Bill Gates I Am Not: Teaching My Kids About Money

Sharing Saturday

One morning this week, as my nine-year old was getting ready for school and I was scrambling to get ready for work, I realized I had misplaced a check from a client that I wanted to deposit that day. I flew around the house looking for it, and enlisted my son in my search. 

“Where would you go if you were a $1,000 check?” I mused aloud as we hunted.  My son, who loves being helpful and was having a good time working with me on this project, suddenly looked up with eyes as wide as saucers.

“$1,000?!” he said.  “We’re as rich as Bill Gates!”

I guess it’s time for some financial education in my house.

First of all, let me be clear. I don’t usually go around misplacing $1,000 checks (or checks of any amount, for that matter.)  This was a particularly hectic week, and dealing with my mail was pretty low on my priority list. However, getting paid by my clients for my work is never low on my priority list, and I needed that check in the bank as soon as possible. I am not now, and never have been, Bill Gates, and so $1,000 is a lot of money to me.

I can’t remember when I first started understanding the real value of money. Perhaps it was when I started earning some babysitting income, although, if memory serves, most of that went right back into the Gap and the local record shack.

Or maybe it was in college, when, for the first time, I encountered peers who came from homes that were significantly more well-heeled than my own. Kids whose parents weren’t borrowing against their life insurance policies and scraping every cent of their public school teacher’s salaries to send them to an unbelievably high priced private college. Kids who had disposable income to spend on keg parties and drugs. 

I desperately wanted to take trips to the local mall with my friends who had more disposable income than I, but I was usually too busy saving my pennies from my work-study job and paying my rent to be able to afford a new Benetton sweater. I got myself into my first real financial pickle early in my freshman year when I spent all my money on quarters for pinball and literally had nothing to carry me through to the end of the semester. And despite my best intentions, I still wound up spending more at the outlets than I should have, with a heavy price to pay at the end of the school year.

Learning about finances through crisis management is not optimal. My parents were not particularly smart money managers themselves, mostly because there was very little to go around in those years, and they didn't do a lot to teach me how to balance my checkbook. Our family learned about money by what we didn’t have and couldn’t afford, not through an active financial education lesson (but again, let me be clear -- until I was up against the rich kids in college, I honestly never felt I lacked for anything, thanks to my parents’ good attitudes and the fact that everyone I knew growing up was in the same financial boat as we were. But after encountering the concept of disposable income, I admit I became quite covetous.)

Today I am living the American dream.  My fortunes, although certainly not vast, are significantly larger than my parents’ were at my age. My husband and I, although not wealthy by our community’s standards and still living a fairly proscribed and budgeted life, fall into the second or third wealthiest tier in the US. We have a small amount of disposable income, enough to allow us to travel a little, buy the things we want, not just the things we need, pay for bar and bat mitzvah celebrations for all three of our kids, save a little for college and enjoy our lives in relative comfort. We had a rough recessionary year, but we are rebounding. We are very, very lucky.

But we are not rich. And for my son to think that we are tells me that he still has a lot to learn about money.

Years ago, when my kids were little, I became determined to figure out how to teach them about money in a more useful and proactive way than I had learned.  I have never forgotten the Oprah show I happened to be watching (probably nursing an infant) about kids and money. The guest suggested that instead of giving your children an allowance, you control how it gets divided into three parts - use three separate containers of some sort, and put 1/3 into spending, 1/3 into saving and 1/3 into charity.

I still like this idea, and in fact, bought a piggy bank for my daughter several years back that had three little pigs and three slots for this very equation. I thought I was being so smart about how to give her her allowance. However, from the beginning, I found that it was nearly impossible to find three equal portions of quarters in my wallet at any given moment.  The 3-3-3 allowance idea quickly dissipated.

I continued to be forgetful about my kids' allowances until the youngest one had reached the age of being old enough to get one, and I realized that I had to figure this thing out. So I moved into a monthly allowance, based on age, put it on repeat forever in my electronic calendar, and it has been working smoothly ever since. I no longer try to divide their monthly income, although I wish I could offer a little more guidance on how they save and spend.

My teen has been earning his own money for a couple of years now, with a teaching job at our synagogue and some babysitting in the neighborhood. He also has money saved in his bank account from the generous gifts he received for his bar mitzvah, and we have allowed him to dip into that money for two large purchases - a phone and a computer. But much like me at his age, he has mostly been spending his money on clothes and music and Subway sandwiches.

My two younger children are just starting to find ways to spend their money, primarily on little doodads like Silly Bandz from our local neighborhood shops. But in short time, there will be many more requests for big ticket items and lectures from me on how they have to save their money if they want that iPod, or that phone, or that pair of jeans.

