Author Topic: How to start teaching our 4 year old about money? (Allowance?)  (Read 7204 times)

CloserToFree

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Now that our older son is 4 and a half, I'm realizing that we need to start teaching him about money. I'm starting to read Ron Lieber's book, The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money, and I've heard that the bottom line is to give your kid access to small amounts of money from a young age, and that the money (allowance) should NOT be tied to chores. (Idea is that chores should be done bc they need to be done, not bc the kid wants to "earn" $$.)

What do/did you guys do with your young/ preschool-aged kids to teach them about the value of money? Do you give them an allowance and if so what are the parameters (what do you make them spend their own money on vs. you paying for it for them? how much per week? etc.)?

I feel like we're behind the ball on this but we recently have started explaining about how things cost money (usually in explaining why we can't or don't want to buy something he wants), saying that Thing X costs money and if we spend our money on that, we won't have money leftover for "fun things" (ice cream was one example I tossed out last night). He seems to get that, at least so far, but I feel like we need to step up our game, and this forum seems like the best place to crowdsource smart ideas.

Also interested if anyone else has read Ron Lieber's book and what your Mustachian take on it is. ETA: paging @whdwight - just read through your excellent bank of dad-type spreadsheet pinned post and looks like you've read this book. Curious about your thoughts. Love the spreadsheet idea but I'm thinking it's a little complex for a 4 yo, since he can't read yet - but maybe not?

Thanks!
« Last Edit: June 06, 2019, 10:12:31 AM by CloserToFree »

La Bibliotecaria Feroz

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #1 on: June 06, 2019, 01:45:38 PM »
I haven't read that book in particular but my kids had an allowance from a very young age. I did save-give-wallet, so at least $3 at a time--they can have one for whatever, one for saving, and one for giving. Saving is really just slower spending at that age--I don't make them save it very long. With give, we do Heifer International or Toys for Tots or maybe shop with it for a toiletries drive or whatever is going on.

Mostly, they have to use their money for whatever stupid kid stuff they want to buy. (My kids are now 7 and 8.) Toys when we are shopping at Goodwill, frozen yogurt at Costco, etc. "Did you bring your money?" is a wonderful answer :-). They also have to pay for things they break around the house (most recently, they pulled a curtain bracket out of the wall, anchor and all, and broke the latch on the gate) and replacements for anything I buy them that they lose or destroy. So, like, I bought the first pair of snow boots, but when they mysteriously disappeared, the kid had to chip in half of the second pair.

Good luck!

ketchup

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #2 on: June 06, 2019, 03:18:02 PM »
Speaking as a former kid:

Trading cards (Pokémon, then Magic: the Gathering) and then video games (Pokémon, and then everything else) were my first "I want to spend money on things" items that hit around age 8.  But really I think some of the magic was gone from my "allowance" from my parents' perspective because I would only want to buy things pretty infrequently so we'd just tally up how it'd been since the last time I bought something.  I think they gave me $1/week starting around age 8 and it kind of unofficially stopped around 12 when I started seeing checks from family on birthdays and holidays, and then getting my first job at 14.

And despite my mom's wishes, I had no desire to ever buy clothes (this persisted into my teenage years: spending hundreds of dollars on a computer was clearly madness, but if I had spent that money on clothes she wouldn't have batted an eye).  This killed any "you need to spend your own money on clothes" ethos that could have been built (if she didn't buy me clothes, I would have happily worn my older clothes forever).  I'm not quite sure how I feel about this looking back.  It was basically a game of chicken that I didn't even realize I was playing.  I just didn't care (...and still basically don't at age 28 - currently at work wearing the same dress shirt I interviewed in eight years ago).  I don't think I even bought myself a stupid T-shirt until I was like 17-18 and then it was tech geek shirts that made her roll her eyes. 

My point is that kids are stubborn, and your intentions don't matter. :D

reeshau

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #3 on: June 07, 2019, 05:33:44 AM »
I also have a (precocious) 4-year-old boy.  I did read that book, but it was some time ago, so I would have to review it to pull apart its points vs. my mental jumble of all the parenting reading I was doing 2-3 years ago.

