. If you give too much and choices aren’t constrained, then the value of delayed gratification won’t be learned, the sacrifice for other’s benefit will be lost, and the relationship between earning money and spending money won’t be established. Allowance is not for chores. Chores stand alone. Allowance is to help children learn how to manage their desires, learn how to conduct transactions in commerce, learn the skill of dividing into different jars, and learn family values. As kids age, the cost of their wants goes up, so allowance should creep up year after year, just like at your work.
The Ezzos (Parenting from the Tree of Life) introduced the Bucket Principle where a filled bucket was worth a dollar. Gary Ezzo described it as a success, though we weren’t so successful. Every year we’d have our lawn aerated which resulted in what we called lawn poops. We thought we would try the Ezzo Bucket Principle on 5 year old Kevin and pay him a dollar for every bucket he filled. We set him up in a section of the lawn to collect the grass plugs. After a few minutes he came crying to us with a completely broken spirit. The isolation of this work was like breaking rocks in prison. The lesson we intended wasn’t the lesson we were in fact teaching which was that work was horribly lonely and hard. What we should have done was have him work beside us while we sang or played games or something that was family oriented and fun, not buckle down and suck it up. Work is its own reward once a child is old enough to understand work.
Another point about teaching your children about money while they’re pre-adolescent – you’ve got time. No need to get it absolutely right regarding chores, allowance, long sermons on the value of hard work, or how money can express your family values. You’re probably still working on these things yourself to some degree, so be at peace that your children will more than likely live your values even if you miss an opportunity or two on the above. We, for example, envied our friends who were disciplined enough as a couple to have chore charts. We never got around to it even though we always thought it was a great idea. No, if you get enough things right, your kids will likely be responsible with money in their life.
We pray your life’s journey is filled with abundance, including money.
Lis and Dave Marr