Encouraging the kids to grow a 'stache.

[Mr.Macinstache]

My kids are 4 (almost 5) and 6. Girl and Boy. Here's my challenge: battling off the mind washing effects of a decadent, consumerist culture on a daily basis. Please share with me some ways you can encourage your kids to save wisely. Also, how can earn money?

I will not pay them an allowance just because. My son tries this and I shut him down. Living under the roof has responsibilities that are expected of him, just like good behavior and that is not something I pay for. After all, no one pays me to behave in life. :) I am going to start paying for other chores that go above and beyond. Like helping me with a household project. I did give him 50 cents for trying my scrambled eggs this morning too. So I'm going to continue that I think.

Also we are opening savings accounts at the bank. So the process of depositing money is an event and can be fun. Free balloons!

Any other idea on how to get these kids on board?

[NinetyFour]

Disclosure:  I am not a parent.

I understand that impulse control is a hugely important idea.  So to me, it makes sense to give kids choices.  This might mean giving them some money so that they can decide what to do with it.  Someone posted (on a different thread) the suggestion of giving the child a certain amount of $$ before a family vacation.  The child was told to do with it what they wanted, but that was all the $$ they would have for the duration of the vacation.  If they didn't spend it, they could put it in their savings account.  The choice was theirs.

I remember having a passbook savings account as a kid, and I just loved studying that thing.

And yes, being transparent about family budgeting--that choices are made every day, and that $$ doesn't just magically come out of those machines (ATMs).

[Mr.Macinstache]

Kids will ALWAYS want to spend every dime you give them. No matter what. And they'll do so at the very first chance they get. It never fails. That is my challenge. Turn them into savers. It's David vs Goliath here.

On vacation, I told them I was going to buy them one thing that was special to ME. And I would pick it out. (My trick) What I did is gauge their wants and decide if they were worthy. I ended up buying them stuffed animals at the Dolphin aquarium we went to. The ended up loving them. I also broke down and bought them t-shirts and hermit crabs. It was a big deal for us, but they will forever remember their first trip to the ocean.

My Dad also mentioned the passbook savings account. I'm going to see what my bank has for kids like that.

[Gin]

My kids are 8 and 11.  My 11 was always a saver my 8 would spend the minute she got any money.  Last year we got new flooring and had to really purge.  When she realized what she paid for something and rarely played with it and then donated it to goodwill.  She realize what a waste.  we all realized this with all the purging.  She started not being as impulsive.  Age I am sure helped.  We also limit the amount of stuff.  For example all her stuff animals need to fit in a big plastic bin.  When she wants to buy a stuff animal I would remind her that if it didn't fit something would have to be donated.  She has not bought a stuff animal because she values her current stuff animals.  We just got back from Disney World.  I told them they could spend $30.  She bought one thing and decided to save her money for a horse book once she got home.  That would have never happened years ago.  We also are more consistent on not buying stuff for kids just because it is on Target clearance.  Since you are on this site you probably already more aware. I think making them aware of their actions will help them grow a stache.    We don't do allowance but kids have savings accounts from birthday, Christmas, good grades, etc.  when they ask for something I tell them they have to pay for it.  Most of the time it is no but when it is yes I buy it and deduct it from their online account.  We also switched savings account for them to earn 1%.  They asked why we explained how you can earn interest.   

[DougStache]

I am not a parent, but I heard a parent at the gym the other day and I think I'm (eventually) going to steal his idea to replace allowance.

The kid was asking if he could have [whatever].  The father reminded him that he can earn money based on how many push ups he does, and how many books he reads.  I'd imagine this would teach kids that money is earned doing fun things, rather than money is earned doing things that we hate (cleaning bathrooms, vacuuming, etc).

[swick]

I did give him 50 cents for trying my scrambled eggs this morning too. So I'm going to continue that I think.

As someone who has worked with lots of kids who are picky eaters, this idea of paying your child to eat raises some red flags for me and could easily lead to some really unhealthy relationships with money and food that once established could have life long consequences.

As far as allowances go, there are two camps, that they are tied to chores or "good Behavior" or they are strictly a tool to teach children about money. I believe the second  camp is better because children also have to learn that chores are a regular part of life and helping out the family unit is something everyone does.

The best way to show young children about money is to involve them in spending and purchasing decisions - groceries are the easiest but it takes a time commitment because instead of a simple task it becoming a full learning experience.

Another easy one is with the electricity. You can show them a previous bill, include a bit of a science lesson on what electricity is and how it works and how mom and dad work to pay for it. Turn it into a fun family challenge to save money by turning off the lights and so on and then spend the difference on a fun family outing.

[seattlecyclone]

I can't take credit for this suggestion as I think I read it elsewhere in this forum, or maybe somewhere else on the internet. Someone said they set up a "savings account" for each of their kids, managed by the parents instead of a bank. The parents put $100 per kid in the account to start, and give 10% of the balance at the end of each month as interest/allowance. The kids are free to spend all the principal if they want, but that means they only get a few pennies at the end of the month. Pretty soon they'll learn about the power of saving and compounding interest. You can add to their balance as a gift for birthdays/Christmas/good grades/extra chores/whatever, so they aren't stuck with an empty balance for very long. Anyway, I thought it sounded like a pretty brilliant idea so I thought I'd pass it along.

