Thursday, September 27, 2012

Cheap Mistakes

Money takes practice. Many parents assume that their kids will learn good money habits just by living in a house where good money habits are practiced. That is no more likely to be true than assuming that if you are a good driver your child will be one too. Like driving, handling money has to be practiced. How do you let kids "practice" with money? Let your kids make cheap mistakes.

Experience is a powerful teacher. We as parents often want to shield our kids from bad experiences, but some lessons are best learned that way. If you give your kid an allowance, teach her to set aside part for sharing, part for saving, and then let them experiment with the rest.

You already have experience. You know that cheap toy is going to disappoint. You know that it is going to break, under-perform, or wear out too fast. So you want to tell your child not to spend his  allowance on that. Did your child learn about cheap products by taking your advice? No, your child learned that you don't trust her to make her own decisions and, maybe, that it wasn't really her money. If, on the other hand, you let your child make the poor choice, it cost a few dollars you were going to give her anyway, and she learned, from experience, that not all merchandise is equal.

I think this is valuable because this is a CHEAP mistake. Far better to let a seven-year-old buy an inferior toy than to have your sixteen-year-old get taken when he buys his first used car. You can buy this lesson for $2 or you can get it for $2000 later. A disappointed child is going to be receptive to lessons about buying that you want to teach her. And you will be more willing to calmly teach from this mistake than when the $2000 used car needs a $3000 transmission. Very few lessons are learned without practice and the ones best remembered are learned by making mistakes.In the long run it makes good money sense to let them make cheap mistakes.

Other cheap mistakes without dire consequences that will teach invaluable lessons:
  • Having to pack a lunch every day for a week because your lunch money was spent on popcorn at the movies.
  • Having to settle for a less desirable birthday present for a friend because you spent your money on yourself.
  • Spending a clothing budget intended for the whole semester on one pair of jeans and some pricey shoes and then having to wear last year's now ill-fitting clothing.
  • Not putting money aside for gas and having to ride the bus to school until "payday."
Letting your kids sink or swim, when the consequences are manageable and short term, is very helpful in the long run. Handling money is just a skill to be mastered like reading or laundry. God has entrusted you with this child and it is your job, as the steward of this child, to teach this skill: to handle what they have. You can do it, because whether you've managed your money poorly or well, you know more about money than he or she does, so embrace those cheap mistakes and teach the lessons to be found in them.

Thursday, September 20, 2012

So Much More

I have known, from an early age,that you should always have some money set aside for a "rainy day." As a child, I wondered how money would help keep me dry but I did get the basic point that saving was good and not saving was risky.

The lessons learned by saving are far more extensive than simply being prepared for a rainy day. Saving also teaches the power of cumulative actions. It teaches how to break a project down into smaller pieces. It teaches delayed gratification. So how do you teach kids to save?  When is the right time to teach them? What's the best method for teaching them? Start with the child. Is this child a planner and a plodder or is this a child who flies by the seat of her pants? Planners and plodders will understand saving as easily as breathing. Your task with these children will be to teach them to let loose with their money from time to time. That is not the case with the seat-of-the-pants crowd! These children will need every lesson you can devise, and may still need some incentives before they really master the challenge of setting aside for the future.

Here are a few strategies I've tried or read about over the years:

First, teach saving as a habit. Explain that this is how we handle money, period. If they get a $1 allowance, pay it in dimes, and give them envelopes, jars, banks, wallets, whatever it takes to make them separate those dimes into the saving, giving, and spending categories. Help them count it and keep a chart of how it is growing so they can see how small amounts accumulate into larger amounts.

Say no to something they want that you are willing for them to have. Make a deal to pay half the cost of the item if they save half. Ideally the wait in weeks should about match their age: 8 years old = 8 weeks of saving. (This also assumes that they have an allowance, or chores you will pay for so that they have access to some cash each week.) If they are older, and want more expensive things, help them figure out how long it will take, and perhaps provide incentives along the way.

Model the discipline of saving. Save up for a big purchase and get the whole family involved in watching the money accumulate. The price of a new refrigerator or washing machine will be big enough to seem unattainable to the average kid. Make a chart or put up a thermometer; find some way to show your kids that you are moving toward the goal. This is a real opportunity to teach your kids an impressive lesson about what can be done when you save your money.

In the midst of all this, don't lose sight of the fact that the best habits and choices don't always guarantee smooth sailing. Remind yourself, and the kids, that God is steadfast and always at your side - able to solve problems that money cannot touch. Faith has carried far more people through a crisis than savings, but savings will nearly always make the problems simpler. 

Thursday, September 13, 2012

Generous Kids

Every baby with Cheerios in front of him will try to feed some to his caregiver. And most adults, even the most fastidious, will eat a squishy, sticky, Cheerio offered by a child because the purity of the child's generosity is so enchanting.

That generosity is short-lived. It is usually followed by the MINE stage of development - where the words no and mine are the most frequently used words in the child's vocabulary. What comes after that stage has a lot to do with the child's perception of the world. If the child believes the world to be abundant, filled with plenty, then he will revert to his innate generosity. If he has formed a belief that scarcity is the way of the world, he will be less generously inclined. Most of us want our child's character to include generosity. So how do we help our kids see the abundance God showers upon us each day? Pretty much the same way we teach most things. . .

Model Generosity: Be generous in front of your kids. Buy the feed-the-hungry coupons at the grocery store check-out. Bring canned goods to food drives. Offer to help your neighbor carry in the groceries. Babysit for friends. Give money at church. Give away outgrown toys and clothing. Volunteer your time. Make giving an on-going activity, and not just a Christmas season feel good exercise.

Live Gratefully:  Express gratitude whenever you are conscious of your blessings. Give thanks at mealtime and bedtime, or anytime it seems appropriate. Talk about whether you are lucky or blessed when something good happens. Mention God's goodness whenever you can.

Reinforce the quality you desire: Yes, it is ok to reward generous behavior! If you see your child behaving generously, tell her how happy it makes you feel. Give her a cuddle and some special attention. Let her tell you how she felt when she acted generously.

Diminish the undesirable behavior: Our youth group has a rule about how we treat one another. If you put someone down, you have to immediately correct yourself by saying three nice things. This is a great idea for addressing selfish behavior too: every selfish act could be corrected by three random acts of kindness. It reinforces the idea that you believe kids are capable of being unselfish while making them think twice about being self-centered.

Teach them to set money aside: Remember the 80-10-10 rule in last week's post? Teach them to calculate 10% as soon as they learn place values in math. Make setting aside 10% a non-negotiable before they ever get used to spending 90 or 100% and they won't question is when they are older. And with that, we come full circle: model setting aside 10% for the purpose of giving it away. . .

I read an interesting idea once. The writer said that God's abundance is like the blood in your body. There is exactly enough for your whole body as long as it keeps circulating and is nourished. When it gets stopped up somewhere, or cut off from some part, there is a problem. Teach your kids to be part of the solution, not the problem.

Thursday, September 6, 2012

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!