How to teach children about money management?

Anoneemoose · 11 September 2015 at 1:53PM

Hi,

I was just reading the thread about the parent wanting to help their son with debts and it got me thinking about what I can do to help my kids for the future.

My kids don't know the value of things and are spoilt by my mother in law. They get toys all of the time and pocket money. It saddens and worries me that they will end up just expecting stuff. We have tried talking to my in laws, but we just get the "that's what grandparents are for" speech. And I get that my in laws get pleasure out of spoiling them, so I don't want to cause problems.

I do want to show my kids that not everything will be given to them and that there is only so much money to go around, but am not sure how to start. Has anyone any ideas of what I can do? Or tips that they have used? Thanks in advance.

Anon.

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rockm87 · 11 September 2015 at 2:42PM

Hi!
i think it is great that you are starting to think about this. I'm sure there are plenty of books out there about this, I know for example Dave Ramsey has one called smart money smart kids, which he wrote with his (now adult) daughter. I kind of think those ideas (I havent read it, just heard on his podcast) about kids earning their money, so getting money for chores, sets them up for the real world.

Depends also what example you set them, I learnt from my dad about negotiating lower bills every year and shopping round and doing your research whenever you spend money. However I never saw him budget or write anything down moneywise, so it scuppered me a little and took me a looooong time to get to grips with that!

I think youre doing the right thing by being aware of it, and Im sure you will get lots of good advice on here!

andyfromotley · 11 September 2015 at 2:48PM

Hi Anon,

how old are your kids? In my experience anything below 10 years old and money management is a bit pointless as they don't really comprehend the difference between a fiver and ten grand.

Above that they start to grasp it a bit more. I use the following tips.

All pocket money is given in return for chores.
If they want an expensive item for birthday/christmas they must ask everyone to give them vouchers for that store and use them to buy the item.
All cash obtained must be split between saving and spending.
I have just sat down with my 14 year old and worked out a budget so that she can plan to use the wages from her saturday job for spending money for a school trip and to buy one of those hover board things. This will take her 8 months to achieve.
i explain in basic terms how the house finances work, budgeting saving and planning.

Thats it for me, its not rocket science. I find that they respond to target driven objectives better than just saving for its own good.

With regard to the grandparents i would let the toys go, but make sure the money is used in accordance with whatever principles you decide. (i would also speak to them again and be much more assertive about the whole thing!)

I read an article about letting kids run the house budget so when they are 15 i will turn over the house budget to them completely for a month. (the article had some surprising examples of how frugal and sensitive the kids decisions could sometimes be)

twiggy86 · 11 September 2015 at 3:09PM

One thing which I liked growing up was that I got a clothes allowance of x per week, which meant that when I wanted something expensive I had to save for it. I'm sure they bought essentials but say I wanted a pair of kickers (yes they were cool back then!) I had to save up but it meant I got what I wanted. Yes I got into debt so maybe it didn't totally teach me(!) but I now do the same thing for myself!

nkkingston · 11 September 2015 at 3:40PM

If the grandparents insist on buying lots of toys, insist on a one in one out system. If they want to buy the kids something new, something they've already got has to go (even if it was the toy they bought last week). Most people I know who've implemented this rule have seen a good drop in spontaneous "don't you love how much your nana spoils you?" presents drop sharply. It'll help the kids with tidying and cluttler clearing, too, especially if you make them part of the decision making process (and stop them asking for more stuff when they're not willing to let go of anything they've already got).

AspiringButAnxious · 11 September 2015 at 3:50PM

Being open about household finances helps a LOT. I always knew my parents weren't that well-off, so I knew that some Xmas oresents were out of the question and if I wanted a relatively "big" present, like the cheapest tv on the market, I would have to have it as my birthday present as well.

When I was a teenager, I was given pocket money — £10 a month — which I had to use for everything except necessities. So if I wanted clothes, I would save up or my mum used to do a catalogue which let you pay interest-free installments over 12 weeks. I did do some sticking up (skittles), for a bit of extra cash, but my grammar school dissuaded pupils from having jobs. Sticking up fit in well with the huge amount of homework I had, since I was good enough to get through a game in an hour and 15mins (unlessthe players kept me waiting) and I got £12 per game, which is obviously a great hourly rate. It was b****y hard work though!

The one thig I wish my parents had done differently was encourage me to save, but they couldn't afford to save themselves so it wasn't something I saw a lot of. Having said that, I was never in debt as a teenager and was scared of getting a student loan — mental illness put paid to that fear, because I was determined to follow my dreams. My dad spends a lot more than my mum would like, but my compulsive spending when I was feeling stressed at and after university was in another league...

I really think people should talk more about money in general. There is no shame in telling kids you can't afford the latest smartphone, but loads of people act as if there is. In a perfect world, maybe every kid would have everything they want — or, preferably, not give in to rampant consumerism and want so much — but kids need to be taught that the world is unfair and having more stuff does not make you happier.