[pbkmaine]

I saw two mothers in Target last week. One was using the experience to teach her kids some math skills. She said they were on a scavenger hunt to find the best deals for back to school. One of the kids would point to a pack of markers, say, and together they all figured out how to get the best price on markers. Everyone was having fun. The kids were jumping up and down with excitement. The other mom was snapping at her two kids who followed her around whining. Same store, kids the same age, but the approach and attitude made all the difference. What was it MMM said about optimism?

[Mr.Macinstache]

Thank you all for these response. Each one is great.

I like the idea of earning more for 'doing' something, this is how real life works. Whether is it solving a complex puzzle, homework, reading, writing and even physical fitness like push ups too, all are worthy of rewards. I think I will still offer rewards for eating healthy foods and trying new ones. It pays to eat right and I think the kids can learn that eating right "pays off". Nothing is ever forced in our house either, so its a voluntary system, how much they want to earn if up to them. No set payments. Then they just expect it.

And I love the paying interest part on their savings. GREAT idea. I'm going to open their bank account and I will pay a % every month on what they save. I'm going to set a spending rule too. They can never spend more than a 1/3 of their account, or something along those lines.

[gecko10x]

I can't take credit for this suggestion as I think I read it elsewhere in this forum, or maybe somewhere else on the internet. Someone said they set up a "savings account" for each of their kids, managed by the parents instead of a bank. The parents put $100 per kid in the account to start, and give 10% of the balance at the end of each month as interest/allowance. The kids are free to spend all the principal if they want, but that means they only get a few pennies at the end of the month. Pretty soon they'll learn about the power of saving and compounding interest. You can add to their balance as a gift for birthdays/Christmas/good grades/extra chores/whatever, so they aren't stuck with an empty balance for very long. Anyway, I thought it sounded like a pretty brilliant idea so I thought I'd pass it along.

That sounds like a fantastic idea!

[beltim]

My Dad bought some stock for me in dividend reinvestment plans (look up DRIPs) starting from when I was 8.  I loved getting statements in the mail every quarter, seeing how the dividends I received each quarter increased because the previous dividend was reinvested.  And then about once a year the dividend rate would increase, and my dividend would jump higher!  Plus, I started reading annual reports to learn more about the companies, which then taught me a wealth of other knowledge - electricity generation, oil exploration, even paints.

Now I look back and can see the value of buying high quality stocks and holding forever.  Plus I've learned a ton about investing, finance, business, and more.

[Samsam]

This example is kind of a mix of what others were saying, but before my siblings and I were old enough to have jobs we would have a weekly allowance, as long as we did our chores.  We would get $5 a week and my Mom MADE us put at least $1 in savings.  If we wanted to allocate more into savings we could, or we could take the $4 right away.  Then, when we would go on vacation or to the mall, we could take out some money if we chose to do so and that was the money we could spend on what we wanted (within reason). 

This exercise helped me understand saving in the present, in order to use it later on more important things later (or at least relatively more important to a child).  It also showed my Mom what kind of personalities we had as far as savings and spendings.  My brother put all of his money in the bank and then barely used it (hes very minimalist), I usually did half and half depending on the week, and my sister...well she never saved more than that $1 my Mom made her save.  When we went to use that money, my sister was very unhappy with the amount of swag she could get at the mall because after all she was the big spender and didn't save.  But after that she started saving more to purchase items she thought more valuable to her.  Then again...I stopped doing chores because I had reached a kid like FI that I was happy with....

Moral of the story...I have no idea where those accounts are right now...going to call my Mom.

[Mr.Macinstache]

My Dad bought some stock for me in dividend reinvestment plans (look up DRIPs) starting from when I was 8.  I loved getting statements in the mail every quarter, seeing how the dividends I received each quarter increased because the previous dividend was reinvested.  And then about once a year the dividend rate would increase, and my dividend would jump higher!  Plus, I started reading annual reports to learn more about the companies, which then taught me a wealth of other knowledge - electricity generation, oil exploration, even paints.

Now I look back and can see the value of buying high quality stocks and holding forever.  Plus I've learned a ton about investing, finance, business, and more.

I think you are very lucky to have such a Dad. My parents are the typical, excessive baby boomer spenders. I was never taught how to save or invest, at all. I am trying to correct that with my kids. The first challenge in our life is saving, which I am mastering and they are learning. Next I'm going to teach myself investing, when I get a handle on that, I'm going to involve my kids as well. Thanks for the advice!

[Iron Mike Sharpe]

I don't have kids either.

But I think an easy way to reduce their exposure to consumerist brainwashing would be to get rid of TV.  Just cutting their exposure to advertisements should be able to go a long way. 

