The best lesson we taught our daughters was how to budget their money. At the time they were 15 years old and 8 years old. Our approach wasn’t anything elaborate or special; it was very simple and very effective. It was a combination of basic mathematics and tough love.
When we started this lesson, both girls were getting an allowance. They used their allowance for whatever they wanted and we paid for other things that came up. This pretty much worked for them but it did not teach them how to budget their money and it didn’t teach them the value of money. So we decided to do something different.
I don’t remember the amount of their allowance at the time or what things cost, we’re talking 20 years ago; but this is what we did. We added the cost of school lunch, a movie with popcorn and a soda, and other necessary things that came up on a weekly basis. To this we added their allowance. Let’s say that came to $30 a week, which 20 years ago was a lot. This amount became their allowance. With the $30 they could either buy their lunch or buy groceries to make their lunch. If they needed school supplies it came out of their allowance. If they wanted to go to the movie, it came out of their allowance. If they wanted a book, they had to pay for it. If they wanted nail polish, they had to use their allowance to get it. They also had to tithe 10% of their allowance to the church and save 10% of their allowance.
When we started this method of disbursing money, they were excited because they had a lot of money, or so they thought. When the harsh reality hit home, all of a sudden their mother was the wicked witch of the East. How could I be so cruel to make them pay for their own stuff? What kind of mother was I? Of course, their dad was still a saint in their eyes because this was their mom’s idea.
The first time one of the girls spent all of her money and didn’t have lunch money, she just knew that I was going to make an exception and take care of it. But when she had to figure out how to use left overs from dinner or make peanut butter and jelly sandwiches you would have thought that Jack Bauer had tortured her. That was when both girls figured out we were serious.
After a few weeks, it became second nature for each of the girls to figure out their budget for the week. Sometimes they had to choose between going to the movie and buying a tape (no cd’s then). Sometimes they had to save their money because they wanted to go to a ball game or some other event. They learned to make choices and prioritize.
Today, both of our daughters handle money quite well. They have good credit scores and money in the bank. They budget well and are savvy shoppers. Our method was a little unorthodox, but it yielded good results. Some people thought we should not have included our eight year old in these money management lessons; as it turned out, she got it faster than her sister.
hey valerie. that’s a great story. it’s never too early to start teaching kids about money. i started very early with my kid, she doesn’t even get an allowance, but has to work for every dime she gets from me. she may get free money from dad, uncle or auntie, but not me. she also watches suze orman with me, we talk about credit cards – actually that’s a bad word in this house. it’s either you have the money or you don’t. no credit cards. she’s a cheap kid and hates spending her money. she knows how hard she had to work for it and will only spend it if truly necessary. funny. with our money, she wants everything. with hers, she gets selective.
good job to you!
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Valerie, This is a great feature. It is not uncommon for adults to assume that children will simply pick up on how to manage money. It clearly takes a concerted effort. I find this information to be very helpful.
Double-D
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Thanks Damon. Fred and I believe parents have a responsibility to teach their children how to budget. They don’t learn if through osmosis. It’s well worth the effort.
Natural, if your child watches Suze Orman with you, she is definitely on the right track. Suze has great advice.
I love this post!!! Growing up many parents did not teach there children the value of a dime and because of that they grew to waste away their money because they did not know about savings. There was no one there to tell you don’t get 10 credit cards when you go to college or how to balance a check book. I have been trying to figure out a way to teach my children how to budget. We give an allowance but like you said you become the evil stepmother when you have them spend their own money for things they want instead of yours. So I do love this approach!!!
Hi Cherise, my mother didn’t teach me about money either. She was good at budgeting but I guess she thought I would learn from watching her. I did pretty good but learned a lot from my husband. If we teach our children how to handle money, they won’t buy into the myriad of credit cards they push at college.
Hi Valerie,
I love this concept and approach. I’m adopting it for the 2009 – 2010 school year. Each one, teach one!
Thanks