## This & That: Kids & Money

Caroline wrote: We started to use the Weekly Jars and so far so good, and I (the culprit of spending) am quite enjoying it.  Now we want to incorporate the kids’ allowance to start teaching them.  My daughter is 11 and my son is 9. I know that you say to pay \$1 per year – that is fine.  Can you explain how the job jars are to work?  Our daughter is into fashion now and is very excited to plan and have money. Our son on the other hand wants to buy something as soon as he gets his hands on money!

The job jar is a way to get kids working for money above and beyond the allowance you’re giving. You would create a list of jobs you need done and an amount you’d be willing to pay for each job. (It doesn’t have to be a jar; it can be a list on the fridge, for example.) So, maybe you no longer want to clean the kitty litter and for that you’d be willing to pay \$10 a week. As long as the job is done, you pay at the end of the week. Or you need the grass cut, and you’d be willing to pay \$20. When the grass is cut, you pay up. Ditto loads of laundry, vacuuming, meal prep, weeding, bathroom cleaning, garbage collecting, dog bathing, garage cleaning, car washing…the list can go on forever… anything you wish someone else would do. Create the list of jobs you’re willing to pay for (this should not be the things they normally have to do as chores because they belong to the family and have responsibilities around the house) and post the list or cut it up and let kids pull it out of a jar for a more random experience.

As for as helping your son plan his spending, get him to commit to something he wants that will take a few weeks’ worth of money and make up a chart with a picture of the thing he wants. Then draw on boxes that represent the money he’ll save each week. So if he wants a new game for this DS, that game might cost \$40. If he’s planning to save \$5 a week, you would draw on 8 boxes (40÷5). Then each week as he sets aside his \$5 (in a jar?) he can check off one of his boxes.

Jen wrote: On your show, you often recommend giving little kids \$2 to buy 2 things at the dollar store.  I think it’s a terrific idea because they have to learn to prioritize.  My question is about dealing with sales tax.  In Ontario, one item at a dollar store would actually cost \$1.13, and two would cost \$2.26.  Would you still give them the \$2 but say “you can only pick one item (or spend \$1.50 if you can find something for 50 cents)” or would you give them \$2.30 initially?  Or, would you let them pick two items and then wait until they get to the register to find out they might have to put one back? (I can hear the tantrum as I type that!) I think tax is something that people (including myself) forget to budget for.  I taught a personal finance course where we had a budget project; some students forgot to account for deductions and sales tax and very quickly found themselves in a deep hole.

I certainly wouldn’t let them find out at the cash register. I’m a big believer in kids succeeding and that would be a failure. Tax is not usually something that very little kids — dollar store shoppers — can wrap their heads around. If you want to introduce the idea of tax, then I would point out the tax I pay when I shop. Since they likely can’t do the multiplication to figure tax out, this would just be an FYI discussion. As they get older and develop the skills to do the math, I’d ask them to calculate the tax on various items I was purchasing so the point would be brought home even further.

As for shopping at the dollar store, let them choose two things and you cover the tax… but point it out to them. “Hey, there’s that tax again. When you’re 10 and can do multiplication, you’ll be able to figure that tax out for yourself.” Something to look forward to!

Calie wrote: I was brought up by parents who didn’t believe kids and money mixed. Family finances were never discussed in front of me. I would love to get some more info on children and money. My four kids (13,11,9,7) have their own saving accounts, however, I have control over these accounts. At what point do I let them control their own money? Is it a good idea to give your teen a credit card (a very small amount of course) so that they learn early on in life on how it all works?

Loads of parents wonder a what point do let their kids control their own money? ?As far as I’m concerned, from the very beginning. If kids don’t have control over their money, it’s not their money, it’s yours and you’re just playing a game. Your job as a parent is to set some expectations, and then take the opportunities to teach the lessons that come from the natural consequences.

As for the idea of giving your teen a credit card so that they learn early on in life on how it all works, it’s a good idea. I’d start young kids (age 12+) out with a credit card on the Bank of Mom. You charge the item for them, you issue them a “statement”, they have to pay you on time or you charge interest and/or repossess their stuff. Later – I believe they have to be 19 — you help them get a credit card with a really low limit so they can build some real experience.

Charlene wrote: You often give percentages for what people should be spending on things like housing and transportation. How much of your income should go towards your child’s extra curricular (e.g., music lessons, figure skating lessons)?

As much as you want and can afford. I don’t think it’s any of my business to tell people how to spend their money. My thing is that people have a balanced financial life, covering all the bases, and not going into debt for crap. As long as you have no consumer debt, are setting aside some money for savings, and are living on a balanced budget, if you want to spend all the extra money that available on your child’s extracurricular activities, have a blast.

Donna wrote: Gail, we’ve successfully implemented the kids’ allowances using the 3 jars (spending, sharing, & long term saving). Our 11 & 7 year olds just love it! Now the question is where should we put the “savings” portion? They only get a penny a month interest while it’s sitting in our bank’s savings account. Where’s the best spot for these kids to leave their money for the next 10-15 years? Thanks!

