Posts for February 2011
Can’t Afford to Pay an Allowance? Maybe It’s Just How You Define It.
By Jayne Berkaw
A few weeks ago I wrote a post about paying allowances, noting that it is “one of the big conundrums of parenthood” and that “a lot of it is based on your own experience, your view of its place in parenting, your financial situation, etc.” One of our FamilyMint parents commented that paying allowances was difficult in light of her family’s limited “spending” money, so I wanted to touch on the topic again with that in mind.
There are lots of reasons to back away from paying an allowance to your child. Job loss, unplanned medical issues, home repairs, and other unexpected expenses can wreak havoc on family finances. But here’s the deal: as parents we simply have to teach our kids how to manage money so they can grow up to be financially responsible adults. We have to give them lots of opportunities to practice saving and using money, and we have to let them learn from their mistakes and applaud their successes.
The US Dept. of Agriculture estimates that it now costs an average middle-income American family $222,360 to raise a child from birth to 18. In their estimate they include things like housing, food, transportation, clothes, child care, health care and misc. things like haircuts, sports equipment, computers, and books. These are things you are likely already paying for, so they are also things you can consider letting your child control through an “allowance.”
This is an idea mentioned on many money sites as a way for families that can’t “afford” an allowance to actually pay one, reaping the benefits of loads of teaching moments and, importantly, building kids’ financial skill and confidence. It’s pretty easy too:
- You and your child sit down and talk about what you spend on him/her during a week or month; things like clothes, school lunches, snacks, movies, sports, etc.
- You talk about what items your child can be responsible for, being careful that choices are age appropriate, and that you discuss what a budget is and how to set priorities.
- You pay your child the agreed upon funds, relieving yourself of those responsibilities, enabling your child to experience the responsibility and all that goes with it, and you become coach and mentor – hooray!
If the family is navigating rough financial waters, adjusting allowance teaches them that when times are tough, belts get tightened. Just be sure to explain what the financial pressures are, with assurances that when things stabilize, things will be readjusted.
I appreciate your comments, so keep them coming!
Copyright Can’t Afford to Pay an Allowance? Maybe It’s Just How You Define It. © 2011. All rights reserved
Self Control is the Real Lesson of Budgeting
By Jayne
Berkaw
“Right now I have enough money to last me the rest of my life – unless I buy something”
- Humorist Jackie Mason
Anyone who can relate seriously to Jackie Mason’s quip has never been taught how to budget. As parents, we have a responsibility to build our children into adults who don’t just cope, but thrive. A lot of it boils down to teaching them self control in making good daily decisions, including how they manage themselves – and how they manage money.
Everyone has their own approach to parenthood, but there is no replacement for teaching your kids how to thrive by showing them how you yourselves thrive. Talk to them about the expenses you manage, like mortgage/rent payments, utility costs, phone bills, food and other regular expenses you must plan for each month. Then talk to them about the “things” you want to have and how you plan to save and pay for those variable expenses. If you’re saving for a 60” plasma TV, talk it over with your kids. Explain how much the TV costs, how much you are saving for it weekly and, at that rate, when you will have enough money to make the purchase.
Take the mystery out of the family finances by sharing the basics of the family budget with your kids. Talk to them when you’re in the store, at the dinner table, whenever a “teaching moment” presents itself. Then get them started on their own budget through an allowance.
With an allowance, you and your kids can set up fixed “costs” like savings and charitable giving, and variable costs like treats and snacks, toys and movies, etc. You can allot a percentage of their allowance to each budget item, and you can review progress regularly. With FamilyMint, you can break savings down into goals like college expenses, computer/technology wants and needs, or even savings for a new bike, video game or snow board. You can show them how saving a bit more each week will help them reach their goals earlier. They can move their funds around to make that happen in a colorful, fun virtual environment that will keep them coming back!
You want your children to have enough money to last the rest of their lives, so keep them grounded in the reality of financial limitations and responsibility.
Copyright Self Control is the Real Lesson of Budgeting © 2011. All rights reserved
Grow Citizens of the World
By Jayne Berkaw
As a member of the Baby Boomer Generation, I heard a lot about the emerging “global economy” as I was growing up, but kids of the 21st Century are truly residents of a global community, where technology-driven news, culture and communication is shrinking our planet more every day. Today’s parents, more than ever before, are tasked with helping their children become responsible citizens of the world.
