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OFF-TOPIC Kids and Money

AroundTheWorld

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When I started thinking about what kind of “money policy” I would have with my kids, I went through several stages and emotions before I figured out that I needed to be asking, “What do I want them to be” rather than “What do I want them to have.”

Two of the main decisions about kids and money – and what we have decided to do follow. For those of you that are parents… what have you decided to do with regards to these issues… and why?

Will you give them an allowance?

This one – for me is a “no.” If they want something, they can figure out how to make the money to get it. If they want to “borrow” the money from me… they can if they have good credit (a past history with me) and they will pay interest on the money. We do currently buy clothing for them. As they get older, this may change.

It is so fun guiding them, watching and teaching them as they work on developing their businesses. They are budding little entrepreneurs.

Will they get an inheritance?

This one is also a “no” – and they know it! When asking “who do I want them to be” one of the answers I have is that I want my children to be self-sufficient. I want them to be responsible and I want them to have the belief and understanding that they CAN do it themselves. They know that we may partner with them on a project – if it looks financially sound – but that they won’t be given anything.

We definitely don’t want our kids to have an attitude of “entitlement.”

The kids are funny… if they are teasing my husband, he will joke and say, “Hey… I’m taking you out of my will.” They laugh… “Dad… we are already out of your will!!”
 

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ErikV10

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Aug 2, 2007
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How old are your kids? LOL. They already know about wills.

Will I give them allowance?

Since I don't have kids yet, I will speak from my past experiences. I was a spoiled brat growing up since I was the only child for 9 years. I get whatever I want plus I also get an allowance every week.

I never really knew the importance of money back then. Since my parents business (telephone company in the Philippines) was doing really good, I always thought money will never run out. It was a hit back then since we were the only ones who had telephone and people from different places come to us just to call overseas. When land lines and cell phones came out, the business finally went out.

Parents stopped giving me allowance. They were always short of cash and I saw them struggling for years. That's when I finally realized the importance of money.

Eventually, one of their business was another hit so were back to the life were all used to. I got an allowance back. Ever since, all the money that were given to me were invested. I stopped wasting my money on stuff that I don't need. I never looked back.

I got hooked to business and investing. I guess that just came naturally to me after I see them struggling from their work salary.

Will my kids get inheritance?

Yes, I'd rather pass the money to people in my family than just giving it out to other people.

But of course, I will also teach them how to make their money work for them.

I will add more soon.

Best,
ErikV10
 

thecoach

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Aug 29, 2007
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Here's an article I wrote a little while ago about money and kids for a newsletter...I like the idea of giving them money if their 'credit is good' too though!

___________________________________________________________________________

To give allowance or not to give allowance? That is the question.

The age old question that has riddled parents for decades: Do I give my child an allowance or make them earn their own money? Furthermore, when do I start giving them allowance or stop buying for them and making them work for it?

While many people are set in their ways saying “That’s how my parents raised me and I turned out fine!”, why not take the steps to make your child a financial genius before they even get out of high school?

To answer the first question above: do both! Give them an allowance until they are old enough to create their own income (running a small business or get a job). By giving your child an allowance they have a greater appreciation for the things they buy and it forces them to think about costs and reconsider their spending habits early.

To answer the second question: Start when they are old enough to understand the concept of money. As soon as they understand that money is used in exchange for goods, you should start teaching them about it. When they start pulling on your pant leg screaming “MOMMY! Can we get that cool race car?” in the store, don’t buy it for them. Give them the money and let them pay for it themselves. Sometimes this could be as young as 5 years old. Once they understand how money works, start them out with an allowance. Make sure it’s on the same amount and on the same day every week. Kind of like a paycheck.

Now I know you might be thinking “Who gives a 5 year old an allowance?”. I didn’t say it had to be a big allowance, just an allowance. You can start them out with 50 cents or a dollar a week. Before you decide how much to give them you need to establish guidelines for what they are going to use it for. Figure out how much you normally spend on the things your child wants on a weekly basis and decide what you will continue to pay for (IE: meals and clothing) and what they will pay for (EI: candy and toys). One thing allowance should not be used for is payment for doing chores. Chores are the price of membership in your family.

