If you've ever been to the store with your child, chances are they're already picking up some healthy spending habits and concepts from watching you.
- "Maybe there's a more affordable version, even if it's not the leading brand" (Trade-offs)
- "Let's wait until that goes on sale." (Delayed gratification)
- "We can pay a little more for this one because it's what we really want/need." (Priorities)
- "We don't need that, even if 'everyone else' has it." (Discipline)
Our children get to see our spending habits much more than our earning or managing habits, but we can certainly try to equip them on all these fronts, and it's never too early. The Internet is full of resources to help you out, and everyone will have a slightly different take on it. Here are just a few brief viewpoints I'd like to share.
INCOME FOR KIDS
Kids get money mainly through gifts, allowance, and odd-jobs.
- Gifts. The amount of gifts depends from family to family, but on average, the actual value would be enough to justify opening a bank account for your child to keep this money safer, trackable, and to introduce them to the banking world. It's also a chance to show your child how the money can grow (even if it's just interest), or what fees if any, could cost them.
- Allowance. Allowance provides a consistent and predictable way for kids to accumulate money over time. As part of a family, they can also gain a sense of shared responsibility for expenses, as well as benefit. Our family also believes that chores are a shared responsibility and that allowance is not earned through chores. (If they are willing to forfeit their allowance that week, can they decide not to do their chores? How much to empty the dishwasher? $2? Meh... I'll take a pass. A slippery slope that I'll digress down later....) Here's a great piece from Money Coaches Canada with some tips on allowance for kids.
- Odd Jobs. We shouldn't deprive kids the satisfaction of earning money. Picking up an odd job over and above their regular chores could certainly be an option. As they get older, they could even try picking up a REAL JOB! With their newfound appreciation for hard work, you might even see the requests for avocado toast and latte frappuccinos decline!
Money management for kids
Now that the kids have discovered money, managing this money is the next step. As I've shared the three-account-cashflow approach for grown-ups (Expenses, Savings & Allowance), I also like the idea of the three-jar-cashflow approach for kids (Spend, Save, Share). It's pretty self explanatory, but ThreeJars.com describes the concept well and offers some great tips. Set a plan together with your child on the portion of income that would go into each jar, then help them implement the system.
Being a conservative spender myself, I've had to consciously encourage my children to actually spend what they've budgeted to spend, and to share with a cheerful heart what they've budgeted to share. If they stick to the plan, they can enjoy without worry, guilt or regret. And that's the beginning to financial freedom.
Proud daddy (and mommy!) moment
"Mommy, Daddy, let's go for ice cream. My treat. I'll bring $2 from my spending jar. We're going to walk to the grocery store and get that box of ice-cream bars that I saw in this week's flyer. It's on sale for $1.99, and there's 8 in a box! That's enough for all of us and even a few extras for later!" ~7 yr old