Jeni Delineates the Thompson Take on Kids and Money

I was chatting in the nursery during Sunday School today about this and that, and the subject of chores and allowances came up.  Now I know there are many, many strong opinions about this, and the purpose of this blog post is not to quarrel with any approach to teaching kids about money management, but rather to tell what we do right now (it could change this Friday) and why.  That’s all. 

We feel strongly that our kids should be taught how to manage money, and waiting for them to grow up and begin making money seems a bit late.  We have tried several different approaches through the years, and I’ll note them here briefly. 

First we did the milk cartons stapled together so kids could deposit their money into the giving carton, the saving carton, or the spending carton.  This would have been fine if a)we actually gave them money to put in those cartons, b)we had room to store 3 sets of them in a very small, horizontal-space-challenged house, and c) I had washed the cartons more thoroughly.  So much for that system.

Once we moved to Georgia we tried a fake money system, and I even printed Thompson Bucks with our kids’ pictures on them, but none of us could take it very seriously or keep track of who got paid for which jobs.  (I had infant twins, for crying out loud!) And then there was the question of the money only being good for things that I was willing to buy and put in our “store.”   Next.

We abandoned that system and turned next to Dave Ramsey’s system for kids.  He takes the commission approach to chores, where kids check off on pre-assigned chores and get paid according to whether they do them or not.  Extra chores are not paid.  This is a great system if a)pay your children more than two dollars a week, b)you’re an organized person, and/or you have less than four children.  For us, it ended up that the kids were making about 5 cents for doing a chore, and really, that is just not motivating. 

I really like Dave Ramsey, though, and we used a lot of principles taught by him when we hit upon the system that works for us. 

Each child gets money automatically put into a savings account each month, according to how old he is.  Nathaniel is eight, so he gets $8 a month deposited for him, but he has no access to that money until he is older.  Ditto everyone except Patience, and she gets $2/ month until she turns three.  Beyond that, the boys get $2.50 a week because they live in our house.  Period.  They do chores, which are non-negotiable, and they do other jobs as necessary, but I cannot keep track of who does what when, so the two things are not connected at all.  They tithe on both their cash in hand and their savings plan, which is approximately fifty cents a week.  There is the question of everyone remembering to take his tithe to church, and there Mark solved the problem very effectively by not giving them that last fifty cents until about two minutes before the offering is taken.  Grace, the Twinkles, and Patie get no extra spending money. 

While putting money in a savings account for a kid, giving him money every week, and making him tithe are good things to do, they will not teach him everything he needs to know about money management.  So our system doesn’t end there.  Mark has, in his sock bin, three envelopes labeled with the boys’ names.  It is their emergency money, and after discussing the matter with them, we decided that twenty dollars would be a good long-term goal for their emergency fund, and they should try to get ten dollars in it as soon as possible.  When we began this system, we had the boys count what money they currently had from birthdays and such and decide how much they wanted to put into their Emergency Fund.  Each subsequent week Mark would ask how much they wanted to put aside.  Emergencies for our boys might be an unexpected invitation to a birthday party with the need to buy a gift or restitution for breaking someone else’s property.  These things (hopefully) do not happen every day, and would be considered emergencies. 

Once their emergency fund was beyond ten dollars, we allowed them to buy whatever they wanted with their money.  They were (and are) encouraged to save it for something big they might want, but that is not required.  It is with their discretionary money we allow them to make mistakes and learn from them.  Plenty of candy is purchased, and later the laments of not being able to buy something else can be heard.  Ben learned to love a used book after buying a new Calvin and Hobbes book for $20 that he could probably have gotten for $5.  Mark introduced them to charitable giving by way of the World Vision Christmas catalog, and now they must dip into their emergency fund to buy 5 ducks because they’ve spent their money on other things.  We remind them of vacations and let them know to save money if they want to buy things for or on the trip.

What we buy for our boys:  Not much.  If Ben wants a book, he buys it himself.  If Bradford wants candy or toys, he buys them himself.  We do give them birthday gifts, and they know exactly how much we budget for their birthdays and ask accordingly for gifts.  At the end of each school quarter, each school child gets a book.  We buy clothes for them, but I no longer buy them socks because they kept losing them.  Now if they feel they need more socks, they must save for them. 

Each year we plan to give them a little more responsibility for their money and possessions.  For next year, we are considering whether to increase their weekly allowance and require them to put a certain amount aside for shoes and clothes or give them a half-yearly clothes stipend.  Either way, we will be walking alongside them, guiding them to make wise choices regarding the purchase and care of their clothes, but letting them make some poor choices and living with the consequences.  

We are also very candid with them about our finances.  We use Crown Financial’s Mvelopes on-line budgeting system (highly recommended, by the way), and I like them to be present when I allocate Mark’s paycheck into the different categories.  I realize they could be indiscreet and tell random people how much we have in any one of our spending or savings categories, but that would be a small price to pay for their growing understanding of making sound financial choices. 

For instance, every kid loves to go out to eat, and I’ll sometimes present the option to them like this: “we have enough in our eating out fund to take you to take you to X fast food restaurant today, or we could go home and eat leftovers, and next month we’ll have more and can go to a nicer restaurant as a family.”  I make the ultimate decision, of course, but just showing them my reasoning helps them understand spending money on convenience has an impact on our ability to do to other fun things as a family. 

The repercussions of this are a little comical.  First, I am more accountable to my kids for how I spend money.  They care, because they know it impacts them.  I must be more careful to model good spending habits.  Second, they are okay with wearing bathrobes over their clothes rather than turn up the heat because they know the extra savings means more to spend on their trip to D.C. with daddy next year.  Right now my nose is cold, but if I turn up the heat it might mean I don’t get a souvenir. 

And now my littlest is either protesting not getting an allowance or needing to go to bed, and I think it might be the latter…