A lot goes with that responsibility, but one key component is nurturing a charitable heart in your children. In all the reading I’ve done about teaching kids charity, most of the experts believe that this is one area that must be “learned,” so charity, it seems, does actually begin at home, as the saying goes.
Religious traditions are extremely helpful in creating a “giving” environment and the opportunity to donate both time and money. In addition, you can discuss with your child what’s important to her or him and, together, search for charities that address that concern. It might be a greener planet, helping children in the developing world, or support for a local soup kitchen. The key is focusing on one or two issues that really tug at your child’s heart and then establishing a plan (to donate time, money or both) that will motivate your child and allow him or her to be successful.
You don’t have to be a Bill Gates or Andrew Carnegie to learn about philanthropy and to grasp that giving of yourself is satisfying, rewarding and helps create a better world. Through its goal-setting feature, FamilyMint.com facilitates giving and visually shows progress, a powerful tool in building your child’s ability to think beyond themselves .
A View from the Other Side…Allowances
By Jayne Berkaw
One of the big conundrums of parenthood is whether or not to give your kids an allowance. A lot of it is based on your own experience, your view of its place in parenting, your financial situation, etc.
My husband and I agreed that giving our kids a regular “payment” they could slice and dice to cover their wants/needs was something we wanted to do. He wanted it to include the purchase of their own clothing when they reached 12 years (as his family had done), as well as entertainment, toys and games, etc. I wanted a say in clothing purchases, and was able to negotiate that out. We agreed that they would be paid their age on a weekly basis with percentages broken out for cash, long-term savings and charity. Those last two went into envelopes that eventually were deposited or mailed.
Was this the best way? Doubtful. But we read about it somewhere and liked it, plus the kids enjoyed getting a “raise” every birthday. However, were we constantly trying to remember if we had put the money in the envelopes? Yes! Did we find ourselves searching for ones and fives and even end up putting IOUs in the envelopes when we had none? Yes! Should we have discussed what qualified for a longer-term goal? Yes! Yes! Should we have better evaluated charitable causes that might have had enduring value to them? Yes! Yes! Yes!
Obviously, there’s no simple answer, but today’s kids have more money and infinitely more product ads and activities luring them to part with it. As parents, it’s important, even vital, that we give our kids the experience of figuring out what they want and how they’re going to pay for it. As someone I know recently pointed out, we have to give them the opportunity to fail, and learn from it, while the amounts involved are still minimal.
The beauty of FamilyMint is that if you choose to give an allowance, the tools are there to:
1) Open the conversation first between the parents, and then between the parents and the children, and,
2) Once decisions are made, take the drudgery out of the process for the parents and make it a highly motivating learning experience for all.
If allowances are not for you, the FamilyMint tool still offers incredible ways to teach your kids to appreciate the value of money and how to use it. Take advantage of it!
Copyright A View from the Other Side…Allowances © 2011. All rights reserved
A View from the Other Side
By Jayne Berkaw
When I first told my husband about FamilyMint, he couldn’t believe what a great idea it was. “I wish we had had something like that when our kids were young,” he lamented. We have four, and they are adults now; two with kids of their own, one in law school (on his own dime, but that’s another blog) and one in undergrad (another blog).
Today’s kids glob on to computer-based programs like it is genetically engineered into their DNA, so dated “tools” like the envelope system we used, piggy banks, etc. don’t capture their attention. And what’s worse, they focus only on the money, and not on what the money can do. Even our envelopes marked “charity” (for what cause, when/how to donate?) and “savings” (to what end??) missed the mark by a mile, even though we were at least trying.
I’ve asked a few people with younger kids why they aren’t on FamilyMint and a typical response is that they have bank accounts. Yes, we had those too, but unless you handle that really well, your kids learn nothing about planning, budgeting and goal setting and even less about the mechanics of making it all work. They do get pleasure seeing the number rise in their little passbooks when they make a deposit (the itty bitty interest they receive isn’t worth talking about). But that’s a fleeting moment compared to the “I’m in charge of my own destiny” sense they get from a program like this that draws them in with its intuitive design, engaging graphics and smart features.
Obviously, I’m a fan of this concept, and if you’re on this site, you feel the responsibility for putting your kids on the right path in life and have an understanding of how many issues and problems can be avoided later in life with an early understanding of how to manage money. As grandparents, we will be gifting FM to our grandchildren as soon as they are age appropriate, but how we would have loved to have it sooner!