Our approach is also centered around give-save-spend.  We have a 3-part bank, and any time he gets money (birthday, chores, and he's really good at finding money at the train stop) we discuss what we could do with it, and what balance that is.  For a while, it was all "spend," because he was (and is) very into Hot Wheels.  But overall, it is surprising how often he chooses save and give as well.  I agree that save, at this stage, is goal-oriented spending:  saving up for fun on a vacation, or a big Lego set, or something.

To keep down the torrent of wants, we have a (rough) maximum of toys he gets.  At this point, if one comes in the house, one needs to leave.  This is another give opportunity, too.  (or could be money-focused, but we aren't up for a car boot sale nor are they worthy of eBaying)

We don't really give him allowance, because his grandparents spoil him, and his banks don't empty.  He is expected to do all of "his" chores gratis:  putting clothes away, helping set the table for dinner, cleaning the house, etc.  What we did set up as an experiment is to give him a chore to help refill the cat's water, for 20 cents a time.  (if done with no spills--10 cents if there are some issues)  We do not prompt him to do this--it's when he notices the need.  In addition to money lessons, we are interested to see how he does in caring for someone else--a prerequisite for ever getting a puppy, which will take a lot more care.  As I said, this is an experiment at this point, so whether we go the pay-for-chores route or a flat allowance will depend on the lessons he seems to need reinforced.

merula

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #4 on: June 07, 2019, 08:23:58 AM »
I read the book, and thought it had some good advice but I disagreed with some of his views overall.

My kids are 5 and 7. They've been getting an allowance for the past year and a half or so; $5 each per week, $2 in their wallets, $2 in their savings accounts and $1 to give away (just in an envelope).

I was talking to another parent the other day, and they thought $5/week was high, but then realized that I made my kids pay for things out of their own money that they had been paying for themselves: school fundraisers (giving money), school fairs (wallet), toys they really wanted, presents for each other, lemonade stands, garage sales, etc.

Recently, we've been having some major issues with leaving lights on, so now they have to pay me a quarter whenever I find a light they left on.

Enigma

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #5 on: June 07, 2019, 08:37:54 AM »
I lived in a house where we were taught about money at an early age.  We were given 50 cents for each book that we read, 10 cents for not peeing the bed (my brother was bad at that)...  As we got older we had house chores ($2 for cleaning teh living room, $5 for doing the dishes and cleaning the kitchen, $5 per lawn we mowed (dad's rentals), and a few other chores.

It is also worth noting that we were required to put 70% of the money in our savings account.  Every few weeks we would go to the bank and we had savings books.  They would print all our interest on it and then print what we were depositing.  The same was required when we got jobs - 70% saved (McDonalds for me, Burger King for my brother).  My brother at the age of 18 bought his first rental from the money he had saved.  I used my money to pay for most of my college.  But both of us still save a lot today.

Enigma

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #6 on: June 07, 2019, 08:38:53 AM »
Also we got paid for grades.
$5 for each A, $1 for each B, broke even on C, Owed $1 for a D, and owed $5 for an F

Omy

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #7 on: June 07, 2019, 08:41:30 AM »
I don't have kids, but my mother made a chore list (other than clean our own rooms, clear table and wash dishes which were to be done without payment). Dusting the house was worth 50 cents, cleaning a bathroom was $1, cutting the grass was $2, etc. The system worked well because each kid could sign up for what they wanted to do each week...and do extra if they were saving for something.

CowboyAndIndian

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #8 on: June 07, 2019, 09:27:38 AM »
I gave allowances for both of my sons. $1/year (so a 5-year-old would get $5).

One third, they had to save for college. One third for a big purchase that the wanted (e.g. one of those Nintendo/Sony game consoles) and the other third they could spend as they wished. Along with this, I taught them about investing (age appropriate ways).

It was interesting how quickly they started distinguishing between their money and mine! If I was buying, they would gladly eat an ice-cream, but if they had to pay for it, suddenly they did not need it ;-)

Well one of them is 27 now and has a net worth more than what I had at 40. The other is still in college but I know he will be great with money when he starts earning!

rainBOW2310

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #9 on: July 08, 2019, 10:43:55 PM »
My kid wasn't ready at 4. I think at that age we started with rough order of magnitude kinds of things (i.e. a car costs a bit more than the $50 you got for your birthday). A lot of "how much do you think that costs?" Now that they're almost 8, we are going to experiment with an allowance (chore list) and incentivize saving by paying interest, because they have the typical greediness and lack of impulse control. Along with the allowance comes the stipulation that we are not buying any more toys except on special occasions. This will be much harder for me than my DH! We will continue to provide for needs, but not wants. I'm interested in the book you mention, and will see if my library has a copy. Especially the idea of de-coupling allowance with chores. I get the principle, but haven't figured out how to get that to work IRL.

