All Financial Matters

We live in an instant society. With the microwave oven, cash machines, and the Internet, whatever we want is at our fingertips in a matter of seconds. Children have learned to want everything right away. Setting limits on your children’s spending habits can curb the urge to be less than patient when it comes to money.

An allowance is one way to influence the spending habits of your children. Start as soon as they can understand about money; set up a weekly allowance for your children. It doesn’t have to be much. The point of it all is to teach them to respect money and understand what it can do for them.

Money can also be given for jobs done around the house above and beyond their regular chores. Children are very creative. If they need to earn more money to buy a special item, they will propose almost anything to find the money.

Once you set an amount for the job, don’t flounder. Some parents see how hard their kids are working and they either help them finish the job or pad their agreed upon price. Resist the urge to help them. They will learn the value of a dollar truly earned if you let them do it themselves.

Don’t offer to pay for half. It is okay to make up the difference if they forget to account for tax and are short a few dollars. Coming to the rescue and offering to pay half encourages children to spend over their limits. If Mom and Dad are going to pay half for everything, then the kids will see their money as instantly doubled.

When parents don’t have the money to purchase something, they have to wait until they have it. The sooner your children learn this fact the better. Managing their money at an early age gives them the skills to handle a pay check when they are old enough to get a job.

With money from birthdays, holidays, and allowances, your children will have a good deal of cash. Every time you leave the house they’ll want visit the toy store or the video store. In advance, decide that shopping trips will be limited to once or twice a month. Choose the days and stick to it unless some unforeseen emergency crops up.

In that time, your child will save more money. They already know the rules of shopping, but they will still try to get you to change the deal. Waiting until the appointed time teaches patience. It takes patience to save money and also discipline. They are learning both at the same time.

It is easy to give in to those cute little faces and buy the kids whatever they want. But, this won’t teach them to form good habits where money is concerned. When you set limits and schedules, stick to them.

An allowance is money given to a child because they are your child. It is not based on chores done or not done, but not contributing can see the allowance suspended until things get back on track. Even at this rate, what is the right amount of allowance to give to a child? Here are some suggestions.

Consider the age of your child. A seven or eight year old is not into clothing and shoes with enough interest to want to own a tremendous wardrobe. Money is mostly for teaching purposes, and fifty cents to a dollar is enough at this age. The most that kids will want is a small toy or a piece of candy. There can be weekly or monthly trips to the dollar store so they can use their money to buy items they want.

As kids approach the older elementary ages, they are usually interested in sports and looking good. As parents, we buy their clothing and other necessities for school and home. Anything that they want above that can be purchased with their allowance money. The allowance can be raised to three dollars a week.

Outside of the basic necessities, kids don’t need too much. They may see a new video game, but they can save their allowance to purchase it. Depending on the price of the game, they may need a month or two to save the money for it.

As the kids reach the tween years, five dollars a week is a healthy amount. It is enough to go and see a movie with friends. If they want any refreshments, they’ll have to save two weeks allowance. You are still buying their school clothes, so their money will be reserved for time spent with friends or personal wants.

Teenagers who are not old enough to have jobs need a little more than five dollars. They are becoming social butterflies who want to spread their wings. Money can be saved for a new pair of shoes or going out on a date with someone they like. Ten to twenty dollars a week is good for them. Once they get a job the allowance can be stopped in favor of earned income.

With an allowance come the responsibilities of being a part of a family. There will be chores that are required for kids to do around the house because they live there. These chores are not for additional money, but a non-negotiable duty.

Younger children can be responsible for picking up their toys after a play session. The toys are small enough that they can pick them up. Clap and smile to assure them that they are doing a good job.

The chores increase in number and difficulty as the child gets older. Older youngsters can load and unload the dishwasher and keep their rooms clean. If you have boys this will likely be the single most frustrating chore for you and for them. They usually don’t like to be neat and most moms can’t stand a messy room.

By the time they are teenagers, the chores are more involved. Teens can take out the trash, vacuum the floors, and clean their bathrooms. If your teen has a job, the chores can be spread out to accommodate their work schedule, but it is still a family responsibility to perform them.

It’s hard to teach teenagers something that they don’t think they already know. Parents are seen as ignorant of what is important to them. Despite what they think, however, parents do know about money and the consequences of using it unwisely. Show them what you know by teaching them a few things about money.

Parents have experience on their side. They have dealt with money and the ups and downs that come with it. Parents can lend insight to teenagers about how to make and manage money. From day one, they can set teenagers on the right track to understanding the advantages money and good credit can bring into their lives. Here are some tips.

1. Start a savings account. When your teenager receives money from their first lawnmowing or babysitting job, take them to the bank. Saving money is an important part of managing money. Ask them to give their money a month to sit in the account before they spend any of it. This will be hard, but one job may pay forty dollars that will be gone in a weekend. After a month, their savings account may have $200 in it. That can buy a new outfit and leave some money for a rainy day.

