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.