[Mr.Macinstache]

I don't have kids either.

But I think an easy way to reduce their exposure to consumerist brainwashing would be to get rid of TV.  Just cutting their exposure to advertisements should be able to go a long way.

It has. They watch maybe 30 mins a day, if that. But right now, it's needed in our house, as it offers the other daycare kids something to put them in a trace with. I'm not kidding, it literally puts them all in a trace.

It gives our kids a little unwind veg time too. There is that tradeoff, but as of now they are pretty minimalist when it comes to wanting toys. It's all about getting a "pet" nowadays.

[prodarwin]

Kids will ALWAYS want to spend every dime you give them. No matter what. And they'll do so at the very first chance they get. It never fails. That is my challenge. Turn them into savers. It's David vs Goliath here.

Not really.  When I was a kid I got an allowance on the order of $4-5 a week (contingent upon having a clean room and doing a few chores).  It took me FOREVER (well, it seemed like that long) as a kid to save for my SEGA Genesis.  And my Super NES.  And N64.  And Playstation.  Consumerism waste of money?  Maybe, maybe not.  I got some serious mileage out of those gaming systems, and they definitely taught me how to save up for something.  It also taught me how life isn't always "fair" as many of my friends had the same systems but their parents simply purchased them for them.

I'm not a parent, but I'd bet what would have made those savings even more rewarding is if my parents helped me setup a savings account, or allowed me to "invest" my allowance in index funds and withdraw when I had enough to purchase a game system.  I'd also consider giving monetary gifts in the form of stock/funds (you can redeem this now, or you can redeem more later) instead of cash or gift cards that just scream "SPEND ME!!"

[beltim]

My Dad bought some stock for me in dividend reinvestment plans (look up DRIPs) starting from when I was 8.  I loved getting statements in the mail every quarter, seeing how the dividends I received each quarter increased because the previous dividend was reinvested.  And then about once a year the dividend rate would increase, and my dividend would jump higher!  Plus, I started reading annual reports to learn more about the companies, which then taught me a wealth of other knowledge - electricity generation, oil exploration, even paints.

Now I look back and can see the value of buying high quality stocks and holding forever.  Plus I've learned a ton about investing, finance, business, and more.

I think you are very lucky to have such a Dad. My parents are the typical, excessive baby boomer spenders. I was never taught how to save or invest, at all. I am trying to correct that with my kids. The first challenge in our life is saving, which I am mastering and they are learning. Next I'm going to teach myself investing, when I get a handle on that, I'm going to involve my kids as well. Thanks for the advice!

I definitely am lucky, and I'm also incredibly grateful.  Your wanting to teach your kids saving and investing is half the battle - and the other half is just doing it, even if it's not the "best" system.  I don't think there's one best system, anyway - my guess is that you'll have to tailor it to your kids personalities.  Also, if you learn about investing along with your kids (at the appropriate age), it could be a great family-building experience!

I'm happy to try to help.  Hope it does!

[avonlea]

Before we started doing this, we used to get regular nagging requests for money for this that and the other.  ONce we started it, especially after the balances built up a bit, our standard response was "are you willing to pay for it out of your allowance?"  In many cases, the answer was no, so they didn't get whatever they asked for.  If the answer was yes, we typically let them buy it, or would set a savings target date after which they could buy it ("If you get your account balance up to $X, then you can buy it" -- teaches delayed gratification and assessment of whether something is a need or a want, or at least how strong the want is).

VERY quickly, my kids requests for things diminished.  When it came to spending their own money, they just didn't want to do it for most things.  And the delayed gratification trick taught them that sometimes things you want NOW don't look so pretty/shiny a few weeks down the road. 

You have your reasons for not wanting to give an allowance, but in our case it has been a wonderful tool.  Kids ask me regularly what their balances are, and enjoy watching them grow.

We do something very similar, and we've also noticed that a case of the "gimmies"  (reference to a Berenstain Bears book that my kids LOVE) goes away pretty quickly when it's their own money on the line.  Sometimes the kids still make ridiculously bad spending choices, but experience is often the best teacher--their loss, their lesson.

[Mr.Macinstache]

So opening the savings account for my son was a HUGE hit. The bank gave him a little green piggy bank, that when he saves $20, they will match it when he comes in to deposit it. He had perma-grin the whole day and is now totally consumed with Saving his money instead of spending it. We are headed down the right path for sure.

Tell me and I forget. Teach me and I remember. Involve me and I learn.
-Ben Franklin

[avonlea]

So opening the savings account for my son was a HUGE hit. The bank gave him a little green piggy bank, that when he saves $20, they will match it when he comes in to deposit it. He had perma-grin the whole day and is now totally consumed with Saving his money instead of spending it. We are headed down the right path for sure.

Tell me and I forget. Teach me and I remember. Involve me and I learn.
-Ben Franklin

That's awesome, Mr.Macinstache!  Thanks for sharing the experience with us.  (And also thanks for posting that quote--I really like it!)