A Fella from Stella

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #10 on: July 09, 2019, 04:48:16 AM »
I give my kids for work they do sometimes. When they do nothing, they always get nothing, and when they do some work they usually get some money.

As such, they generally have cash, and it's good for them because I also don't usually buy them things. In fact, the other day I said to my daughter we could get a hot chocolate between her art class and going to the pool. She said "Really?" very excitedly. She knows hot chocolate isn't expensive, and there's no shortage of sweets in my house, but the idea that I'm treating was kind of a big deal.

NextTime

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #11 on: July 16, 2019, 12:57:47 PM »
I'm trying to figure it out right now and am a little confused. Maybe I should read that book.

We're doing the $1/age/week for my 8 year-old (birthday yesterday) as well as the spend/save/give. We've been doing it for about 7 months.

He now has over $200 between the 3 jars and has only used his spending money once.  He just rarely wants to go out and buy anything. Part of me says that's great. The other part of me wants him to run out of spending money so he can learn a lesson.

robartsd

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #12 on: July 16, 2019, 01:14:21 PM »
I lived in a house where we were taught about money at an early age.  We were given 50 cents for each book that we read, 10 cents for not peeing the bed (my brother was bad at that)...  As we got older we had house chores ($2 for cleaning teh living room, $5 for doing the dishes and cleaning the kitchen, $5 per lawn we mowed (dad's rentals), and a few other chores.

It is also worth noting that we were required to put 70% of the money in our savings account.  Every few weeks we would go to the bank and we had savings books.  They would print all our interest on it and then print what we were depositing.  The same was required when we got jobs - 70% saved (McDonalds for me, Burger King for my brother).  My brother at the age of 18 bought his first rental from the money he had saved.  I used my money to pay for most of my college.  But both of us still save a lot today.
This sounds like something I'd want to model - though I'm not sure I'd force a 70% savings rate. I'd have the earnings reported as income on a Federal tax return and encourage a 50% savings rate on jobs I'd paid them for by offering a match in a Roth IRA (I'd probably set a limit on matches for savings from outside work).

TVRodriguez

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #13 on: July 16, 2019, 01:29:39 PM »
I haven't read Ron Lieber's book, but I've read several of his columns in the NY Times.  I don't agree with him on everything he writes in those columns.  Hence, I didn't get the book.

I give my kids allowance that is not tied to chores and is not give-save-spend.  It's all up to them what to do with it (although I have veto power--too much candy at once is a hard no).  I don't give $1/week per year of life.  I think that's too much.  I give them about half of that.

I started them on chores about two years before I started allowance.  I think I started weekly required chores at about age 4, and allowance started at about age 6.  I wanted no tie between chores and allowance. 

They occasionally can earn extra money for extra chores, but they also get more chores as they get older.  I also tell them explicitly that their allowance is for them to learn to manage money. 

I also tell them that I am sharing my own income from work with them and that if I had no income, I couldn't share it and they'd get nothing. 

I calculate with them how much they can have in a year (or six months) if they save all their money or even half of it, and their eyes get wide at such big numbers.  But then I kind of like it when they run out of money after buying crap or candy because those are the times when they really learn that they need to save it and how quickly it can disappear.

They have to use their own money to buy things that DH or I think are unnecessary.  I will still buy them clothes and things that I deem necessary and appropriate.  DH even bought them an old Xbox 360, used and cheap.  But when our oldest wanted an Xbox One, he had to buy it himself.  He thinks it quite unfair that he has to share it with his brother, but he knew that when he bought it, so too bad.  He also has to pay for the Xbox Live membership from his own money b/c I won't pay for that.

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #14 on: July 17, 2019, 09:08:48 AM »
Apparently this is something I should be thinking about?   Have not done any money teaching with the 4 yo.  She just does her chores (we call it doing your part to help out the family).  Between Christmas, birthdays, and being spoiled by grandparents (we put up with it as the price of free babysitting), she has enough stuff by our standards, and she doesn't really ask/demand/make it known that she wants anything.  It just... hasn't come up and we are more focused on reading/numbers/playing/etc. 