Have you tried ING?  I believe they were offering a bonus for new chidlren’s accounts. And whatever they pay, it’ll be better than you can get at a bricks-and-mortar bank. Once my daughter had accumulated \$1,000 we switched to using GICs. Eventually, when she goes to work, I’m going to have her put the money in her RRSP, and invest it as part of that long-term portfolio.

### 23 Responses to “This & That: Kids & Money”

1. Great blog, Gail! We use ING for our two daughter’s long term saving – however, it is like a joint account as I have to be linked to it too. The interest is 2%, and they had a deal that if I put in a \$100, they would give the account \$25. Great deal!

2. FYI…in Ontario 18 is the minimum age requirement for credit….not 19…I got a VISA with a 500.00 limit and made my 16 yr old an authorized user…this way he can use it…see it on his online portfolio and pay it…it has worked like a charm and he has never been late or paid a penny interest…

3. Great lessons Gail, as my kids are coming up on the age when they are starting to understand money.

4. I teach high school, and one thing that continues to shock me is the disregard many students have towards money. A comment I often hear is that it doesn’t matter how much something costs, since their parents are paying for it. This makes me cringe. When I say that their parents work hard for this money and they should maybe show a little respect, I get shot down. They tell me that their parents have lots of money or that obviously it’s not a problem or the parents wouldn’t spend the money. I just teach at a regular school, so these aren’t trust fund kids.

I really think that if parents sat down with their high school kids and set some reasonable targets (how much per year on clothes, cafeteria lunches, stuff, outings with friends that parents expect to spend) and then give the kids an allowance based on this, I think I’d see a little more concern about how much things cost and what expectations are reasonable. I know some of it is bravado on the kids’ part, but this attitude is surprisingly common.

5. My step-dad got me a credit card (secondary card holder) when I was 16. It was made very clear to me that if it was an emergency expense like a tow-truck or I needed a safe way to get home – he would cover that. Everything else was my repsonsibility.
He gave me some great lessons about minimum payments and interest. Definitely a “do as I say, and not as I do” situation since he still has credit card debt, but a lesson I learned well!

6. I had my 10 year old daughter try on some jackets at Lou Lou Lemon just in case one of her relatives decided to splurge at Christmas. She has been getting an allowance for a few years now, so when I told her that the jacket she had just tried on was \$118, her eyes grew very wide. She has been told that I will not be buying her a jacket from there until she is done growing. She was fine with that, but there are kids at her school that have many of those jackets, again just a normal school.

7. Sparky, I’m getting my “drinking” age and my “right to use credit” age mixed up I guess…. anyone see the irony in being able to go into debt before you’re able to drink legally?

8. Gail, I love the job jar! When I was born, my parents had just purchased a business and it was “all hands on” every weekend, holiday, and summer vacation… and still is for my little sister who lives at home and is a student! Even from a very young age (so, too young to actually be working for wages) we went in to wipe down windows, fold napkins, help sweep up, roll pennies, etc, and were paid our ’salary’ so money was always associated with working. We never received an allowance in that form and I’ve always had enough money to meet my wants, because I was working long before I had wants so by the time I was 10, I had an account with hundreds of dollars. This approach makes sense to me and I’ve often wondered how I would do the same for my own kids since I don’t plan to be a business owner, and the job jar sounds like a good solution. I plan to do as my parents did and make sure my kids are ‘employed’ in an outside the home kind of way fom the begining.

9. National Post had a great article about kids and allowance that I am using as a springboard to discuss the issue with my doting (on the kids) husband. Fortunately, ours are still 4 & under so we can work out our strategy now.

10. I think it’s so important to teach children money management skills and having a jar system seems like an excellent idea as it visually shows where the money is allocated. Where I have a concern is the idea of paying children to do household chores. As members of the family, if old enough, children should be expected to do pet related jobs or lawn maintenance, as well as many other chores. Parents need to teach the proper, safe way to do each job but then the children need to do their part. Not only will they be making a valuable contribution to the life of the family but they will be learning skills for when they leave home.

11. I think a very good idea is to let your kid’s watch Gail’s shows…ie Princess and TDDUP. My son (now 26) watched TDDUP with me for a number of years. He now lives away from home with no school debt as he hates to have any debt and is trying to teach his girlfriend about money. She grew up with a single parent and has \$30K student debt, which is about to start to be paid back since she’s just graduated with a degree along with \$5K credit card debt. CC debt was larger until they got together and he’s been showing her how to get it paid down. It’s a slower process than he’d like, but she’s seeing it going down which is amazing considering the hugh interest rate of almost 30%.

I would like to jump in and help…but…we need them both to try it on their own to figure it out before we’ll assist…I’m thinking of giving them Gail’s book for Christmas.

12. When I was a child, my parents would tell us that we could spend “X” amount for our meal when we went out to eat. We could choose anything we wanted (except dessert). If what we wanted was “X”, then we had water instead of soda or milk or tea. It really gave us a better idea of costs and consequences in a painless way.

