Thursday, 25 June 2009

Teaching my children about money

by Eilleen
Consumption Rebellion

I have written before about children and consumerism. Consumerism is alive and well in my children's playground. Children seem to be so much aware of products, brand names, and the power of money.

Readers of my personal blog would know that I have recently started giving my daughter pocket money. I have decided to use pocket money as a means to teach them how to manage money and how to delay gratification for greater gain. I hope by teaching them about money, they are more able to cope with our consumerist culture.

Some background first...

I had decided some time ago that my children won't get pocket money until they are able to recognise notes and coins and and understand basic addition and subtraction (in 1s, 5s and 10s). For my daughter this meant that she has not had pocket money until now - at the age of (in her words) "6 years and 3 quarters" she is finally able to show me that she knows her notes and coins and can add and subtract fairly well.

I had also decided not to tie pocket money to chores. Simple reason is that I just don't see the two of them as related. She (and her brother) have always done chores fact, it was only recently that my daughter realised that what they do are called "chores"!! Both of my children have been doing age-appropriate chores since they were about 3 years old. Its a normal and almost unconscious part of our lives (and I quite like it that way). It also helps me because I can teach her about money without having to think about chores either.

(Note the rest is xposted from my personal blog)

For me, my daughter has "earned" her pocket money by becoming proficient at the very basics of it - the adding and subtracting by 1s, 5s and 10s. Next step for us is for her to now learn how to managing that money. For me, that means learning about financial goal setting, saving and using alternatives.

Financial Goal-Setting

So as a first step, I asked her: "If you had money, what would you buy?" She told me she would buy a stick insect. So I wrote on a piece of paper stick insect, small aquarium and rocks = $65.

Then I asked her "If you had money to buy something little once a week, what would you buy?" And she told me that she would buy food from the canteen once a week (she's currently not allowed to do this). So I got the food list from the canteen and wrote all the foods she would buy and it all added up to $5.

Talking about Saving

I then told her that I will give her $6 a week for pocket money. This meant that she has $5 for the foods she would buy AND have $1 saved over which she can use to save for her stick insect - which would cost $65 after she's bought the aquarium, the rocks etc. This meant she would get her stick insect next year!

Looking at alternatives

As you can imagine, my daughter didn't like the idea of waiting that long for her stick insect. So the clever girl then said "I can look on Freecycle for the aquarium and the rocks....that's free."

She also said that she can get rocks from the garden and wash them, if she can't get those on freecycle.

And even more alternatives

After all this, I told her this brings the cost of her stick insect to $20. Which meant that she can have her stick insect by Christmas instead of next year. She still felt this was too long to wait, so I then sat down with her and said you can save for your stick insect by looking at what foods you can do without in the canteen. I told her she can save money if she brought her lunch from school instead.

She still didn't like this and said she wanted to buy something at the canteen with her friends. I told her that now its a matter of priority and that whatever she decides, that's okay. I told her that she can either wait till Christmas or have fun with her school friends.

After much thinking my clever girl came back and said, "I can still buy from the canteen and be with my friends but just not buy as much so I still can save money."

So I sat back down with her and went through the food list and in the end, she decided that she will just buy the chicken nuggets and not everything else. Instead, she will bring food from home to go with her chicken nuggets.

This meant that she now will only spend $3 a week of her $6 pocket money. Which meant she will get her stick insect in 7 weeks instead of Christmas. This is still a "long time" for her but we've agreed that there may be times when she will decide that she can bring all her lunch one week and so all her pocket money for that one week will go towards her stick insect.

Let's hope she can stick to what is effectively her first budget!! I know that there may be times when she'll slip up but I think saving up to get to $20 is a small enough amount as a first goal.

For now she's just so proud to be a "grown up" about money and I have to admit I've also very proud of her thought processes so far with it.

(Update: on the day of her pocket money, my daughter decided that instead of buying chicken nuggets ($3), she can buy chips ($1) instead. So she has now saved $5 instead of $3 - if she keeps it up, then she'll have her stick insect next month!)

If you have any stories about pocket money, I'd love to hear them!


lakeviewer said...

This is a precious lesson, indeed.

lakeviewer said...

I have a grown up version of the same story. My son wanted to buy a house recently, and figured he had to sell his car and get a clunker that he can fix himself and that it would eliminate the need for the expensive comprehensive insurance. So, he bought my dying clunker from me, eliminated $1,000 in car and insurance payment and qualified for an additional $100,000 loan for his house.

A house or a car was his choice. (Same concept with a fancy car being a friend's magnet.)

