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How will you teach the lesson of `money management` to your kids?

March 14th 2017
Question of the week: Question of the week is yet another effort by the debtcc team to enhance the community knowledge bank. It’s a weekly contest and every week a challenging question will be thrown before the members for responses. The best answer will be chosen collectively at the end of the week by the debtcc members and the admin panel of the site. The winner of this contest will receive a handsome reward of a $50.
The purpose behind this idea is to encourage the members to share their real life experiences in dealing with the financial challenges.
Though different financial issues are being discussed across the debtcc board, but it doesn’t leave much scope to the members to share their personal experiences. Here is the place where it can be done, and also that the new members can get the innovative ideas to deal with their debts along with the conventional ones.

Latest Question

Question 2: How will you teach the lesson of `money management` to your kids?
We may all agree that the kids should start getting the lesson of ‘money management' at their early age in order to lead a debt free life in future. But how will you teach them the effective ways of managing money? Winner PostTrophy emoticons

Answer 1: I started with my kids early. I made them earn their allowance. I did a chore chart and gave each chore a dollar amount and everything they did that chore, they put their initials by that chore. At the end of the week, I would add up how much they earned and gave them that amount of money. If they ask to borrow money for something they want, they have to pay it back and I keep a talley of how much they owe me and how much they have paid back. There have been times they have wanted something and I have asked them how much money they had, if they say none, then they are informed that they have to save up for it. Each child has a savings account and when they gotten "paid", I have tried to sit down with them and have make a list of what they want want as to how they need to situate their money, so much for savings, so much for this or so much for that, etc. When I put mu son on my car insurance, he was told that he had to pay his portion (he had a part time job). He didnt like it because it seemed like he didnt have very much money left, but he learned that if he spent it all right after he got paid, he would not have anything left and he could not do some of the things he wanted to do. If he didnt charge his phone up (he had Virgin Mobile), he didnt have a phone to use. A lot of people have not agreed with me about this and think that I needed to just give my kids an allowance, but felt it was better for them to earn it for they would appreicate it more. Also many have not agreed with me that if they ask to borrow money that I make them pay it back. I have always told them that we have to work for our money and do not just get handed it for doing nothing and that they had responsibilites also and that we were not going to just hand them money, they had to earn it. They also have learned the value of the dollar by learning how to budget their money and when they run out, they run out and cannot do anything or get anything. They have learned that you dont get something for nothing, although once in a while mom will do a little something for them. Told them to consider that a bonus. LOL My son got his first job at 16 and worked part-time. My daughter wants to get one soon also and I do not have a problem with that, as long as school work is kept up. I have also discouraged them from using credit cards. They also know kind of what our financial situation is and have seen us struggle, and in one way, I feel that it lets them see how hard things can be sometimes and to prepare for it so they dont make the same mistakes we did. I encourage them to save as much as they can.

Answer Posted by |2nband

The other answers worth mentioning are:

Answer 2: First of all, my children earn their money by doing odd jobs around the house. When we have a garage sale, they have their own little area to sell their own things. I am trying to teach them, that if they want something bad enough, they need to save the money first. My son will usually take 1/2 the money he makes and put it toward something he wants, and he puts the other 1/2 in a savings account for something he may want later. I am hoping that this will help them learn to manage money when they are older.

Answer Posted by |strangclan

Answer 3: I think one of the best ways to teach kids money management is by creating a systematic allowance system which mimics real life economy.

For example, I think think it is very important that the allowance is "earned" by doing chores/special projects, etc. This way, they are learning that you have to work for your money (it doesnt just appear out of thin air). Also important is that allowance money is needed. I intend to pay for for all essentials of my child, but to budget extras such as "special toys", gifts for family members, treats from the icecream truck, etc. in their allowance money. This way, from a very young age they will be used to budgeting their money. If I pay for every special treat my child wants, their money will not mean much to them. I would much rather pay my child a generous allowance (based on work ethic) and have them make financial mistakes as kids instead of as adults.

Another important part of their allowance includes a mandatory budget. I had a friend growing up who received allowance every week. Each week 10% of her earnings went to church, 10% went to savings and the rest she could spend however she wished. Imagine practicing putting 10% of your income in the bank since you are 5 or 6 years old.

