By: Jeremy Skoglund, Vice President Trust Officer
If you’re a parent like me, we sometimes forget that in addition to keeping our children safe and supplying their needs. We also need to teach them how to be an adult well before they become an adult. Today, I’d like to help you educate your kids about how to handle the money they will be in charge of when they’re older. Feel free to read on for more detail or just read these highlights:
- Decide on an approach, such as an allowance, to teach your kids about money and stick with it.
- Use a separate jar for Savings, Donations and Spend. When kids get money, have them put some in each jar.
- My wife and I also added a Family Tax jar to teach them about taxes and use the following percentages:
- 15% goes to Family Tax
- 10% goes to Donations
- 50% goes to Savings
- 25% goes to Spend
There is plenty of information out there on how you should go about teaching your kids how to handle money. Some people say that an allowance is a great solution. Their kids do chores around the house and get paid a certain amount. This can definitely teach them how to earn money. The downside to an allowance is that if the child decides they have enough money right now, they may decide not to do certain chores. A good way to alleviate that problem is to have a set of chores that are required and a set of additional chores that can be done for the allowance. My wife and I decided against an allowance all together as our philosophy is that every family member has to help out with chores because they live here. Mom and Dad don’t get paid to do work around the house. There is no reason our kids should get paid for chores.
We decided a few years ago that our goal is to make sure that our kids become good stewards of their money and learning how to handle their money was the most important part. We separated the daily chores around the house from money. How we get them to do their chores is a topic for another day. We decided that we would provide them with a weekly amount based on their age. We gathered some jars which they would keep in their rooms and spent a Saturday morning labeling the jars and explaining how it would work going forward. The jars included a Savings jar, a Donation jar, a Large Item Spend jar, and a Spend jar. We also created a jar labeled Family Tax, which we keep in another part of the house.
We explained that each time they receive their funds, 15% of it will go into the Family Tax jar, 10% will go into their Donations jar, 50% will go into their Savings jar and the remaining 25% will go into their Spend jar. The Large Item Spend jar is there for those items they would like to save up for, so once they have something in mind that is parent-approved, they can move some of their spend into that jar. We have noticed since we started that they are more selective in what they spend their money on as they have realized that once they buy something, they don’t have any money left for other things. As for the Donation jar, they take most of it to church for offering each Sunday. We talk about organizations and individuals that need financial help and, occasionally, they decide to use some of their Donation money to help those causes. A couple of times a year, we gather up the Family Tax money and decide as a family how we are going to use that. We used it once to purchase an annual Zoo pass. Another time it was an annual pass to the Science Center. These are things we probably would have purchased anyways, but this way the kids get to be a part of the process.
We figured we needed to call this something other than an allowance. Our kids have friends that get an allowance and we wanted to distinguish between what their friends get and what they are receiving from us, so we called it their Legacy Fund. It is obviously a gift we are giving them, but it goes beyond the money we provide. We hope that we are handing down a mindset that will promote financial stewardship in the future.
I think the hardest part of this whole process came down to figuring out the money that we give each week. For example, you can’t just give your child 5 dollar bills and expect them to be able to put 10% in a jar (that’s 50 cents by the way). You would have to figure out that they would have to have $0.75 for tax, $0.50 for donate, $2.50 for savings and $1.25 for spending. After that, you would know that you need 3 dollar bills and 8 quarters each time. There is math involved, but don’t get discouraged. It is well worth the time and investment. If you do happen to need help figuring out the best way to break up the money or have other questions on how to help your child learn about money, please give me a call at 701.255.440.