Money Toolbelt

One of my favorite sayings is "You don't know what you don't know." It comes up for me most often when I don't know what question to ask to unlock the topic at hand. This is where your kids are with money.  Most questions will not occur to them - but they still need the information. Here are a few concepts to explore with them, and a few ideas about how to do that.

Money is a multi-purpose tool. That's it. It can be a knife, a screwdriver, a cork screw, a file or a scissors.  It just depends on what you choose to do with it: provide for your basic needs, fulfill your dreams, create choices, share with others, prepare for the future. It is merely a tool, neither good nor evil. Like every tool, it requires some practice to learn to use it.

One simple way to help kids get this is to initially present them with three basic uses for money: spending, saving, giving. Lots of people live by the 80/10/10 rule and it's a very good place to start with your kids. Help them do the math on this one: out of every dollar ten cents goes to savings, ten cents is given away, and eighty cents is there for them to spend. Almost all of it! Starting this plan with a child who completely trusts you to know everything will help them form a great habit for a lifetime. Give them a piggy bank for savings so they can watch the money add up over time. Encourage them to share (give with no expectation of reciprocation - to church or charity).

A budget sharpens your money tool. If you've achieved a certain level of financial security in life you have probably learned to budget your money but it may not be obvious to your children.

A budget is nothing more than a plan for spending your money. To teach this you really have to give your kids some financial responsibility, otherwise the point will be completely lost. One good strategy you can start very early is making children responsible for their own lunches. Give them enough allowance to cover their fun plus enough to cover their school lunch. Then give them the option to buy lunch at school, or to pay you $1 for the groceries and  pack their lunch at home and take it. (If you pack it for them they have to pay more.) Let them control how they spend this money. They will most likely mess up. Don't bail them out! Lend them money against next week's allowance so they don't starve, then withhold it the next week. This kind of practice will improve their ability to plan ahead. 

When they are older, you can give them more money, less frequently, and also make them responsible for more of their needs. I love WSJ reporter Jonathan Clements method: "Every three months, I deposit $200 in my 16-year-old daughter's bank account, which is meant to cover clothing and entertainment. Our agreement is that I will pay for bigger-ticket items, like winter coats and running shoes. For everything else, Hannah either has to limit herself to the $200 or earn extra by babysitting. My daughter, of course, buys idiotic items and struggles to make ends meet. And I, of course, want to guide her decisions and bail her out. But I don't. The reason: If I bail her out now, she won't learn responsibility -- and I will end up bailing her out later."

God must smile while watching us help our kids learn about money. It probably looks very familiar!