I suppose when something breaks, she'll go "oh I guess we need to buy another," and I talk to her about trying to fix things first.  We also do almost all of our shopping, aside from groceries, at thrift shops and such, so she is very used to those and that mindset.  Does that count? 

meerkat

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #15 on: July 17, 2019, 01:17:43 PM »
We're thinking about starting with an allowance with our four year old but haven't put it into practice yet.

My theoretical plan is to pay a nickle per chore. A chore is something that helps the household (dusting baseboards, helping fold and put away small laundry, feeding the dog) as opposed to something you just do as part of the household (put your shoes and laundry away, clear your dishes to the sink, etc.) Even then the chores he's doing for the most part are things that it would be easier for me to do by myself, but he's got to learn sometime. When he's older then I'll worry about the save/give/spend part of it, for now I'm just going to use it as a way to cut off "I want it" when we're out at a store. "You want that? Did you bring your money?" I'll subsidize a bit since we're paying such a small amount, but last time we were out it seemed like he was on a mission to say "I want it" every ten seconds even if he forgot about the thing as soon as he looked away. (Side note, another trick I use for this is to take a picture of whatever thing. Seeing that I took a picture of it makes him feel better and then he never brings it up again. I'm sure this will bite me in the butt some day, but for now it's great.)

robartsd

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #16 on: July 17, 2019, 01:24:44 PM »
(Side note, another trick I use for this is to take a picture of whatever thing. Seeing that I took a picture of it makes him feel better and then he never brings it up again. I'm sure this will bite me in the butt some day, but for now it's great.)
Great idea make a "I Want" album for him. Use it to make a semi-embarrassing presentation at his Graduation Party or Wedding.

merula

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #17 on: July 17, 2019, 02:05:46 PM »
We're thinking about starting with an allowance with our four year old but haven't put it into practice yet.

My theoretical plan is to pay a nickle per chore. A chore is something that helps the household (dusting baseboards, helping fold and put away small laundry, feeding the dog) as opposed to something you just do as part of the household (put your shoes and laundry away, clear your dishes to the sink, etc.) Even then the chores he's doing for the most part are things that it would be easier for me to do by myself, but he's got to learn sometime. When he's older then I'll worry about the save/give/spend part of it, for now I'm just going to use it as a way to cut off "I want it" when we're out at a store. "You want that? Did you bring your money?" I'll subsidize a bit since we're paying such a small amount, but last time we were out it seemed like he was on a mission to say "I want it" every ten seconds even if he forgot about the thing as soon as he looked away. (Side note, another trick I use for this is to take a picture of whatever thing. Seeing that I took a picture of it makes him feel better and then he never brings it up again. I'm sure this will bite me in the butt some day, but for now it's great.)

I opted to disconnect chores from money for the most part. They're required to do their chores as part of being a family, and they get paid allowance so that they learn to manage money, and I felt that tying the two together undercut the logic of both. However, I do let mine do extra chores to earn extra money.

I absolutely still use the "I'll take a picture of you with it" even with allowance, because the rule with their savings accounts is that they need to wait at least a week to make sure they want something. They almost never want the same thing a week later, and (like yours) are generally satisfied that I've taken their wants seriously enough to take a picture.

waltworks

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #18 on: July 18, 2019, 07:43:25 PM »
I wish I could get my kids to give a crap, but at 7 and 5 they still have zero interest in money. We have given them small amounts, had them earn money, shown them how they can buy things (or save money, or give money away)... but they just leave it laying around the house, or throw coins at each other or do something similar.

The issue, I guess, is that neither of them really seems to want any stuff enough to care about using money to buy things (they mostly just play with random crap they find in the road/tools/junk/rocks). Literally, neither of them can be bribed with any physical object. They just don't care about any form of toy or physical possession as far as I can tell (but they'll fight over a dirt clod, of course).

Any thoughts on how to get them to at least understand the concept? I'm of two minds about the whole situation - it's good that they're not materialistic, but it's also eventually going to be a problem if they don't at least understand money and how it's used.