I also intend to teach my children about money by recycling toys. If my child wants a brand new toy, I will tell him/her that I will buy it for them if they will give to charity an old toy they no longer use. I will also take them to garage sales, thrift shops, etc. and emphasize how fun it is and what treasures we have found. Instead of throwing something old out, I will try to make a game as to how we can use it for something else?

Lastly, I will model for my childen how to maintain a budget and be honest with them as they grow up about my financial problems early on. When I see someone who is homeless or if we volunteer at a shelter, I will take the time to explain to them how sometimes good people mess up with their money and it takes some time for them to get back on their feet. *I also plan to educate them on investing (as soon as I learn more myself. *As they enter college and get a car, etc. I plan to put their name on my credit card and to teach them how to use credit for one central thing (such as gas) and pay it off each month. Their name being on my card will also allow them to start life with a high credit score and several years of credit history.

Answer Posted by |luv2laugh

Answer 4: I have made many mistakes in managing my own financial affairs throughout my life, but I am making sure my kids understand how to handle money, credit and all related issues:

-we sit down and discuss the months bills and how much income we have coming into the house every month. This way, they understand when I say "eating out is not in the budget this week", and they understand exactly why - instead of just saying "we cant afford it" and not giving them an explanation.

-each child has a minor savings account with our credit union, and when they earn money by doing work for their grandparents, or I am able to give them a little money for helping me with a special project around the house, they put part of it into their savings - even if its only $1.00 or $2.00 - every little bit adds up, and we sit down with their savings account statement every month when it comes in the mail, and I show them where they have earned interest on their deposits.

-I use THIS SITE to educate my kids on credit and payday loans, and what can happen if you misuse your credit or take out paydyay loans. I have showed them the horror stories of the illegal payday lenders and what they do to peoples lives. Ive shown them an online calculator and had them add up purchases theyd like to make - and then said, "ok, if you made these purchases on a credit card, with, say, just 9% interest, this is how much you would repay for those purchases". Then we take it one step further and I tell them "uh oh! You just got injured and cant work for 3 months - meaning you cant pay your credit card bill for 3 months - your interest rate just jumped up to 21%! This is how much you will pay for those purchases NOW..." Weve done the same things with payday loans, using the "rollover fee" that many of them charge. This site is a fantastic resource for teaching your kids about credit, debt and payday loans.

-I try to teach by example. My kids have seen me, as a single parent, struggle, fall, get behind on bills and have to deal with the consequences, and pull myself back up and start all over again. Theyve seen me have to borrow from family to make it through the week or month, or to put gas in the car to get to work. BUT....theyve also seen me repay those debts (sometimes slowly, but always paid in full!), and theyve seen me make phone calls to creditors in an effort to make a payment arrangement - not ignore them and allow them to start collection proceedings.

Hope this info helps! :-)

Answer Posted by |SUEBEEHONEY70

Answer 5: What I currently do:
1. I never let my children borrow money to buy things they cant afford.
2. Both my children receive an allowance and I encourage them to put some of that allowance into a savings account.
3. I talk with my children all the time about how credit cards work and how the companys are not their friends.
4. But most importantly, I model how I would like my children to use money.

Answer Posted by |spatterson_40

Answer 6: In order for kids to understand debt and money they have to live it. I have two pre-teens and my problem was, "Mom can I have 10 for this or 20 dollars for that". They hadnt a clue the value of money (as most kids dont)That was my problem.
This was my solution:
Instead of paying them an allowance for chores etc, I put them on a time card system. I agreed to pay them 8 dollars per hour for the work that they did around the house. That sounds like a lot of money but if you figure the dishes got done in 10 mintes the laundry in 15, and real solid hours worth of work, a lot gets done. First off that eliminated the money they ask me for here and there. They get paid on payday, the same payday that I do, and we keep the time cards on the kitchen fridge.
Inevitably they allways need to "borrow" because payday is not for a few days (sound familiar) Well then what I do is reduce their hourly rate from 8 per hour to 4 per hour until that debt is paid off. They dont like it but they wanted the money early, and it will cost them.

A couple of things have happened since I have implemented this.
1: My house is immaculate!
2: I dont hand out money from my wallet anymore, ever!
3: They are learning the basic rule, If you cant pay cash you cant afford it, and if you have to borrow it will cost you.

