Why I am teaching my kids about money by not giving them any to begin with
I obviously see the huge benefits in teaching your children about money early on, no matter how young they are, but for me, being a parent means being a role model for them in the sense that what I do, I expect to see emulated in them.
(This may or may not be a good thing considering my track record .. HAH! Good thing my partner is far smarter about this slightly foreign concept you call “frugality” than I am.)
However, I am adamant I will not be doing these two things:
1. I AM NOT GIVING THEM AN ALLOWANCE
A lot of financial advisors and parents will tell you that a child should get an allowance something akin to a dollar for how old they are.
7 years old? $7 a week (or a month? I don’t even know).
While I see the good side in giving them their own money to budget and handle, I am not as thrilled with the idea of giving them money for nothing but how old they are.
I mean how realistic is this?
At 65 years old, will I get $65/a week just for being old?
So why the heck would I teach my kids this as an early money rule?
Even if they understand later on that it’s an allowance and not something that is indicative of reality, I am not interested in starting them off feeling like they are entitled to an amount each week or each month.
It’d be like teaching them that when they go to retire SOMEONE will pay for them and take care of them, like let’s say the government?
Well I don’t have to tell you how realistic I think THAT is.
They’re going to learn that to get money, they have to work for it.. which brings me to my next point.
2. I AM NOT PAYING THEM FOR CHORES OR GETTING GOOD GRADES
A lot of parents will say:
I agree with not giving them an allowance!
I will just pay them for when they do their chores.
Nope. Not happening in my household either.
For me, children have 2 jobs in their lives up until the age of 18 that I expect them to do without getting any money:
- Contribute as a member of the family by doing chores for the family
- Go to school and get good grades
CHORES AS BEING PART OF THE FAMILY
Since my children will be part of the family, they will do things for the family as a contributing family member.
My reasoning for this is that as a parent, and I am also a contributing family member, but I am not a slave.
I’ve seen far too many parents and grandparents act like their kids and grandkids are the masters in the house and they’re just there to give in to their childish whims.
From my perspective, not only do I bring home the money, pay for shelter, food, clothing, utilities and things they want/need, it makes no sense at all to me that I should have to also pay my children to act like contributing members to the household and part of the family.
It’ll just make them start asking you money for every mundane little thing like cleaning up their room, going to bed on time, or helping clear the table — all things they should be doing anyway and for free because I’m doing those things, and supporting and taking care of them.
It soon spirals out of control as I have seen in some households.
I know a father who pays his daughter to hug and kiss him. She learned early on to negotiate and ask for $20 bills for each kiss she gave him.
He thinks it’s cute and funny, I think it’s appalling for more reasons than one *cough* golddigger-in-the-making *cough*.
SCHOOL AND GOOD GRADES
Some parents will say:
Okay I concede to that.
Chores aren’t paid, but if they work really hard and get good grades in school, can’t that be seen as my giving them a bonus for doing so well at their “job”?
I admit there’s a little something there with paying children to obtain straight As in school, but again, I will not be doing this with my kids.
Their job is to work hard and get good grades in school, and in return, they’ll be able to not only learn and better themselves, but to also find good jobs (presumably) afterwards.
Essentially what I am saying is that doing well at their job (getting good grades at school) is something they should be doing.. FOR THEMSELVES.
They shouldn’t be getting good grades for ME, even as a parent.
Strictly speaking I shouldn’t care at all if they had a good job or not and have to be stuck working minimum wage and struggling for the rest of their lives because it’s really something they should understand they need to be doing for themselves so that they aren’t stuck working nasty jobs for very little pay.
(Of course I would care enough to parent them onto the right path, but I hope you see my logic in what I am saying.)
Why would I pay them for something that basically doesn’t benefit me, but benefits them?
Can I really pay my child to develop a work ethic?
What if I stop paying them to get good grades — will they revert back and become lazy bums if there’s no money coming their way and therefore no motivation?
Will I just have to keep paying them forever to keep coaxing them and motivating them?
What about if they get a job — will I still have continue to have to pay them to make them work hard to climb a corporate ladder?
That all sounds ridiculous.
Sounds like a waste of money to me if they don’t want to work hard in school to better themselves.
I am not going to be enslaved by my own children as some A+ paying machine. I will do my best to help them, tutor them and teach them as much as possible above and beyond what they’re seeing in school as any good parent should, but money will not be a factor in this.
If they aren’t already motivated by my talk of understanding what hard work means at the end of them (good paying job for instance) and then choosing to be lazy instead of putting in the effort to do well in school, then I am not going to supplement and enforce this mercenary attitude by encouraging them with money.
No one has given me money from my family to be better at my job, and I don’t think it’s reasonable to expect that your family should give you money to encourage you to keep working and to be motivated to do well at anything you consider to be your job (e.g. school).
Aside from what I consider was an excellent salary out of school ($65,000) which I negotiated hard for, all I got was a pitiful bonus from the company (if that) at the end of the year.
…..but that pitiful bonus wasn’t really what I was working for — who works mind-numbing 80 hour work weeks just for $1000 at the end of the year? — I was working for myself because I knew it would bring more money as a salary if I could be promoted as soon as possible and move to a higher and higher position.
This is what I am expecting for my children as well, and if they don’t turn out to see the rationality in what I am proposing as the Reality & Logic of Life, at the very least I won’t be wasting my money trying to teach them something they don’t really care or want to understand.
Here’s what I will be doing instead:
Note: Just in case you are wondering, I did not receive an allowance as a child, nor did I get paid for getting good grades in school.
I knew I wanted/needed money for candy, so I started working at 7 on a paper route.
I never really stopped working (sometimes taking on 3 jobs to pay for college) until I became a freelancer a few years ago and wanted a better work-life balance.