Make sure that you make it clear what you expect them to spend the money on: 1) Sharing: buying gifts for birthdays, etc, 2) Spending: buying candy and toys for themselves and 3) Saving: encourage them to put some of it away each week for the bigger toys they want. An easy way of doing this is getting 3 small piggy banks for the child and labelling each one with the above names. Place an equal amount in each piggy bank each week. If you are giving them $3.00 a week, make them put $1.00 in each of the piggy banks. Piggy bank #1 (Sharing) can only be used if there is a note put into the piggy bank explaining who it was used for, Piggy Bank #2 (Spending) can be used for whatever the child wants. Don’t make the decisions for them. If they take their dollar and spend it on a chocolate bar and it’s gone in one shot, they are broke for the week. You can suggest they the next week they only buy hand full of 5 cent candies each day so it lasts. Let them make mistakes, it’s the only way they will learn. Piggy Bank #3 (Savings) is off limits unless the child can come up with 3 good reasons why they need to spend the money. By using the 3 piggy bank method you are establishing the solid foundations to any successful financial plan: charitable giving, proper budgeting and decision making when spending and paying yourself first.

As your child starts to further understand the concept of money and that savings are important, show them a way of making more money. This might be around age 7-9. Take them to the bank and help them up a savings account in exchange for Piggy bank #3. Teach them the basics of how interest and compounding works. Show them that the more they put away and leave it there the more accumulates. As they further understand interest and compounding, progress the savings account into an investment account like a mutual fund account.

If they feel that their allowance isn’t enough, make them justify getting more, just like a raise at work. This might happen around ages 10-12. Another option is to show them ways to make money for themselves. Some simple options (depending on their age) are lemonade stands, cutting the neighbours lawns or having their own table at the family garage sale. All 3 of these options will teach your child the entrepreneurial spirit. Like the old saying goes: “You don’t get rich working for someone else”, why not get them on the right track early? If running their own ‘business’ really isn’t their thing yet, get them a paper route, sign them up for officating a local sport if they are old enough.

___________________________________________________________________________


As far as the inhertitence?

I don't have kids but I think I will leave an inheritence for them if they don't need it. I don't want my kids to be under acheivers because they know they will cash in some day when I die. If they are too young to support themselves I will leave enough to make sure they are taken care of, but if they are old enough to support themselves they are going to have to earn it, otherwise it will likely all go to charity. I'll help them out, but I won't give them the silverspoon unless they know what to do with it.
 

kimberland

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Jul 25, 2007
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One of the things my Mom did
which I thought was a great idea
was have a family tax.

Of any money earned,
10% had to be paid back into the family.
This is likely why none of her 6 kids are still living at home.
'Cause you start to think
"I could use that 10% to pay for my own place."

Our allowance was also 10 cents a week
for every year of age we had.
So when we were 10, we got a dollar.
Forced us to save up and/or get a job.
 
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AroundTheWorld

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I think this topic fits in really well with the "entitlement" topic that is floating around elsewhere on these forums.

When thinking about our money strategies with our kids - we should also be thinking about what these strategies will teach them about entitlement.
 
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How old are your kids? LOL. They already know about wills.
They are 11,10, and 8.

We had a really fun morning...

The kids have started a business. They are putting ATM machines in local businesses. After setting up their LLC’s and doing research on various ATM machines available (prices, etc.) - and figuring out how to raise the money for the machines, the next step was to approach business owners.

They wrote a presentation - and each of them practiced it. Then, they targeted 3 businesses in town to approach. Each child took a turn presenting to the business owner. They got a no, no and a mabye (with no follow up yet).

We talked about the numbers game and that every no will bring them closer to a yes. They continued to identify potential locations - and continued to practice their speach with one another.

Then, yesterday they got a call. Someone had heard about their business and was interested in having an ATM at their location. So, they practiced what to say on the phone - and did a few runs with me. They went into a different room and called me. I pretended to be the business owner - and we ran through the conversation 3 or 4 times.

The real call was made this morning - and an appointment was set.



 

snowbank

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When I have kids this is what I'm going to do:

Let's say all the bills add up to $3,000/ month for mortgage, utilities, cable, internet, etc...