2. Invest in a certificate of deposit. When your teenager has accumulated around $500, have them put the money in a CD. The longer you keep the money in a CD, the higher the interest rate will be for you. Try a one-year certificate. After a year, you can sit down with them and decide what to do with the money.

3. Sleep on it. When your teenager sees something that they really want to purchase, ask them to sleep on it for a night or two. Parents know all too well about buyer’s remorse after an emotional purchase. Implementing the “sleep on it” rule of thumb in your household can save your teenager from feeling that same remorse. They want a scooter today, but by taking the time to think about the purchase, they may choose to save to buy a motorbike instead.

4. Develop a financial plan. Adults are told to come up with a budget for their family, but teenagers can benefit from a similar plan. Get them to list their wants and needs in two columns on a sheet of paper. Wants and needs are subjective things, so be sure that you explain the fine line difference. They don’t have to do it in one sitting. Give them time to think about it.

5. After they prioritize their wants, let them figure out how much money they would have to save to purchase it. To make the process less painful, they can figure up how much money they want to devote per month towards the purchase. This leaves them disposable income for dates, nights out with friends, and incidentals like gas.

Raising a teenager that understands money is not impossible. Starting when they are young children lays the ground work for future teachings. Teenagers that can take control of their money become adults that won’t want for it.

Children learn by watching others. Who do they watch more than their parents? As parents, we need to be careful to put our best foot forward in matters of money in order to give our kids a healthy start in that arena.

A parent that spends money today without giving thought to tomorrow will almost certainly teach their child to do the same. Using money as a means to an end is not a good lesson to pass on. Money is important because it is a necessary tool of life. Money does not turn a house into a home, but it does keep a roof over one’s head and food on the table.

Money that is handled with respect is money that will be around for more than one day. Lack of money is the reason why many couples in a marriage argue. Parents that come from two different backgrounds when it comes to money will likely butt heads. Before the children become adversely affected, the parents need to talk out their differences and come to a common viewpoint on how to handle the family finances.

Learning to save takes time even for parents. We didn’t all grow up with money-savvy parents. But now it’s time to break the cycle of overspending and debt. Parents can take a money management class or read a book on the subject. As they learn, so will the children. The information can be shared at family meetings.

If the family doesn’t have a financial plan, start one. Gathering the family together to do this is another way to include children in financial decisions. Being part of a family meeting shows children the role money plays in the home. Family meetings can be a place to voice any concerns about money and to find answers together.

As a child, my family didn’t have a lot of money. When I was old enough to have a job, I would spend my money on whatever I wanted. I didn’t want to live a life where I was deprived of things because I didn’t have money. I worked hard, but spent every cent.

This carried over into my adult life and created problems when I got married and started a family. My parents didn’t do anything wrong, there just could have been a few more “right” things done. We never talked about money. It was a “grown-up” thing and children weren’t included. I went with what I perceived to be the truth when it came to money.

It is better to explain money matters to your children instead of letting them draw their own conclusions. That doesn’t mean that each decision you make needs to be run by them first. But when major money changes occur, include the children in the discussions so that they know what is going on and how the family plans to deal with the situation.

Poor money choices, even for the right reasons, can affect the way children deal with money. You may think that the children aren’t watching, but they are — carefully. Make use of every opportunity that you have to arm them with the tools that produce good money management decisions.

Have you ever written a check for something that you knew you didn’t have the money for? People do that more than you think. They play the game of “robbing Peter to pay Paul”. This is a common practice that can lead to debt and bad money management.

When you take a job, you are given a salary. The salary only changes if you get a promotion. For those that work an hourly wage, the amount of your check changes if you work more or less hours each week. Despite our paychecks being fairly consistent, people continue to spend more money than they earn.

One cause of this is the “buy now and pay later” trap. Knowing that the first payment is two years away gives consumers a false sense of security. They may have walked into the store to purchase a bed, and end up walking out with the entire bedroom set because they don’t have to make payments until 2009! If you didn’t have the money to purchase more than a bed in the first place, what is the logic of purchasing furniture worth three times that much? In two years you may still not have that much.

Credit cards can also be a trap if not used with discretion. Statements come at the end of the month. Erroneously you might think that although you don’t have the money now, you will have it when the bill comes due. The problem with this thinking is that you haven’t figured in the budget the money you just charged to the card. Once you pay the other bills, there won’t be enough to pay the card balance so you pay the minimum. An unpaid balance on the credit card results in a larger balance next month even if you don’t charge anything else.

We have to learn to be financially responsible or the debt situation will worsen. More people will file for bankruptcy or pay credit counselors to fix the debt problem. While these options are available to help those who have gotten deep into debt find their way out, far too few people take advantage of the help that is offered.

Carrying a certain amount of debt has become a status symbol. Everyone else has debt so why shouldn’t I? People are not pressed to get rid of their debt. As long as they can pay minimum balances it doesn’t seem to matter that it will take five years and several hundred more dollars to pay off a credit card.

As long as there is a credit company or store willing to extend more credit, the problem of overspending will continue. How we handle money affects the next generation of consumers. They learn from watching us. What are we teaching them?