Teaching kids about handling money...

[smkiya]

I'm getting DD Financial Peace Jr. by Dave Ramsey for her 6th birthday in October. I want to supplement that with other books that teach kids ages 5-8 about money. I do not want her to fall into the credit/debt trap when she goes off to college (I know, a long way away). It took me several years and a lot of debt to figure it out for myself.

My mom was the type that whenever she got a lot of money (gift, tax refund, extra paycheck), she would spend it all. We never really had money so when she got it, it definitely burned a hole in her pocket. That's what I learned. When I went away to college, the credit card companies set up shop in front of the cafeteria with their FREE gifts. I had 8 credit cards at the age of 18!!!! Every single one was maxed out. That is the way I lived for several years after that, on credit.

DD is getting an allowance now ($2 per week) and it burns a hole in her pocket. She wants to spend it on food/snacks though. I keep trying to educate her about how and what to spend money on, and the importance of saving. I know it is sinking in because the other day DH spent $60 on takeout!!!! She said, "I can't believe daddy spent all that money on food, when he could've just eaten what we have here." I affirmed what she said and told her we could have made the same thing, and ours would've tasted better.

So, if any of you can recommend any good kid books that will help continue to educate her, I'd appreciate it.

 

[clutter]

Honestly, you are already doing a LOT to teach your dd about money.

First of all, as you know from experience, your dd will learn the most from how your family handles money.

Next, the allowance is a GREAT tool. You can tell her how to handle money until your blue in the face. But she will learn best by experience. "Oh, it's too sad you can't buy such and so because you've already spent your allowance!" After a few times, and give it years, not days or months, she'll get it.

I didn't know DR had a junior version, and I'm a bit appalled by that. As far as I'm concerned, it's the parents' job to worry about money. And they should teach their children in an age-appropriate manner. Things like budgets and credit should come at later ages, maybe around 10 or so.

Once your dd has spent through her allowance a few times, perhaps you should increase it. The general rule of thumb is $1/year of age/week.

When my dd had an allowance, we split it into categories. So much for the wallet, so much for short term savings to get that coveted toy or game, so much for long term savings for college or car, so much for charity and so much for vacations. Now that she's older, she's getting so much per school quarter with additional spending responsibilities such as any clothing beyond basics.

While I understand how your history is causing you to ensure your dd doesn't make the same mistakes, I think you're already doing a great job of that! My concern is that you make it a bigger worry for her than it should be. It's a big issue to you, because you've lived through consequences. But if you teach her well, and give her good experience, making sound financial decisions should become second nature, not a worry.

 

[MrsPete]

She might be a little young for it now, but consider giving her X amount of money and putting her in charge of buying certain necessities. For example, put her in charge of her own back-to-school supplies. Have her make a list of everything she needs, give her the money, and have her make the choices. A clothing allowance as she grows older is a good idea.

Don't always insist that she makes the cheapest choice. None of us do that all the time in real life. Instead, help her think through what she really wants and help her understand that it's important to spend according to your real priorities -- not just to spend without thought.

 

[nchulka]

I give my kids (6&8) an allowance of 4.00 per week, 50 cents goes to church on Sunday so they end up with 3.50. They can spend or save, but if they spend they are left with the consequences of not having money. That may mean that when the ice cream man comes by one will have money and the other will not. I do not buy ice cream for the other. To teach the dangers of borrowing I will occasionally lend them money, and charge interest. I charge 25 cents for every dollar borrowed. So if they want to borrow 2 bucks they have to pay me back 2.50 on the next allowance day, then they're really short the next week. I do not let them borrow often, usually I tell them no that they have to wait, but occasionally I lend so they can see that it actually cost more when they don't wait.

 

[smkiya]

These are really great ideas, thanks!

 

[bellarella]

I don't know how you feel about screen time, but I've found Webkinz to be a good way of teaching my kids about money and choices in a very fun way. They have to feed their online pet and there are all sorts of things that they can buy -- but they all cost money that they have to earn (through games, but still). They pretty quickly realized that they have to budget their money and if they want a bigger house for their pet, then they need to not buy as many clothes. Their pet will get sick if they don't feed it well enough, so there always needs to be enough money for food, and sometimes they get sick anyway and need to go to the doctor, so they need to keep enough money on hand for emergencies.

Also, I would be a little wary about making learning about money too academic or too scary. I agree that worrying about money is a parent's domain, not a child's. We discuss money in terms of choices in our house and our kids have really picked up on that. We rarely say that we *can't* buy something, but rather that we choose not spend our money that way. My kids have really picked up on that and when my DD has money to spend she will really spend a lot of time and think of whether she actually likes something X dollars worth or not.

 

[mrsbornkuntry]

My kids don't get an allowance right now. For my 6 year old we have been concentrating on teaching him the idea of working for money and saving up for something he really wants instead of spending it as soon as he gets it.

For my older kids, starting around 8 I guess, I would take them to the grocery store with me. I tell them what our budget is and let them use the calculator to add it up. When my budget is really tight I have taken two kids, one to use the calculator and one to check off a very specific list.

I also use itunes and McDonald's gift cards to help teach them. They have to keep track of how much money they have left on them, when they're gone, they're gone.

One other thing, with my oldest 3 kids I put a little extra money in their school lunch accounts. That is for extras and I only put it on there once every two months so they have to make it last. I know that doesn't really work with a 6yo, but I just thought I'd mention it.

About Dave Ramsey's ideas...I don't like his allowance system of paying kids for chores. My problem with it is that when you start paying kids to do chores around the house it gets to where every time you ask them to do something they ask to get paid for it. I am not going to pay my kids to clean up after themselves or to do things that I expect of them as part of the family nor am I going to explain that to them every time I ask for something to be done. If I have an extra chore that I feel is "above and beyond" or picking up someone else's slack I will tell them ahead of time that if they do it they will get paid and how much. Sometimes you do things because they need done, not because you're going to get paid.

 

[Leajess99]

Does your DD have a savings account?? My 7 year old is stingy with her money and it all goes in her bank account. She has big plans but has offered to "loan" me money should I need it. She loves watching her money grow and I am seriously considering a CD or finding another investment for her.

My 12 year old is all about spending her money and I keep trying to encourage her to save it up. She wants to spend it so I have to keep emphasizing that when it is gone it is gone.

My 17 year old still wants to blow his money and is mad I won't give him access to his savings ccount. He definitely takes after his dad and it makes me sad. I try and try to teach him about saving and really asking himself if he needs it or not but he just wants to buy. He currently owes people money so this weekend's pay (he is a soccer ref still looking for another job) comes to me to pay off his debts.