I'm going to have my kid pay for his portion of all the bills. So let's say his portion of the bills are $1,000/month. I'm going to give him an allowance of $1,010 for the month, but he'll be responsible for paying his bills before he can spend any of it. I'll also have them invest at least 50% of the remaining $10 or whatever they have left after their bills.
 

rcardin

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We have always paid for chores done rather than a set allowance. Our daughter learned how to save her money for important or large purchases. She has learned the value of money this way. This year she is in 5th grade. She goes to school across the street from where I teach. She has been walking across the street to my class room after school the past couple of years by herself. This year we have a few teachers at my school who have 1-3rd graders at my daughters school. She worked out a deal with these teachers for 5.00 a week to walk them over to our school and watch them on Wednesdays when we have a staff meeting. She has 2-3 kids that she watches now.
Lately it seems like she is the only one in the house with cash.
 

Jonleehacker

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The kids have started a business. They are putting ATM machines in local businesses. After setting up their LLC’s and doing research on various ATM machines available (prices, etc.) - and figuring out how to raise the money for the machines, the next step was to approach business owners.
Wow, that`s impressive. What a head start you are giving those kids.
 

andviv

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Atw, I M P R E S S I V E!!!!!!!!!!!!!!
 

Jorge

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I'm going to have my kid pay for his portion of all the bills. So let's say his portion of the bills are $1,000/month. I'm going to give him an allowance of $1,010 for the month, but he'll be responsible for paying his bills before he can spend any of it. I'll also have them invest at least 50% of the remaining $10 or whatever they have left after their bills.
In my opinion it would be better if you explain them how to make that $1000 into $2000 to pay the bills. You know, "Pay yourself first" If they are only left with $10 a month, then I can't see a way out for them...
 

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thecoach

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When I have kids I'm sending them to ATW's house to live! That's is awesome!
 

Jito

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All I can say is that I'm glad I don't have the responsibility of Children yet. I think there are a lot of factors that go into money decisions with kids. Ill use myself as an example. I was definitely given more allowance than I needed, however my mother and grandfather, also instilled the value of hard work and thriftiness in me and when ever something needed to be done, I did it.

I learned the value of investing and saving when I was very young, and have consistently invested my money since age 10. Conclusion: I don't think allowance is the problem, I think hands off parenting is.
 
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Get Them Involved!

When our kids got some Holiday money a few years ago, there were a lot of family talks about what they could do with the money. They thought about toys, savings accounts, etc. but in the end, they decided to buy some silver.

Yes. . . silver. How would they ever think to buy some silver???

It just so happened that about a week prior to that, we (the parents of the team) has been having a conversation about the silver market. They were around - sort of drifting in and out of the conversation. They got interested enough to peak at some of the charts and learn the basics of technical trading. (Buy low, sell high).

We didn't think much of it at the time, but a month later when they came to us and said, "Will you help us buy some silver?" we happily obliged.

If kids hear all kinds of financial, business, and investing conversations it is bound to soak in. They may not be interested in all that they hear, but they will be interested in some of it, and they will ask questions.
 

bpk1

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Wow, some of you guys are tough. I'm still in high school as is obvious from my age. I don't and never have got an allowance, instead I got paid for doing chores. I think it has taught me responsibility, and instilled in me the value of money. I mean I am on this site for a reason after all. I also have a deal with my parents in which I pay for half of what I want. For example, I pay for 1/2 of my clothing costs, which at this time has gotten probably a little out of hand (200+jeans, etc). So I slowed down on some of the spending. I got the money from x-mas/birthday money. Alot of that money I put into savings. I used some of this savings to invest along with my parents in a collector car. We'll make some money off the car once we sell it, which be before I leave for college, or maybe sometime this summer. The rest of my savings I'm probably going to start up a portfolio, and short stocks up until I'm in college. After I amount a good amount of money through that, I'm hoping to start up a hedge fund, getting funding from family and friends and run that throughout college. Lots of work still ahead. Sorry for getting of course.
 

Adam_C

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I don't have any kids yet and sadly I am not in the fast lane... yet. :p

It obviously depends on how you raise your children... but if you decide to give them whatever they want, they could end up like a Hilton, if you're stricter they could end up like a Trump.

I think the stricter way, always works out better in the long run.
 

