Thrifty Times

Every parent feels the pressure to help their child learn proper perspectives about the use of money. If one looks around it won’t take long to find a spoiled child or adult child who makes poor financial decisions and is continually looking to their parents for help.

In order to assist you to instill wise financial values in your child we have identified five important perspectives you can teach them as they grow. The five perspectives are broken down into age categories with suggestions for each age level.

Perspective #1 – Earn, then Spend

The idea that gratification should come as the result of hard labor will be key to an individual’s financial well being. Some parents inadvertently teach their child how to enjoy now and pay later. From early on we can teach our children how to wait for gratification.

• Age 3-6: Give rewards for chores completed. Allow your child to earn a special treat by using a marble cup. Each time they obey or complete a chore, they may place a marble (or whatever item you choose) into the cup until it is filled. Once the cup is filled reward your child with the promised special treat, such as a walk in the park or a Zoo visit or McDonald’s ice cream cone.
• Age 7-11: Begin an allowance (tied to completion of assigned tasks) with the understanding that additional “special items” will need to be earned. (Don’t allow them to spend it all, it is wise to begin a savings program as well – more on that below.) If they would like a special treat at the supermarket, a new video game or toy, let them check their account to see if they have earned enough from their allowance to purchase the item. The account can be cash in a money jar or a running total on paper.
• Age 12-15: Allowances should now be directly tied to how well they complete their assigned tasks. Their wants will be more expensive in this age range, some items may be very difficult for children at this age to earn such as a computer or church youth group camp, but children this age should be required to pay a % of these items. So if Church Camp is $200.00, then require that they earn half. Parents should not feel obligated to “manufacture” earning opportunities. Instead, brainstorm with your child and help them learn to problem solve to make their desire a reality. Children this age can begin to get work outside the house, such as babysitting, odd jobs and lawn mowing.
• Age 16 +: Children this age should be expected to earn nearly all of their desires. An allowance is fine, but tie it directly to performance of assigned tasks. If your daughter is assigned to do the family laundry, but is going away for a week, she should not get her allowance for doing the laundry. If your child has a dream such as buying a new car, sit down with them and explain the true costs and help them brainstorm how they can earn the money.  If you will require they pay the car insurance, set a clear expectation that you expect this money at the same time the insurance payment is due. If they don’t make the insurance payment on time, then take their keys until the payment is made. The object is not to allow them to go into debt.

Perspective #2 – Learn to Save

The idea of saving for a rainy day is difficult for parents, let alone children. Some children will be naturally inclined to save, while others will really struggle with the concept, yet, this is a critically important principle.

• Age 3-6: Use of the marble reward system can help children learn the idea of saving.  Begin to use the word "save" and help them with the difficult concept of delayed gratification.  You may want to link their favorite snacks with the concept of "saving" some until you are hungry or "save" some for later.
  Age 7-11: Help them set up a savings account with your local bank and insist they make regular deposits. For some children you will need to set a required percentage that they must save. Show your child how their savings are growing and give them lots of encouragement along the way.
  Age 12-15: Some children at this age will have trouble understanding the difference between short term saving and long term saving. You may want to set up a separate account for long term savings, such as a college or car account and could only be withdrawn with your permission. A spending account may be set up that they are allowed to “use” for special purchases. Continue to encourage and praise them for money saved.
  Age 16 +: If your child has a debit card for his or her spending account, you will definitely want them to have a savings account that is only accessed with your permission. You should require that a set percentage be placed into their savings account each month. You may also want to set up a yearly account (formally called vacation or holiday accounts) where a set amount is placed into the account each month for larger planned items. This is a wonderful exercise that can help your child learn the importance of both long term and short term savings.

Perspective #3 – Identify and Talk about Materialism

The craving for more is never satisfied. The only way to overcome materialism is to learn to be satisfied and content with what you have. This lesson can be taught all through childhood.