National_Debtline · 11 September 2015 at 4:04PM

Hi Anoneemoose

I think that if grandparents want to spend their money on your children, they'll spend it come what may. What you might be able to do, though, is encourage them to channel it towards actually doing things and sharing experiences with the children, rather than accumulating more toys than they know what to do with. From my own experiences, it's too easy for children to form an acquisitive mindset - where quantity matters over quality - and this can filter through to later life. Only earlier today, I dealt with a caller whose house is at risk as they've run up debts allowing their grown-up son to live there rent-free while he spends his wages exclusively on clothes and socialising.

A picnic in the park or a trip to the zoo will likely do a lot more from a bonding perspective without any unnecessary clutter building up in your house. I appreciate that getting out and about depends how fit and mobile your children's grandparents are, but hopefully there are enough activities on their doorstep for this to be feasible.

Dennis
@natdebtline

rockm87 · 11 September 2015 at 4:32PM

you may find this interesting. From a parent who retired at 30.

http://www.mrmoneymustache.com/2015/05/20/what-im-teaching-my-son-about-money/

MakeAChange_2 · 11 September 2015 at 5:21PM

Hi there,

I do this with my children because i wish someone had done it with me! lol

what i do is anything extra than the norm is rewarded by maybe £1 - £2 never more, so this would include things like , helping me with the garden, sorting out the toys, what to keep and what to donate etc. I dont exactly stand there saying ''if you do it il give you a pound'' but i will say ''that was very kind of you, i will put £1 in your jar''

I dont reward for chores because i kind of expect them to keep their rooms tidy and tidy up after themselves etc, but anything extra and i do reward. if they want something i do also say ''well lets see what you have in the jar'' if its something i think will help them, for example a learning game then i will put in the difference so they can buy it (as long as its only a few quid). if its a toy or some other junk that i know they wont use i say ''well you need to save up some more for that'' and by the time they save enough they dont want that anyway, which kind of teaches them not to buy random things they dont need lol.

im not sure if my system is the right one but it works for the moment, lol

Anoneemoose · 11 September 2015 at 5:41PM

Wow! Thanks for the replies. Lots of food for thought. My kids are just gone 9 and nearly 6...I do get that trying to get them to 'take it seriously' is likely a little way off, but I wanted to see if I could come up with something that would at least get them thinking.

It isn't their fault either, it is just what they have known, particularly from the in laws. And I love my in laws to bits, and know they only do it because they can and it gives them pleasure. They do spend time with them as well, mainly at their house, rather than out for days (father in law has many ailments and disabilities). When they are at their house, they get attention from Nana, including playing games, doing crafts, baking etc. They also snuggle up in front of a movie on Grandads knee.

My MIL saves their pocket money and gives them it £50 at a time..my youngest went to toys r us and spent the lot (no reasoning with him) on 2 largeish figure type toys...both of which have been played with approximately twice. It is the same story for my daughter. I hate it because it is so wasteful and they don't see the value in anything. On top of that, everytime they go to the supermarket or somewhere similar, they will get something for about £10 :eek:

I have tried saying why don't they (in laws) put half of the pocket money in an accoutn for them and half to spend but they were all "no, we want them to have it now". Maybe I need to be a bit firmer.

We often spend money on indoor play areas or swimming if the weather isn't great so I was thinking of setting aside a certain amount each month and telling them about it, and letting them choose what to spend it on, obviously making it such a budget that there will need to be choices made so to speak. We have tried looking for free activities but I struggle with ME and Fibro so can't often just 'go for a walk' or do family games involving running around etc. I like the idea of rewarding additional help, although, to be fair, they struggle to keep their room tidy, let alone anything else!!!

MallyGirl · 11 September 2015 at 6:04PM

My daughter is a bit older but on her 11th birthday she got a bank account with a debit card. We haven't set up pc banking yet but will at some point. I send her £15 pcm pocket money into the account by standing order as it tended to burn a hole in her hand if it was given in cash. Birthday and Christmas money goes in there if she gets any. She can use the debit card to buy magazines, cinema tickets or get cash out. It is also linked to her Amazon account so she buys her own kindle books and occasional real books. This has certainly focussed her mind on what things cost - she buys 2nd hand books quite happily now it is her money!!
She knows that if her account drops below a certain balance then the interest rate, such as it is, drops and that has meant she has postponed buying things that would have dropped her below the threshold.
We have talked about credit cards, credit history, loans, mortgages etc and will do so in much more detail when it is closer to being relevant. She knows I have a secret savings for her for university (because she opened the post in her name before I got to it once) but has no idea how much is in it.
I have never had debt issues but grew up with a single parent on very low income so I think her careful attitude was instilled in me.

How to teach children about money management?

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