PEERless

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Will you give them an allowance? Will they get an inheritance?
No and NO!

My $7.00/wk "allowance" was more of a salary, which could be docked for skipping chores.

As for inheritance: Gag me! There's nothing worse than the high-and-mighty attitude of a "trustifarian." My kids (should I ever make the error of breeding) will have to make it on their own.
 

Bilgefisher

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ATW...thanks for the catch...sorry for the 2nd post on this topic. Read almost every thread on here, but this one missed me. Good topic and well deserved bump.
 

Legacy Dad

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Allowance: No. Money to manage and invest. Yes

We use the 3 Jars Method and play Cashflow for Kids. My kids are actively learning how to invest in their Roth's and we discuss ideas for businesses.

For instance, my son wants to start a business to sell Italian Gelato here in the US.

Inheritance: Yes, after certain tests and conditions are met. This is a detailed plan I have on raising my children. The conditions stem around having adequate financial knowledge, having proven themselves on their own first in many different "tests" and finally when they have demonstrated the ability to run their own business and investments. (I project this to be somewhere around age 30-35)

This is further commentary from the other thread on this topic.


We encourage calculated risk taking.

We praise their grades in school but more so we praise their creativity and ability to think outside the box.

Our children are allowed to make most of their decisions and have been since age 5. They decide on their clothes, toys, activities and then we discuss the financial pros and cons of those decisions. At age 10, we give them their first checkbook and teach them budgeting.

Our children frequently sell old toys, items, games online or to friends to make extra money.

My whole blog is dedicated to the processes of raising my children, finance is one of the tenants of our parenting.

The Millionaire Mind research (although mostly slowlane) shows the top traits of millionaires were:

Honesty-Integrity
Risk Taking
People Skills
Dealing with Adversity

We focus more emphasis on these traits than traditional schooling, sports or the arts.

Lance
 

Z5 FILMS

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Damn, yall are mean. :)

I don't have kids, but I would give my kids everything and give them my inheritance. I would probably restrict the inheritance to the age of about 30 or 35 so they don't blow it on car audio equipment or some garbage like younger kids do. I think at 30 or 35 age most are mature enough to make better financial decisions. The only aternative is to give it to charity. And most charities only give a small portion to the actual cause. The rest is spent on supporting the charity. I would much rather give my money to my kids than to pay the salary of some secretary I don't even know. That's stupid IMO.

Plus after estate taxes and income tax there's not going to be much left anyways. So it's not like it would put them on Easy Street and they can go retire on a Carribean island somewhere. They would still have to work.
 

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AroundTheWorld

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Next Topic: FAILURE
What do you teach your kids about failure, either directly or indirectly?​

To obtain financial freedom in adulthood, one needs to understand that failure is found all along the path of success. This seems to be a really difficult concept for many in our culture to understand. We learn to fear, shy away from, and be ashamed of a failure. We shout our successes from the mountaintops and hide our failures in the basements. There are two ways to handle failure:

  1. Try. Fail. Quit. Never Try Again
  2. Try. Fail. Learn. Rinse. Repeat. Succeed.

Which path do you want your children to learn? How can your tailor your response in the following situations to help shape your kids view on failure?

  • What happens when they bring home a D? What does your reaction teach them about success and failure?
  • What happens when they fail to do a chore or fail to do it correctly? What does your reaction teach them about success and failure?
  • What happens when your child fails to wear a coat to the store or bring a lunch to school?

These are all teaching opportunities. We can support our kids as they struggle with the feelings of failure, we can help them figure out what they learned, we can help them put together a plan to fix the problem, and we can help them see that failure is a part of the path.

Failure is a tough one to handle when we - as the parents - don't have a healty view about failure. In order to give our kids a healty view, we have to give ourselves one first. Then, whatever reaction we have to our children in a failing situation can come from the heart.
 

Runum

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I've got to say that this is a work in progress so I don't know what always works. My poor kid has been blessed with 2 teachers for parents. If she forgets her homework, oh well, she is going to get a bad grade. If she forgets her coat she will get cold. If she doesn't do her chores she doesn't get to go out with friends.

