Right now my wife and I are working hard to instill proper money management habits with our children. They are getting older and we don’t want them to succumb to some of the same mistakes we made growing up. You know which ones: credit card companies set up at college campuses enticing you to get that first card, which then spills over into store generated credit cards and so on down the line to the road of debt.
This brings me back to the banking days of elementary school with my own money habits. My mother encouraged both my brother and I to take parts of our weekly allowance money and add it to our savings accounts. Granted it would be small amounts of money: $5 here and there, but in the long run I applied this philosophy to devoting a healthy percentage of my part time work income into this same savings system. By the time I was a junior in high school, I would bank $50-$75 of my weekly pay check into a savings account, and also take extra earnings from our deejaying work to build up this account.
If I didn’t put this disciplined, week in and week out money into the bank, I never would have had the cash on hand to purchase my first car outright and also pay for the car insurance, gas and repairs. Did I get the latest and greatest car? No, I bought a 1973 Dodge Dart Sweeper, putrid green in color. I remember the leather seats, the AM radio and the fact that I could seat 7 comfortably, plus the bumpers that stuck out a couple of feet from the base of the car.
I was willing to sacrifice short term immediate satisfaction for the overall long term goal. I needed reliable transportation when I went off to college, and that meant less impulsive purchases to see the big picture vision of me riding behind the wheel of my own car, without financing or a loan hanging over my shoulder. I still find to this day the debate raging in my head of wants versus needs, wrestling with my head over developing an emergency fund and planning for those rainy days versus going on a big personal shopping spree to splurge for myself.
I watched my oldest daughter take some of her money and buy 5 new pairs of shoes. Granted, she got some great deals to the point that the cost per pair was less than $10- but it made me think again of what was running through her head that she really needs 5 new pairs of shoes at the same time? That’s why we balance out how much she’s able to spend when she earns money versus what needs to happen if she wants bigger ticket items.
I want her to understand that you can’t be impulsive all the time the minute money enters your hands. They both are now realizing that my wife and I have to balance out the needs of the family against the personal wants we all have. I don’t want them to be afraid of budgeting, I hope to show them there’s a way to get what you want if you can develop a plan and sacrifice certain purchases to put your money in other baskets. It’s something that isn’t going to be taught in school, so prepare your children well.
I do agree with Denis Waitley’s idea of a weekly allowance based on $1 per year of the child (thus, a 6 year old would get $6 a week, a 12 year old $12 a week, and so on) but they do not get paid for the upkeep of their bedrooms. This would be weekly chores that they do to maintain the upkeep of the house. From there you can teach your children to develop 3 buckets: 1 for short term savings, 1 for long term savings, and a third for immediate spending needs.
Put fiscal fitness at the top of your list and you’ll be happy with the results years down the line.