I am still in a quandary as to how to better prepare my children for their financial lives. College is looming for my oldest child, less than three years away.  We are fortunate to have some funds put away for the tuition (please, oh please, get into a state school.) But I don’t have a clue about how to deal with his cash flow needs while he is living away from home.

So I am going to fling this question out there to the Current Mom reading population: how do you teach your children about money? How do you prepare them for a lifetime of financial planning and responsibility? What do you do when your kids are in elementary school, high school, college?

I look forward to hearing more about your thoughts and ideas about kids and money, with the hope and prayer that none of my children (or yours) will ever spend their last quarter on a pinball game.

 

Photo by Alancleaver_2000 via Flickr

 

 

 

 

 

 

 

Comments

[Katherine]

Great post, and one that is very much on my mind. We just started giving an allowance to our 4 and 6 year olds, in the hope that they would appreciate what it means to spend $10 on an electronic hamster. (5 whole weeks' allowance!) But instead, they seem happy to blow the entire thing on trinkets like Silly Bandz or those dime store magic tricks that break as soon as they get them. No matter how many times I encourage them to save up for the thing they really want.

As for charity, I don't like the idea of forcing them to give - I want it to come from the heart. But now that all the other kids at religious school give some change for charity each week, my 6-year old doesn't want to stand out by not contributing.

It's hard. I guess you have to let them make their own mistakes, and learn from them, and hope that they never end up inadvertently choosing pinball over dinner. (Although, that would be a lesson they'd remember!)

[Paula Lewis]

When Leah has any money it usually ends up on the floor with everything else. Sigh.

[Cynthia]

Karen, Your idea of three piggy banks can still work. Make one a charity box instead and let them see you put money in the box every sabbath.
I was lucky - I had little money given to me as a child, and without giving away my age, was given pennies to give to tzedukkah (charity) at Hebrew School and a small amount for me. I could spend it or save, there would be no extras. I started babysiting at age 11, and saved and used that money to send myself to summer camp, and with after school jobs in high school, saved enough to buy a car at age 17, and send myself to community college at night while I worked during the day. I am not trying to play the pity violin, but I learned to discern the difference between what I really wanted and what I craved at the moment. A couple of impulse purchases is all it took, or I had to work more to make up for it. I learned that I could work and increase my sepnding power. My kids were taught to save by being expected to work for their allowance. They were given a set amount, but had household jobs to do and their money had to last. For an especially good job or extra tasks (geting the house ready for Passover) they could earn a bonus. There were no loans and they both learned to save for the big items. My daughter graduated from Brandeis, a very pricey college and while she had some scholarship help, and I paid a portion of her tuition, she had personal $20,000 in student loans and paid off her loans and a car loan five years after graduation. My son is on the same track, paying off student loans, three years after graduation,and working two jobs. My kids were taught the power of self sufficiency and that charity is also expected. I gave them their allowance on Friday and we all put money in the pushke *charity box) together before candle lighting. They learned from example.

[Moneyprofessor]

A great and timely post. I've always been a firm believer that learning about money should be done around the kitchen table;it's a question of imparting your values to your kids.

[FamZoo]

One thing we've done as our kids have moved into their teens (4 of the 5 at this point!) is to take a clear area of spending - like clothing - and turn over the responsibility to them. We have them propose an annual budget, review it, and approve it. Then we give them an allowance based on that budget and have them make all the purchase decisions (as long as they stay in budget and adhere to a few high level family guidelines) and deal with the consequences (like blowing most of it on a one-time prom dress and having to skimp the rest of the year).

It's been a valuable learning experience every time and a good one to have under their belt before hitting college.

[Priti]

Karen,

I give all the coins to kids to put in piggybank. We also talk about pitfalls of loans, how to grow money. Another site that helps parents teach kids about money is http://www.threejars.com

Money flow is so easy nowadays that kids always think it is easy to earn money. It is not. Saving is the key. Budgeting is next.

[S.Yean]

This is a great post and thanks for the sharing. How kids perceive money depend on the value parents' impart to them.

I gave my two kids allowance but they never spend any. As far as I can remember, my daughter only bought a mechanical pencil she likes. Another time, they dig into their allowance was for the school fund raising. And, that's it! All the money went into their bank account. They don't seem to have any material things they want to buy.

Recently, I was surprised to find out their friends' parents rewarded the kids with money when they do well for the school examination. It is a norm when I found out most of the parents in the school did the same. Luckily, my kids are not motivated by money to study hard.

As far as I am concerned, teaching them the right value about money is important. When the time is right, we will definitely want the kids to go out and work to earn some pocket money. This is already in our agenda.

[Computer Repairs London]

Really True amazing words of the post. I think Bill Gates has done a lots of development and have shared their income with the charity funds to reduce the poverty in the world and free from dangerous virus.