I have been wanting to teach her about RE for 2 years now. She hates Cashflow 101 and will only play it if I make her. So now I have taken a new direction....she has just gotten hired to work at Walmart. Now my hope is that she tries several of these lower skill JOBS and decides for herself that she doesn't like it.

Most parents I meet with as a teacher are afraid to let their kids mess up and then suffer the consequences.. I try to get them to understand that the kids need to messup and experience the results now while their messups aren't so terrible or permanent.
 
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AroundTheWorld

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Unfortunately, I haven't found any good books on this topic... this one and on the topic of obtaining financial freedom with children.

I've kicked around writing a book on the topic.... add it to the list of things to do! lol.

I'm curious about this as well. Anyone else know of a good book on the topic?
 
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The other day, we bought a trailer house for the trailer park. Hubby was down the road supervising the transportation prep work.

9 year old daughter asked where he was. I told her. She said, "You bought a trailer? For how much?"
I told her, "One dollar!"

Her eyes got big.... she said, "Oh mommy. You should have told me. I would have bought it for a dollar and sold it to you for one hundred!" LOL. That made my heart sing.

"We would have paid $100, too" I told her. She laughed and laughed at that.
 

servicefly

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I love this thread! I have a 3 year old daughte and I have worked out my plan:

No allowance. When she wants something, her and I will work out a method for her to get the money or the item. We will negotiate the terms.

For her birthday we give to someone or a charity, she doesn't get gifts from me. She gets them from the rest of the family unfortunately.

What ever she gets interested in, I will support her if she works with me to get her necessities. Like soccer, she and I will work out a program for the uniform etc.

As for inheritance, i will leave my children with a trust fund charity foundation, for them to decide who gets help and how. They will not get a salary for running it.

I will give them a student loan for college with expenses with negotiated terms.

As for credit, I don't believe in the credit system. When I had money before my credit went from very poor to excellent as my cash assets increased! Financing is a fool's game. Building credit is a way for the lenders to get you to finance a way to live above your means rather than work for your means. It is a societal flaw we have in America.

Final comment, I was raised exactly opposite and it hit me hard throughout my career. I love my daughter more than any other person on this planet!
 
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Final comment, I was raised exactly opposite and it hit me hard throughout my career. I love my daughter more than any other person on this planet!
Care to expand? How did it "hit you hard" ?

Seems to me that the pendulum swings in a lot of families when it comes to this. If someone grows up "without" and makes money, they decide they don't want their kids to experience going without, and so they decide to give their kids what ever they want - - and visa versa...
 

NoMoneyDown

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I've got to say that this is a work in progress so I don't know what always works. My poor kid has been blessed with 2 teachers for parents. If she forgets her homework, oh well, she is going to get a bad grade. If she forgets her coat she will get cold. If she doesn't do her chores she doesn't get to go out with friends.

I have been wanting to teach her about RE for 2 years now. She hates Cashflow 101 and will only play it if I make her. So now I have taken a new direction....she has just gotten hired to work at Walmart. Now my hope is that she tries several of these lower skill JOBS and decides for herself that she doesn't like it.

Most parents I meet with as a teacher are afraid to let their kids mess up and then suffer the consequences.. I try to get them to understand that the kids need to messup and experience the results now while their messups aren't so terrible or permanent.
Actually, Runum, I had an idea I was kicking around about 6 months ago that involved creating a program for children to learn not only about financial responsibility, but set them on the track to financial independence. Teaching is far from my forte, but I figured someone who is skilled at teaching (children) AND understands all that entails financial independence could make this work. The school would be a supplement to public/private education a child receives, and not a replacement, as it would only teach a singular, vertical "subject".
 

servicefly

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ATW,

MY parents were rich until I was 5 years old. They divorced and became very poor (both of them). They were both very secretive about their finances growing up. My father blamed everyone else for his problems. My mother got back on the horse and started Real Estate investing till I was 10. She lost everything around that time. She has always been secretive about money; therefore, I learned about finances in the military which is not good.

It took me years to figure out how proper business finances work! My parents never taught my brother and I how to get what we want, they inadvertently taught us that we were lower class and money was the root of all problems. My mother still says she gave up her Entrepreneurial enterprises for us kids. She never realized that parents lead and teach by example. Sometimes families get in a rut of hopelessness (specifically rising above lower class mentality).
 

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