13. In our house, we have a ‘chore chest’. When the kids do chores, they get a token. the tokens can then be cashed in for an item out of the chore chest. They get a small allowance as well (\$5/week each, they are 11, 8, and 5) but it is not tied to chores, and saves my sanity. Before the chore chest, I wrestled with the “well, they didn’t do the dishes/laundry/make their beds one day this week so do they still get their whole allowance” question. It also prevents them from spending their whole allowance at the Dollar Store, because they are instead doing chores to earn tokens to spend on items in the chore chest that are way cooler than what they would find at the Dollar Store anyway.

Our tokens are worth the equivalent of 50 cents. We have all girls, so the items in the chore chest currently include a few books, several moshi monsters (small plastic ‘monsters’ that are collectible and you can play online), petshops, webkinz and some candy. Occasionally I will add a ‘Mom, please please please buy me …’ and then they have to earn it with chores (no freebies, and comes out of the ‘clothing and gifts’ budget line).

As a bonus, when a birthday invite shows up, I can pillage the chore chest for a gift too!

14. @Lisa, my oldest daughter found a lululemon jacket at a consignment shop about 2 yrs ago for less than half the regular price, and it’s reversable too! She also paid for it herself and still wears it. Neither one of us could afford full price on an item like that…

15. Does anybody have or remember the code for the ING \$25 gift for opening a kids account. I can’t find my flyer.

Thanks

16. My 16 yr old son has watched TDDUP several times and just rolls his eyes, claiming, “What’s wrong with these people?!”
We have been inconsistent with the job jar. But we own investment property that we manage ourselves. It’s clear to our son that the yard work is his “job” and he’s paid according to how well it’s done. He’s now working a PT job as well and manages his money just fine, setting aside a comfortable percentage for longterm savings. He deposited his paycheque recently and the teller tried to sell him on a new account. He told he “No way. The fees are too high.” Thank you Gail!
We did have a conversation recently about credit cards and he says he doesn’t want one anytime soon. He prefers his debit card to cash as well.

17. For Natalie…if you’ve got an account with ING already, I think you can use your own “orange code” when the account is opened up…but I’m not sure! Check the ING website – the info will likely still be there.

18. Although I never understood the stigma around ’second hand’ (just wash afer you buy it!) there are Consignment Stores FULL of awesome, brand name, wares for a fraction of retail cost.

Teaching kids “how” to shop for sales/coupons/deals, is a valuable skill! Most women’s ‘xs/small’ sizes can fit young women. \$40 sweater retail will be on sale for \$5-10 in January. Consignment, that sweater could be \$20, but consignment stores have sales too!

Consignment & second hand are valuable options for growing, young adults. I’ve always been a ‘clothes horse’ and consigning has allowed me to wear and recycle clothing as I grow out of sizes or styles. \$\$ earned from your trade-ins can be paid in cash or used as credit toward more clothes!!

19. Gail – I caught the irony! You make me laugh!

Julie – I know what you’re saying. I teach high school too and find the same attitude from many (not all but many). I’m stunned how many are given Ipods, phones, laptops, Ipads, credit cards, etc. and seem to provide this sense of “entitlement” and disregard for how much things cost.

At others & Gail: some cool ideas here for kids and money! Mine are still very young so I’m just coming into this. Am getting some great ideas so thanks!

20. When I hit junior high I went to my dad to have a “serious” chat about my mum’s ridiculous (to me) insistence on buying me pink sweaters with teddy bears when clearly I was a cool rebel and required head to toe black. His way of keeping the peace ended up being my first, and best financial lesson.
He agreed that I could buy my own clothes if I made a list of everything I would need over the year, using the Sears catalogue as my price guide, and showed him a budget for the year, divided by season. He advised that how realistic my budget was would determine whether he accepted it or not so I made sure not to give him any budgets with 20 pairs of pants or 10 pairs of shoes. I was allowed a certain amount of the budget per month, with a larger amount at the start of every season to account for larger items like coats and boots and to establish a critical mass of school clothes that fit. While the price guide had set my budget I was allowed to spend more or less per item then I had budgeted as long as in total I ended up with everything I needed. When I ran out of money for the season that was it, if I wanted a special outfit for a party I better have saved my allowance and later my earnings form part-time jobs.
If I spent money on something inappropriate that I knew they’d never let me leave the house in, I would lose the item and its cost from my budget – natural consequences.
Not only did it cut down on the wardrobe fights but I learned to manage both short and longer term budgeting and spending, and how much it really cost to clothe me for a year. I felt a sense of accomplishment every time I found a sale and came in under budget, and I also got comfortable talking about money (a rare thing) because every year my dad would review the list and budget with me and I had to explain why any budget increases or new items were necessary.
With a kid, a house, and car, my budgets are more detailed now but I’m still guided by the same principles I learned with that first taste of semi-independence.

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