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La Bibliotecaria Feroz

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #19 on: July 19, 2019, 03:22:19 PM »
I wish I could get my kids to give a crap, but at 7 and 5 they still have zero interest in money. We have given them small amounts, had them earn money, shown them how they can buy things (or save money, or give money away)... but they just leave it laying around the house, or throw coins at each other or do something similar.

The issue, I guess, is that neither of them really seems to want any stuff enough to care about using money to buy things (they mostly just play with random crap they find in the road/tools/junk/rocks). Literally, neither of them can be bribed with any physical object. They just don't care about any form of toy or physical possession as far as I can tell (but they'll fight over a dirt clod, of course).

Any thoughts on how to get them to at least understand the concept? I'm of two minds about the whole situation - it's good that they're not materialistic, but it's also eventually going to be a problem if they don't at least understand money and how it's used.

-W

I'm sure they will start to want money for things as they get older. You could give them slips of paper instead of real dollars if you don't like them getting lost--that's what I've done for my kids when their rooms are disasters.

It's GREAT that they are not materialistic! Really! I mean, keep an ear out for treats or whatever that they want, maybe get them to pay for anything that they break, but otherwise, I would just let time solve this problem.

JustTrying

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #20 on: September 17, 2019, 08:12:01 PM »
We started allowance at age 2. I know this sounds ridiculous, but I paid cash for donuts one day when she was 2, and my kid saw and wanted money. I told her she could earn some by doing chorse.

She's now 3, and allowance goes great for us. She gets $1 per week for doing chores, and gets 25 cents taken away any time she refuses a chore. She has 6 chores a day. She is required to give some of her money to savings and some to charity, but I let her choose how many quarters to each fund. I know she doesn't really *get* it, but I feel good that I'm normalizing giving and saving, and she's still quite excited about it. I figure it can't be too bad to teach her early since she's interested!

gatortator

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #21 on: September 18, 2019, 04:29:45 PM »
we started allowance on first birthday after Kindergarten started (so age 5 or 6).

Chores and allowance are handled separately but both are discussed in weekly family meetings (15-20 min in length).

everyone gets a job- leader, banker, recorder (secretary), time keeper.   jobs rotate over time so everyone gets experience.

 If you leave the table during the meeting,  you must skip the rest of the meeting (as in: no allowance).

Appreciations-  each person says 2 nice things about each other. (3min)
Chores(aka Contributions)--  these are part of contributing to the household.  Everyone does them to make the house run successfully.  we say this often.  kids get some choice which chores they do. (3min)
Problem Solving-- discuss any issues and brainstorm solutions.  anyone can start a topic. (10min)
Allowance-- these are tools for practicing money management.  they are not linked to chores.  intentionally separated in meeting structure from the chore discussion.(2min)

Allowance is for any wants that we won't pay for. 
"Did you bring your money?" is a wonderful answer :-)

it really is.  removes the problem from my plate completely.  They groan when I say it and I just smile.


we have not yet paid extra for bonus chores but my kids are now at the age (10 and 7) where this may is a possibility.  My spouse and I are still figuring this out.  They have already done jobs for neighbors(plant watering, pet sitting) and they really like the payday.

gatortator

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #22 on: September 18, 2019, 04:48:54 PM »
slightly off-topic as I definitely wouldn't do this with a 4 year old, but

saw the below post on https://old.reddit.com/r/financialindependence/comments/clvsoz/top_reasons_parents_dont_discuss_wealth_with/ last month

wheels are turning in my head if I could incorporate this, even briefly, into our house.  still contemplating this.

Quote
I personally am considering financial lessons like this from ruat_caelum, perhaps a bit less extreme:

    My parents started us off on an allowance of $40 a week (That was HUGE) but it cost us $5 to eat dinner with everyone else. If we wanted to skip that $5 we got steamed rice and a vegetables, which wasn't bad, but it wasn't the meatloaf and potatoes, or whatever everyone was eating.

    We were never given the money, but instead we could ask for it as then get it.

    The first two weeks were horrid. the kids ate rice and vegetables, while my parents ate all our favorite foods, including ice cream deserts etc. cause we were stupid and spent the money on dumb shit.

    Then my parents started making us pay $1 a night to watch tv. Well 7x5 for dinner, and 7x1 for tv was 42 dollars, and we only got 40 a week.! The Horror.