I can tell them over and over the importance of money management but at 12 and 13, they couldnt care less what I say, its the REAL LIFE consequences that they respond to and its working.

To do this with your kids, you NEED time cards and a set payday. And you have to be firm and consistent.

Answer Posted by |Joanna

Answer 7: Well, the first thing that comes to mind is allowances--my parents paid me a certain amount for chores, and helped me open a savings account. One good thing that I got out of my childhood was helping my mom out with her annual garage sale! I learned quickly about the value of a dollar(which stretched further 30 years ago than today) :)

Helping your child set up a budget with their earnings can be rewarding and even fun at times! And when they purchase items with their own money, they tend to cherish it and take care of it much better, knowing that they worked so hard to obtain it!

I think parents should be somewhat more open about their finances with their children(at least when they are mature enough to understand). Involving and educating your children using your household budget once they are old enough can really prepare them for their finances once they are out on their own. And they will appreciate you for it. :)

Answer Posted by |saxy_soprano

Answer 8: The number one way to teach your children or any child is by "EXAMPLE". What you do they mimic to the letter so please set a good example by Saving your money, spending it wisely in front of them, talking about money in senseable manners and most of all "RESPECT" your moeny!!

Thank You

Answer Posted by |Lukeskywalker

Answer 9: Ive developed a payment schedule that is assigned to each household chore, instead of a "blanket" allowance. I have the younger two pick pictures of items they would like to have, including the price, from store advertisements. My older child is more aware of what her activities cost. They then have an opportunity to earn money towards their purchases by picking items off of the chore list. At the rnd of the week I total their balance. Half of the balance must be deposited in to their savings accounts, which we opened with christmas money, and the other half can be spent or save toward their wish list items. I think that this helps my kids see the value in hard work and also how quickly money disappears when "blown"! We also have a rule that half of "gift money" will also be deposited to the savings accounts.

Answer Posted by |angell

Answer 10: I think the best way to teach at a young age is lesson learned. When a parent starts to give a child money, they should explain to them the value of money and parents should have the child sit down with them when they pay their bills. This way the child will see how much the parent makes, how much goes toward each bill and what the parent has left over for the week. Tell the child that this does not mean that the left over money is not to spend as they want.

After a few months, start to give them an allowance. Take the child to the toy store and see how they respond and ask them if they want to buy anything. If they spend all of their money and a few days later they want something, such as ice cream or a candy bar, tell them they should have managed their money better. Buy the child a small box for them to keep their money in. Instead of handing the money to the child every week, put it in the box for them. Go to the bank and get some withdrawal slips and give them to the child. Also get a small notebook for the to keep track of how much money they have. When they need money, have them fill out a slip and deduct it from the notebook.

If they overdraft send debt collection letters to them. Just kidding.

Answer Posted by |pokertramp

Answer 11: At the beginning of May I sat my kids down with a plan. We were going to write down each cent we spend and in June we are going to review and work out a budget for the house. Im also going to work out a budget for my kids with all of the items that are bought for their needs excluding the necessary ones like movie tickets, soda, ice cream... etc. These are things they have been buying with their allowance and if they needed extra it was purchased for them.

In June my kids will have a budget and they will have to use their allowance accordingly to buy their extra things so that they will be able to understand how important it is to spend your money on the things you want vs the things you need. They are always needing extra things like an eraser or a new notebook or wanting an extra snack or ice cream from school. These things they will have to buy on their own with their money. If the project is a success I will continue it.

My oldest is just 13 but by the time she is 16 I plan on introducing her to credit if she is employed. My plan is to co-app with her on a credit card and try and teach her at the importance of good credit and paying your bills on time. She already has a car she just doesnt know it yet. She will be responsible for carrying the insurance on it as well as putting gas in the car. I will continue this also with my next three children.

Answer Posted by |FYI

Answer 12: Well, our older two are 6 and 7 years old. K and 1st grade. Were starting with teaching them the value of work, that money doesnt grow on trees. We buy them things in moderation, but extras, they get to work for. An extra chore here and there around the place nets them a quarter or so. Good grades pay pretty well, too. It adds up quick, for kids that age.

Erik [7] is getting good about it. Rather than asking for stuff outright, most times he asks if theres something he can do to make some extra change to get whatever it is.