Kimberly said...

Well done!! Both of you!

MystikMomma said...

Thank you for your post. This helps put the lesson in concrete terms for helping me teach my boys. I really like your approach and willing to share.

getting stuff done said...

that is SO clever. I am going to keep that in mind for when I am going to need it! Genius.

Tara said...

I love this approach. Thanks so much for posting this.

Sarah said...

We give our daughters 5 singles a week. Two go into a savings jar. One goes into a charity jar. Two go into a spending jar. The savings jar eventually gets put in the savings account. The charity money gets collected and we plan how to spend it at Martinmas. The money is not connected to chores--it is a way to learn about money. We began in 3rd grade (which is when they learn about money in a Waldorf School).

Shelly said...

Thats fantastic. What a great lesson and a very clever girl you have on your hands. I hope she gets her Stick insect soon.

We have plenty of rocks in the front garden if she would like to come pick some :-)

livinginalocalzone said...

Great method - and it is the kind of thing that will stick with your daughter because it is something she chose on her own.

I was thinking about how I learned about budgeting, and one of the things I remember is never having an "allowance" per se. We did it for a few months just because it seemed to be "the thing to do," but quickly found that it didn't work out because I didn't really have things I needed. My parents (oddly enough) did pay for what I needed, and often what I wanted. But they did have limits (strong ones) and made sure I knew that some things wouldn't be possible, or that I would have to wait for things/choose among 2 options.

Because I knew that there wasn't a cutoff or a "never", I think I became more reasonable and understood budgeting intrinsically. It also made me know that I didn't have to ask for everything, because my basic needs, and some wants would be taken care of. Maybe a way to explain it is the way some people think of a food "diet" - when something is "off limits" it is craved even more. But if "treat" items are enjoyed in true moderation, that craving is not really there because one knows that the option exists.

Today, I just have 3/4 of my earnings directly sent to savings, and use only 1/4. Out of that, I remove cash in a set amount, and can use that for both "musts" (bills etc) and "wants" - and this intrinsically requires making a choice between A and B. It also makes me rethink what I *really* want to do with the spare money I have - what is truly worth it. And sometimes, choice B can be simply adding it to the savings pile.

Woody said...

I told my daughter that she could have her own horse if she could save enough to buy AND feed for a year. Her uncle lets her shadow one of the waitress' at his restaurant helping with service. She starts in telling all the horse owning customers that her daddy is making her work to buy her own horse to which they say as they open their ya go little girl, you're gonna need this.

So I learn a valuable lesson on goal setting, childhood tenacity and living up to MY word.

She is so much more responsible at her age than I ever dreamed of.

liz jenkins said...

We do the pocket money part if we are going somewhere where she might want to choose something of her own, but mostly my daughter earns it. She's 7 and has set chores (like you, didn't realize what they were til recently) that are just part of our family life. But I've set extra chores (weeding the garden, dusting, emptying the dishwasher, etc.)that are for extra cash.
Like you, I waited until she really got the coins and bills so she understood what she was doing with it, but I've also talked her through the spending process whenever she comes with me. I explain how much something is and how many coins or bills it will take. It's odd for me because I'm so used to a debit card but I've been carrying cash more just for this reason! It's also helping me budget!
I did not grow up in a family that budgeted so I've had some hard lessons in it - don't want my daughter to go through the same problems I had.
Excellent post - and I learned something here that I can definitely use. Thanks.

Carol said...

Wonderful read. My children are grown with children of their own. I am suggesting they start reading your blog. I like the "pocket" money idea not being tied to chores. That chores are just things that a family has to get done..together. One other is so simple and common fits your new lifestyle.

Joanne said...

My siblings and I didn't get pocket money and I made myself promise that when I had children they would! Just to have that little bit of independence and autonomy.
My boys get pocket money and although it is not directly tied to specific chores, if they haven't done certain tasks they are expected to do, they won't get that weeks money. My feelings are that grown-ups are expected to work for their money so there is some expectation attached. But they know that some things are done for the benefit of the family, without being paid.
We don't have set rules for saving and spending but we had a discussion about donations and they voluntarily give an amount they wish. We also bank some when it accumulates in their money jars. They have internet accounts that earn a slightly higher interest rate so they like opening their statements and seeing the numbers rising.

Lysy said...

That is the loveliest story, and so nice that she came to the conclusion to save herself. You must be very proud of her!

Anonymous said...

Don't forget to teach your children about charity and paying herself. My daughter puts 10% of everything she gets into an account for herself - we call it her future fund - and 10% to give away to someone less fortunate than herself.