• Age 3-6: Help your child learn to be satisfied with life in general. Don’t make different meals or switch your plans due to the dissatisfaction of your child. Help them identify the good in all circumstances and encourage them to accept and be grateful for what they have.
• Age 7-11: Begin to define materialism for your child. Help them see that the thirst for more can never be satisfied. Give them examples. Begin to show them how commercials attempt to lure them to crave an item to order to feel satisfied. Don’t give in to begging or whining because such capitulations only encourage continued inappropriate behavior.
• Age 12-15: Continue to define materialism and show examples to your child. Help your child understand and see the consequences of materialism. Talk about problems that you see in society and in others. Point out how individuals can be satisfied with less. Help them begin to understand the “burden” of materialism and owning things. When they want to purchase something ask them to agree to a waiting period to see if they still want the item after a time.
• Age 16 +: Discuss how those wanting to profit from us use our materialistic desires for their own gain. Determine to be thrifty and responsible with what you are given. Share with your child when you had to be content and wait for items. Help them see the virtue in having “less.” Serve or volunteer together where your child can see others who have less.

Perspective #4 – Live On a Budget

Children tend to swing from one desire to another. When my son was 15 he thought he had to have an expensive BMX bike. When we reminded him he would be driving in a little over a year it did not matter. He wanted to pour all of his resources into saving for the bike. Fortunately, he was already obligated to pay for other items and the portion he could save for a bike was relatively small. Budgets tend to stabilize spending desires. However, for many the common sense restraint of a budget does not exist. Teach your children the realities of a budget early and often.

• Age 3-6: For children this young you will need to group budget lessons together with delayed gratification. The marble jar mentioned above can be used to “budget” in simple ways. Take for instance, your child loves to earn a walk in the park, but also loves to earn a McDonalds ice cream cone. Fine, get a second jar. Divide the marbles they earn into the two different jars. This way you “budget” for both. When they get to the top of both jars take him or her out for a wonderful afternoon with both the ice cream and the walk.
• Age 7-11: Begin to link future spending with present earning.  Work with them to create a simple budget plan. Set aside a % for saving and a % for charitable giving. When your child wants to “spend” refer to the budget to see how much is in that spending category. If they want to take money from another source, make them choose right then which budget area will be shorted. Then explain the consequences when they are short in that budget category. Don’t bail your child out. Let them learn that life is a series of trade-offs. A budget teaches that lesson wonderfully well.
• Age 12-15: Begin to have your child create their own budget. Make sure they set aside a % for savings and a % for charitable giving (you may want to assign these amounts.) Make decisions together concerning larger expenses and be ready to advise if needed. When we moved and changed churches we went from a youth group that gave us a schedule for the year-ahead to a youth group that would announce even expensive events only three weeks prior. This put a considerable amount of pressure on them to budget and save.
• Age 16 +: The budgeting process should be completed by your child at this age. Keep close as an adviser and have them run major expenses by you, just as you should run major expenses by your spouse. Give them the reasons behind your assigned % to savings and charitable giving. If you have other expectations then outline these clearly. Some reasonable expectations would include – a % of your family cell phone bill, car insurance and gas money, replacement of broken household items, etc.

Perspective #5 – Give

While this is technically part of the budget process, it is simply too important not to emphasize it specifically. Giving may be easier for some children, but for many these are tough lessons.

• Age 3-6: Slowly introduce the idea of giving to others. Practice giving in small ways including allowing your young child to hand out special desserts or snacks to friends or neighbors. Help them to share their toys. Help them give of their time and talents by setting up specific opportunities. Even a kindergartner or first grader can help clean for others or make a nice card for shut-ins.
• Age 7-11: Help them set aside a specific budget category for charitable giving to foster the importance and obligation to give to others. Explain that everyone must learn both giving and receiving. Help your child see how they receive from others. Provide them with age appropriate ways to give their time and talents including serving others in their neighborhood and church.
• Age 12-15: The onset of the teen years can be surprising as it appears they have forgotten some of these lessons. However, don't be dismayed. Continue to require a budget category for charitable giving. Be creative in setting up opportunities for them to give both money and time. Many in this age group are not yet working and have talents and abilities that can be used to help others. Your young teen will not forget the lessons you teach them in this area.
• Age 16 +: Your older teen should have a specific budget category for charitable giving. Instead of choosing opportunities to serve, you should allow them to make these decisions. However, remain as coach and encourager making sure they are aware of options and opportunities.

Teaching your children these important perspectives will help them more fully grasp the value of money. These lessons will serve them well through childhood, young adulthood and beyond!

Creating a personal budget does not have to be a painful process.  Honestly, if you spend money than you already have a budget!  By thinking and working out how you want to spend your money you are simply applying rational thought to your budget.

Here are three spread sheets that can help you take control.