1. TEACHING THEM HOW TO BUDGET AND WHY IT’S IMPORTANT
For when they’re little, it will be simple things like showing them how much living costs, what we spend on groceries, and little lessons on the fact that everything costs money.
When you walk into a store, and you pay someone either with cash or a card, it is money that comes out of your pocket, not some magic card that you flash and get stuff for free with.
Then as they get older and get part-time jobs (and believe me, they will be working), they are going on the tracking expenses bandwagon as well so that they can see where the money is being spent so that they can’t complain to ANYONE that they’re out of cash before their next payday.
(I do not want to hear that kind of nonsense.)
I will also (on their salary) show them what living on their own would typically cost, with rent, utilities and so on, so that they understand that every penny that they make is not 100% disposable income, and to show them that even working minimum wage, they couldn’t afford the current lifestyle that their father and I are providing for them — that it takes much more money.
They will understand that there are obligations to pay for shelter, food and utilities first before they have any fun money, and if they want MORE fun money to spend in addition to living the lifestyle they are accustomed to, they will need to make more money, which means working more hours or getting a better paying job… all of which can be had by having good grades in school.
(See where all this is going?)
2. SHOWING THEM MONEY AND LETTING THEM PAY WITH IT
When they’re little, it will be letting them pay for small things like buying fruit at a fruit stall, helping them count out the money, and then receive back the change and understand how much they spent.
Showing kids money, actual coins and cash will be handy for children to understand that you have a finite amount ($10), and when you spend it, it’s gone, so you have to understand where the money is going.
3. TEACHING THEM ABOUT COMPOUNDING INTEREST AS EARLY AS I CAN
Had someone taught me this when I started my first job, I would have been more inclined to save, I think.
Showing me numbers and proof convinces me faster than just talking.
If I can see that I set aside $200 a week of my paycheque and it grows into X amount after 10 years, it excites me more than just telling me vaguely: You should save your money.
..which brings me to my next point:
4. MAKING THEM SAVE FOR THEIR OWN EDUCATION EARLY ON IN RESPs
In my books, early independence is a virtue, especially financially speaking.
I was pretty independent at a young age.. by 7 I was doing my own laundry, walking myself home from school and making my own lunch (this was before everyone was freaking out about child kidnappers), as well as basically taking care of myself the best way I could (making my own dinners sometimes which were cans of soup or sandwiches because my parents were never around to do it for me).
While I do not really want my children to live off cans of soup or sandwiches (I’ll be having them help me make dinner instead, thankyouverymuch), I want them to start saving for their own education early on so that the message of: You are on your own for this education thing, comes through loud and clear.
This is a perfect lesson to couple up with RESP savings, which incidentally, Baby Bun is already saving for himself before turning the age of 1.
I’ll tell them (and show them) that if they save $2500 a year in an RESP (registered educational savings plan) for themselves, they’ll get $500 from the Canadian government.
Free money should motivate anyone, and when they’re old enough to manage their money from the government (or at least, say where it goes) there’ll be no crying or whining when they realize they have to take out student loans to cover their education if they decided to blow it on a car instead (they may even think twice about this, thank goodness).
If they DO decide to save, it means they’re thinking about their future education and learning about compounding interest to begin with.
I really wish someone had told me when I got my first job at 7 that I could save money for myself and earn free money. We didn’t know jack squat about RESP or anything to that effect.
Had I known, I would have probably tried my hardest to save $2500 a year to get that $500.
(This goes for any cash gifts or anything they receive from anyone. They can even ask for money as their birthday gift instead of stuff, and then decide what they want to buy or do with it.)
5. HELPING THEM RESEARCH AND OBTAIN THE BEST BANK AND CREDIT CARD EARLY ON
I will take them in to get their first bank account, open their first balance and teach them what questions to ask the bank especially in regards to fees, numbers of transactions and grown-up stuff I had to learn on my own.
As for a credit card, getting a credit score early on especially as a working teenager is important. I got my first credit card at 16 and never paid a penny in interest because I was given only ONE money lesson my entire life by my father, who said: When you buy something on the card, pay for it immediately with your bank account.
I listened quite faithfully and never made a mistake there.
Had he had any more pearls of wisdom like that as I grew up I’m pretty sure I wouldn’t have had to struggle quite so hard to learn how to get out of $60,000 of student debt in the beginning, and may have done it faster than in 18 months.
6. SETTING AN EXAMPLE AS A ROLE MODEL ABOUT PRIORITIES
Now I half joked about being a bad role model, but honestly I do believe that you should save your money and spend it on what YOU believe is important to you in life.
See, I will NOT be setting an example to be cheap or “frugal” to the point where I am making them count toilet paper squares, but I will be showing them what priorities are in life, and then as they get older they can decide which priorities make sense to them and go from there.
Taking ownership of what you consider to be your decisions is one of the best lessons I ever received as a kid.
I don’t spend waste/money on furniture, overpriced rent, utilities I don’t need, debt, cable TV, smart phones, fancy decorations, many commercial toiletries or cleaning supplies, but I do spend good money on eating good food, clothing, electronics, and other things in life that I find important instead.
Basically, the way I live my life is that you can spend your money on WHATEVER you want as long as your priorities are in order.
Food first, of course.
(I still don’t get why people own an expensive smartphone with fancy data plans but eat cheap, almost rotten food to afford it and ruin their bodies, but that’s another discussion for another day.)
I want them to understand that they should enjoy their money in the NOW but also think about their retirement in the FUTURE.
It’s a fine balance between the two and the sooner that they learn about delayed and instant gratification, the better.
I and my partner are big fans of the “teach them to fish so they’ll fish for themselves” because we won’t be around forever to baby them, nor do we want to.