Hes pretty well figured out the concept of working. Hes getting a handle on saving, too. At present, hes saving up for a new, fancier bike [a share of the price, actually]. Im starting to touch on budgeting with him, as well. Using simplified examples, like what happens to his plan for a new bike if he takes a dollar out to get ice cream from the roving [overpriced] truck.

This approach has had its pitfalls. Especially in the beginning, when he was getting used to the idea that Im serious about it. On the other hand, hes come up with some surprisingly sophisticated questions, for a kid his age. Hes also managed to seriously impress his first-grade teacher.

Answer Posted by |unclewulf

Answer 13: The first rule of teaching good money management is to practice it yourself.Besides that, there are a few important lessons to make sure your teens learn about money before moving out.

The first thing you need to do is make sure your teen learns the value of a dollar. This means they need some sort of opportunity to earn money.

If they don't have the time to get a job, have them caddy for you on Saturday mornings or mow a neighbor's lawn during the summer. All they need is a little bit of income to teach them valuable lessons about money.

These three new things will give them a good understanding about how banks work.
Next, have your teen get a credit card. Not your credit card to be used “only for emergencies†but a credit card in their own name to be used for their everyday purchases. Teach them to pay it off every month.

Finally, teach your teens a little bit about taxes. If they have a job, they'll be required to file taxes.

Giving your teen good lessons in money management can be some of the most valuable lessons you teach them during their time in your house. A young adult who is well-acquainted with how to use money will be prepared to leave the shelter of your home and become a competent member of the real world.

Answer Posted by |Keith1210896016

Answer 14: I pay them for each task that they do. I inspire them with the reality that they can have whatever they want but must earn it to do so. I pay them for each task that they are willing to do, mow the lawn = 10.00, do the dishes = 1.00, clean the house, (sweep, dust, clean windows) = 20.00 etc...
Quarterly I show them the bills and the process I go through to pay them, (checkbook logging, addition, subtraction).
I also have Mutual funds set up for them and as the monthly statements come in we sit down and review the math on the statement such as if there was a loss or gain, any dividends, interest or charges etc... I ask them if they would like to contribute any funds they have earned into their mutual funds on a regular basis so they can experience realtime the impact of their own efforts.
Jack Hallaran Atlanta, GA

Answer Posted by |Jack Hallaran

Answer 15: When my kids were younger, I started teaching them about money, too bad I didnt follow my own advice! I wanted to teach them responsibility and how to save and money management, so I started when they were 4 or 5 years old.

They had chores to do each week, pick up toys, take out trash, set table, etc. I made a chart and each day, they got to put a sticker if they completed their chores. At the end of the week, if they had completed their chores, they got an allowance.

The rule was, that they had to put a third in a savings bank, a third for emergencies(Like an extra something for soccer, or extra money to buy a shirt or tennies they wanted), and a third for them to spend how they wanted.

When they were young, they didnt seem to notice the savings, but as they got older, they saw how the money built up and that they had extra if they needed it. It also taught them that you have to work for what you want.

The lesson stuck with my oldest, he still does this, my youngest--well, thats another story.

Answer Posted by |Bossy4455

Answer 16: About two years ago, my current husband began investigating ways to do a proper budget and in his search, he came upon Dave Ramsey. He went to Borders, bought Mr. Ramseys book, and that led to us buying the Financial Peace University home study course, which led us to taking the real course taught at a local Christian church by a certified FPU graduate.

My son is 23 years old and he has watched me (his mother) struggle financially since he was born. My ex-husband (his father) was not really interested in paying bills or working so after being several months behind on rent, car payments and utility payments, I left him,(after 17 years of marriage, so I did give it the old college try) but not before I settled up with everyone. I had to borrow money from my extended family and I walked away. To this day, he has not changed, but I have changed, especially how I look at money.

What my son has learned through just my husband and I talking about Dave Ramsey and his FPU is that all high school teaches you is to go to college so that you can learn to incur debt, so that hopefully one day you will be able to pay off your student loans and have a career that will pay just enough to pay off the student loans, car payments, credit card payments, etc.

Since my son has been out of high school and Ive remarried someone who knows accounting inside and out, he has learned that you cant spend what you dont have. My son does not have any credit cards or credit card debt, he does not have any loans, except for what he owes to his school. He does not have a car payment, rent, mortgage, etc. He works part-time and puts his money away for the day when the "student loan payments must start". Most 23 year olds cannot say they are "debt free" except for what they owe their school.