    They they started charging us $7 if we paid for the family meal before dinner or $5 if we did it the morning of, or $3 if we paid a week in advance.

    They actually had to sit us down and show us how if we ate rice and veggies for a while or gave up tv, and paid in advance for the next week in a short time we'd have extra money to spare. Some hardship upfront but then better off for much longer (They had to show us cause we never put that together on our own and didn't have the "extra" cash to do it.)

    One of the best financial lessons I've ever experienced and could have only been better if they added a predatory quick cash, check cashing type option, so that we learned as children that type of stuff was a scam."

robartsd

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #23 on: September 19, 2019, 10:35:57 AM »
I have thought about having a currency for the a household where chores earn credits, a certain number of credits are required for basic living, and additional credits can be used to claim privileges or allowance. Gatortator's example of actually paying an allowance and charging money for dinner and tv time is interesting. I'm curious if the parents meal planned so that you knew the menu early enough to know if it was worth spending $3 on rather than opting for rice and vegetables. Still $12/week after paying for dinner in advance and TV every night is quite a bit more than any allowance I received.

morjax

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #24 on: October 30, 2019, 08:54:03 AM »
That is about the same age as our oldest started wondering about money. I figure as soon as they're old enough to start asking questions about money, buying things, day jobs/working, and the like, then they are old enough to start learning.

We have had enormous success so far using a three-jar method: a GIVE jar, a SAVE jar, and a SPEND jar. Kiddo gets $1 per year old he is per week - he's now 6 so he gets $6 each week.

The rule we follow is that he must put at least $1 in each jar, and then it's his discretion where he puts the remaining. I feel like a crucial bit is that we don't get to force his hand where he puts the discretionary cash. It's his choice to make.

We explained to him that although it's more complicated for grownups, we do the same thing in that we spend some, we save some, and we give some. We believe it is required for each of these to be non-zero. We explained the importance of giving and helping those less fortunate than us (edf.org and GiveDirectly are his charities of choice at the moment). We also explained why we save, and the power that saved money can have (your money can earn you more money while you're sleeping, playing, etc.). He seems to grok the importance of all three jars.

Sometimes he's been saving for something (bought himself a 2DS and some games after saving for the better part of a year!). Other times, he gets on a save jar or give jar kick.

Our plan going forward is that a minimum of something like 10-20% should always go into each jar each week, and he should always have some portion of the weekly dole that he gets to choose where it goes based solely on his own discretion.

We have not been diligent about this last point, but are getting better and rapidly seeing returns in his understanding. I wish we would have done this from the very start: when he spends his spend money, have him bring the money and physically hand it to the cashier himself. If he wants to buy something when we're at target, we ask him if he brought his money. If not, he can't buy it. If so, he pays for it physically himself. This has done wonders into his understanding of money and we've already seen a dramatic decrease in what I would categorize as frivolous spending; he has become much more intentional about the way he handles money.


I'm sure that YMMV, but this system has been superb for us, and we will be doing it for our newborn for sure as well when the time is right.

meerkat

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #25 on: October 30, 2019, 09:35:28 AM »
We're thinking about starting with an allowance with our four year old but haven't put it into practice yet.

My theoretical plan is to pay a nickle per chore. A chore is something that helps the household (dusting baseboards, helping fold and put away small laundry, feeding the dog) as opposed to something you just do as part of the household (put your shoes and laundry away, clear your dishes to the sink, etc.) Even then the chores he's doing for the most part are things that it would be easier for me to do by myself, but he's got to learn sometime. When he's older then I'll worry about the save/give/spend part of it, for now I'm just going to use it as a way to cut off "I want it" when we're out at a store. "You want that? Did you bring your money?" I'll subsidize a bit since we're paying such a small amount, but last time we were out it seemed like he was on a mission to say "I want it" every ten seconds even if he forgot about the thing as soon as he looked away. (Side note, another trick I use for this is to take a picture of whatever thing. Seeing that I took a picture of it makes him feel better and then he never brings it up again. I'm sure this will bite me in the butt some day, but for now it's great.)

