I will be the first person to admit that I'm not always smart with money.
My mother raised me on her own after my father passed away and she never really taught me ways to be smart with my money. Rather, I picked up on all of her (not so good) spending habits while we were out shopping as a child. My mother hardly used cash and always had her credit card or used a check while out and about. I remember asking her, "Why does that machine just give you money when you ask for it?" I was talking about the ATM. Obviously I didn't grasp the concept of an ATM and the fact that you have to put money in for it to come out.
Because of my mother not explaining financial caution to me, I got a credit card at 18 and spent more than I could handle. I did attempt to pay it off with my minimum wage part time job, at the time, but I didn't get very far and decided to give up. After that I got a few more credit cards and took on even more than I could put on my plate at that time. Fast forward 10 years later and I'm struggling to pay off my debt, including student loans.
For this reason, I want to teach my kids how to be financially savvy now that I believe they are both old enough to understand the concept and value of money.
> When should you talk to your kids about money?
I think around 6 or 7 is the best time to do so. Some people say that you should start as soon as they are old enough to understand what is going on in the world around them (2-3),but I feel that is way too young. I think around 6 years old they are old enough to understand how much money they have and what happens when they buy something. It's important to tell your children that money has value and when they spend it, it's gone until they can make some more money.
> How to talk to your kids about money?
It's important to let your kids know that money just doesn't come to them with a magic wand. There's no money tree, there's no easy way to get money. The only way to get money is for them to earn it themselves. We are following the way of age = allowance amount. (i.e. If your child is 6 years old, they will get $6 a week if they do their chores and behave. If your child is 8, they will get $8 a week and so on...)
My kids know that everything we have, we have to pay for. I explained to them that every month mommy pays for the rent so we can live in our house, cable so that we can have TV and internet, electricity so we have lights in the house, our cell phone bill and other bills to keep living how we are living. Of course, they found that out the hard way when our cable was shut off when I was between jobs. As much as they wanted Disney Channel and Nick Jr. back, they had to patiently wait until mommy had the money to pay for it. As much as I am ashamed to admit that fact, I'm sure that I am not the only person that has happened to in the past.
Explain to your kids that saving is important for the future. Do they want to go to college? Do they want to buy a car when they get older? Is there something special they want to save their money for? Then they have to SAVE. We are doing the envelope method.
We have two envelopes per child and each has "My Money" on one and "Savings" on the other. I have a small lock box that we will be keeping our savings envelopes in so they are not tempted to spend any of it. The envelopes for the girls to spend, I will be keeping in my purse each time we go out just in case they feel the need to purchase anything when we are out and about.
I am going to follow the method that for them, 10% goes into savings and 90% they can keep for themselves. So that would mean that Olivia (6) would have to put $0.60 into savings every week and Alayna (8) would put in $0.80. I explained to them that though those amounts are small, they will add up over the course of a year.
We are also turning this into a math lesson for my girls. We found two blank check registers when we were moving and I knew they would come in handy. We put each girls name on one of them and will start this week entering:
- How much they get at the end of the week- Calculating how much they have in total- Entering in their purchases- Deducting their purchase amounts to equal how much they have left.
I feel that if we put this all down in black and white it will be a lot easier for them to understand where their money goes and how fast it can go when you want something you don't need.
Why am I doing this?
Plain and simple -- I spoiled my kids for years. They seem to think that every time they go shopping with me they are entitled to my purchasing them a toy, which is not the case. I want them to completely understand the concept of money and how quickly you can spend it without even realizing it. If I don't teach them now, I worry that in the future they will get into the same problem I am now in, trying to pay off tons of debt.