Although I feel badly that for so many years I struggled, maybe that was a lesson that although you can choose to struggle, you can also choose to do something about it.

I thank you for your time and God Bless.

With belief,
Gina M. Bricka

Answer Posted by |TickleMePink

Answer 17: The best thing to do is to first educate them on the difference between what is/is not crucial (wants and needs) as well as budgeting skills and critical thinking. Also it would be good to let them know just how bad credit cards can be and to teach them never to take out a PDL.

Answer Posted by |JCEMT

Answer 18: Open a savings account for them. I try to put some money away here and there. Also have family members that may put some in on occasions or through small odd jobs. When the child asks for something, ask if they have enough in their account. With time and patience, they can learn the value of the time it takes to earn the money and also to decide if it is worth giving up on that item.

Answer Posted by |phoenixp

Answer 19: I will teach my girls to pay theirselves and to save 1000.00 to start with just for emergenices! I will not allow my girls to get a credit card as soon as they graduate, because Im not paying the bill! My kids will be allowed to live at home until they can afford to buy a home of their own and not rent. They should put money in a 401k while they are young. If they need a small loan they should always ask parents first. They should never buy a home where it depends on two people to make the mortgage payment.But these days thats about the way it is unfortuately because people want more,and more. We should be able to get more for our money than what we get.

Answer Posted by |Debra King

Answer 20: I have a 6 year old grandson. I took him to an ice cream place and we looked at the price of an ice cream cone. It was approximately $2.50. for 2 scoops of ice cream on a sugar cone. We then went to the grocery store and we looked at ice cream to see how much it was. He found out that for $2.50 he could get a 1/2 galloon of ice cream. Then he could have ice cream every day for a week.

We did the same thing, he wanted from Sonic tater tots. They were $1.99 for 1 cartoon of them. We then went to the store and got a huge bag for the same $2.00 and he got to enjoy them all work.

My goal is to teach him that you can sometimes still have treats but you have to make your money go further with the treat money you do have.

Answer Posted by |Cyndy Nordyke

Answer 21: My son is 6 and he is already learning the responsibility
of money.He doees little jobs around the house and recieves
a money award.I.e-if he dusts his bedroom he gets 20p.
He has got what he calls his transformer fund, and
is saving to buy as many transformers as he can.
Because of this he understands why i have to go to work
for our money, as i am a single parent and have to watch
money.

Answer Posted by |samantha maslin

Answer 22: I belief we need to first of all teach them on the importance of money. Example - Without money there will be no sweets, toys etc..

Action- Start on getting them to take action. Get them started on collecting coins first and show them how it can grow to a dollar and why is it important that it should grow to a dollar.

Piggy banks- Buy for them their first Piggy banks teach them to start putting coins now. My preference would be a transparent one so as they can see the coins growing physically.

Wealth Journal- Get the kid started on his or her own wealth journal. Teach your child to identify goals in the journal and encourage your child to write about why the goals are meaningful to them

Start an account- If your kids are old enough, you can give them their very first bank account (I belief that this is the best present you could give your kid)

There are Board games design for kids about investments/ money management etc.. Examples would be the Monopoly (Junior), Moneywise Kids, the cashflow for kids and etc..

Once your child learns to save- teach him on compound interest.

To summarize- if you want to teach your kids on money management, you have to lead as an example. Constantly teach them about the 3 keys to money management

Saving, budgeting, and investing

Answer Posted by |success4resource

Answer 23: I would start by getting them a savings accout. I would let them have an atm card (not debit)and they would put their earnings from there allowance in the savings account every week. When they want something that of course isnt a nesessity to them they could pull out the money and keep a tranaction register of their spending to keep track of their money. When its all gone they will realize the value of a dollar and learn to manage their money more wisely.My mother did the same thing for me and by the time i had graduated high school I had bought my own car and had about $3000 of my hard earned money in a savings account which later was the down payment on my house. I was 19 then and if my mother didnt teach me the value of a dollar the way she did I probably would be like the average 25 year old today still living with mom not knowing where i was going in life.

Answer Posted by |mcclammy27

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