Let’s do our kids the favor of taking the mystery out of money.
There are plenty of people who think that money isn’t an appropriate topic for kids, especially very young kids. I’m not one of them; I think that money is a topic that’s surrounded by a ton of secrecy in our society – even close friends and family members often don’t discuss finances with each other – and that all that secrecy does is make people feel even more at sea about a topic that is likely already a pretty big stressor in their lives.
For the past few months, we’ve been testing out different ways of instituting a reward system with our five-year-old son (three weeks of not biting nails = a small toy; clearing your dish every night for a week = 25 cents), but none of them have felt quite right, mostly because it’s been difficult getting him to understand that a quarter means something; it’s not just an odd, shiny toy to play with. And besides, I’m sort of from the “kids should help out and do the right thing because that’s what they should do, not because they’re being paid for it” school of thought, so rewarding our son for chores and such has always felt a little odd to me.
What I ultimately realized: introducing children to money (much like introducing children to reading) is another one of those concepts that I can use some help with. In an airport a couple of months ago, I started paging through a book called The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money, and was so floored by what I saw that I immediately bought a copy. The author, New York Times columnist Ron Leiber, says that the only way to prepare our kids for financial independence and success is to…you know, teach them about it.
Parents tell inquisitive kids that the answers to their questions about family finances are none of their business, or they divert the conversation in order to protect children from all of that money stuff for as long as possible. But in an era in which teenagers make six-figure decisions about college and five-figure ones about how much student-loan debt to take on, the greatest act of protection we can commit is to talk to our children about money a lot more often.
– Ron Lieber in Slate Magazine, February 2015
Ron is apparently my spirit animal, because holy do I ever cosign on this. So let’s take a look at his advice, shall we?
Financial Planning For Kids: When (And How) To Start
In the past, money that we’ve given our son has ended up being carted around in a green plastic bucket and played with; I’ve always struggled with how to help him translate that bucket full of pennies and quarters into the more abstract ideas of “helping others” and “saving for later.” Having now spent the past several weeks using Ron Lieber’s system for introducing financial planning to children as young as four or five, I am a huge superfan. To start with, let’s go over some of the fundamentals of Leiber’s plan (and how Kendrick and I interpreted them).
When should I introduce the idea of an allowance?
According to Lieber, if your child is asking questions about money and how much items cost (or has started pestering you to buy stuff), he or she is ready for an allowance. Leiber also argues – and I agree with this point – that an allowance shouldn’t be tied to household contributions; chores are simply what everyone must do to help the family as a whole.
How much allowance should I give my child?
The general rule of thumb is a dollar per week per year of age, but to me this rule doesn’t work when applied to children under age 10 or so. After some discussion, Kendrick and I settled on $1.50 a week for our five-year-old, mostly because $1.50 is an easy number to divide into three. You’ll see why in a minute; it’s all about the banking system.
The First Bank: Setting Kids Up For Success
Teaching my child how how to simultaneously be generous to others, save for the future, and leave a little cash over for fun is way beyond my skill set. Enter: Ron Lieber’s easy banking system. You already have everything you need to create it, because all it entails is owning three jars (or Tupperware containers; basically, three of anything see-through).
1. The Spending Jar: This is for small, in-the-moment purchases: an ice cream cone at a fair, or a little toy in a restaurant vending machine (the idea is that the parents front the child the money and then take it out of the bucket when they get home). It might sound crazy to give young kids the opportunity to choose their own purchases, but it’s also excellent practice for impulse control.
2. The Giving Jar: This one can be tricky, especially with very young kids. One way to broach the idea of giving money with them is by talking about sharing food: if someone’s hungry, you want to offer them a bite to eat, right? (And you don’t expect to get the food back, as you might expect someone to return a toy.) How I approached this with Indy was by talking about people who might need our help – people who are cold in the winter; people who have an illness; people with no clean water to drink; etc – and asking him which group he’d like to focus on helping. He decided that he wanted to help sick children. St. Jude’s: done.
3. The Saving Jar: The last jar or container is for saving, which is both the hardest concept for a young child to grasp and the most crucial one. The idea of “saving money,” according to Lieber, should be positioned as an exciting opportunity rather than a commandment (e.g. “If we can do this, look at what the result will be!”). To start, help you child pick something concrete that’s not too far-off in the future; something he’ll actually be able to save for and buy in short order.
(My son picked out a three-foot-tall plastic Tyrannosaurus Rex that roars, because of course he did.)
My Little Add-On Trick
Now here’s the tweak I added that I think really helps clarify the system for little kids (and makes it more exciting): add visuals. Talk through the ideas behind each jar – spend, give, save – with your child, help him or her come up with a visual representation of each, and then tape it onto the back of the jar.
Indy, for example, said that he wanted to “spend” money on small toys like those crappy little plastic superhero-things you get in vending machines, so I printed out a picture of a crappy little plastic superhero-thing, cut it out, and taped it to the “spend” jar. He wanted to “give” money to sick children, so I printed out a picture of a medicine bottle and we taped it to the “give” bank. And he wanted to “save” his money for the aforementioned three-foot-tall T-Rex (uggggg), so now there is a photograph of a massive T-Rex stuck to his “save” bank. Every week, when he gets his allowance, he turns the jars around to remind himself where the money in each one is going…and you know what started happening?
He started putting less in the “spend” bank and dividing the majority of his allowance between “give” and “save.”
And there you go: that’s the point, exactly. So Ron Lieber, I’d like to say for the record: you are a genius.
Raising children who are better at handling money than their parents (and who never ever ever spend their weekly shopping budget on chokers from Forever 21) = the dream.