Following up on this - we give a coin per chore. 95% of the time it's feeding the dog her dinner, sometimes he helps clean the house but he has to actually help and not just poke a rag at some dust for five seconds before getting distracted. He doesn't really understand nickles vs. dimes vs. quarters yet, he just knows he gets a shiny thing and puts it into his wallet, his wallet lives in a specific spot because otherwise it would constantly be lost. He's bought a few things at the local museum's gift shop (it's free to go to so we're there a lot). I think he put $0.80ish on the counter for his first purchase but it actually cost $2.50. I provided my credit card and he happened to get distracted so I swiped all the coins into my purse so I could return them to the coin jar at home, plus then the cashier didn't have the tedious job of counting it all out. As he gets older and less distractable I'm sure I'll change this approach.

We have not been diligent about this last point, but are getting better and rapidly seeing returns in his understanding. I wish we would have done this from the very start: when he spends his spend money, have him bring the money and physically hand it to the cashier himself. If he wants to buy something when we're at target, we ask him if he brought his money. If not, he can't buy it. If so, he pays for it physically himself. This has done wonders into his understanding of money and we've already seen a dramatic decrease in what I would categorize as frivolous spending; he has become much more intentional about the way he handles money.

A-friggin-men. Being able to say "Did you bring your money" has dramatically reduced the "Mommy I want that" whining at stores and done wonders for my sanity. I was actually really surprised the first time he had saved up enough, not only did he remember what it was he wanted, he made a bee line for it past a lot of distracting stuff to the exact spot where he knew it would be on the shelf. His long term planning skills are nowhere near an adult's, but it was a good reminder for me that he's not a baby or toddler any more and "out of sight, out of mind" doesn't really work any more.

Edit: Usually after he spends his money he immediately wants to buy something else and he is reminded that he needs to earn money all over again. I like this lesson. We may address savings and charity around the holidays this year but it's not a big priority for me yet.
« Last Edit: October 30, 2019, 09:44:55 AM by meerkat »

TVRodriguez

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #26 on: October 30, 2019, 09:39:34 AM »
when he spends his spend money, have him bring the money and physically hand it to the cashier himself. If he wants to buy something when we're at target, we ask him if he brought his money. If not, he can't buy it. If so, he pays for it physically himself. This has done wonders into his understanding of money and we've already seen a dramatic decrease in what I would categorize as frivolous spending; he has become much more intentional about the way he handles money.

I also have my kids bring their own money and give their own money to the cashier.  I like that it also encourages them to interact with an adult they don't know (they have to say hello or good morning or something and thank you, etc).

I have loaned my kids money when they've forgotten their money, but I charge interest.  Even if they pay me as soon as we get home, they have to add something onto it (50 cents or $1).  I want them to learn that borrowing money costs extra, whereas if they plan ahead, save up and bring their cash, they get to save that extra $1.

We have had enormous success so far using a three-jar method: a GIVE jar, a SAVE jar, and a SPEND jar. Kiddo gets $1 per year old he is per week - he's now 6 so he gets $6 each week.

I don't require my kids to put any amount in different jars, and each of them has at some point spent all of their cash and felt the dearth of spending money until they saved some up again--which was one of my hopes.  After my 10 year old spent ALL her money multiple times, I very casually mentioned to her the idea of splitting up her allowance and saving some for longer term.  She took to it like a duck to water and started dividing her cash up into 3 sections on her own.  She has even encouraged her younger brother to do the same thing.  And now her older brother has started asking me to keep most of his allowance in a separate envelope in my room so that he doesn't see it--he knows that what he has in his room is for spending and that he's got some "long-term" savings in my room.

robartsd

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Re: How to start teaching our 4 year old about money? (Allowance?)
« Reply #27 on: October 31, 2019, 12:08:45 PM »
Our plan going forward is that a minimum of something like 10-20% should always go into each jar each week, and he should always have some portion of the weekly dole that he gets to choose where it goes based solely on his own discretion.
My parents used 10% give, 10% save; but these came across more as fixed amounts instead of choices (give was in the form of tithing which was taught as a fixed amount). I think they work well for as minimums. "Simple math of early retirement" indicates a 10% savings rate takes about 40 years to reach FI - about the length of time from reaching adulthood to standard retirement age. Of course most careers have growth of real earnings over the decade or more, so sticking to 10% savings and indulging in lifestyle inflation with the remainder means it's not quite that simple; but at least setting a 10% savings floor would mean that you don't live a lifestyle as a young adult that your future self must subsidize.

 

Wow, a phone plan for fifteen bucks!