I challenge you this month to teach your kids about money using your family economy however it is constructed. Read on for some inspiration. I will discuss our strategy, including payment details and how we pay for it, as well as the debate on save versus invest. Our strategy is a mix of systems I have learned over the years as well as those we have developed. We need a system that works well for us. A system that suits you, your family.
We knew that there was one rule that would make our system work. We couldn’t buy gifts for our children (except for Christmas and birthdays). Everything else was easy.
Marco, my 9-year-old son, was recently asked to picture what it would be like if Target gave him a toy he wanted. And then I bought it. He could ask me for a game, fashionable shoes, or his favorite snack at check-out. It would be a gift for him if my husband or me bought it.
Marco looked suspiciously at me, and asked, “what’s the catch?”I explained to him that he would have all his savings in his bank and stock accounts, and that he would not be able to save any money.
He laughed, shook the head, and said indefensively: “No way. No way.”
He is just like his younger siblings and loves to make money. He loves to spend the money he earns, and, people, I must say, he is becoming more comfortable saving. Nothing can smell like deprivation. I have been watching their interest in the economy grow over time and it has made me wonder whether we aren’t tapping into a deeper human need. It might be fun for them to want something they don’t have, and then work hard to get it. Why would I want to take this chance at such an early age?
It is worth taking a look at the retirement plans I see. Young people are often unprepared for the financial world that traps and traps them. I think about the $50,000 student debt they thought would pay for themselves or the credit card debt they took out trying to see the part of success that Instagram influencers claim is so important, even though you aren’t yet successful. Could I now prepare my children to avoid falling for these traps? I hope so.
The Gutierrez economy makes it easy for the children to fall into money traps, and suffer minor consequences. I do my best to help them financially whenever possible. I know better here than I do over there.
My middle son Max, aged 7, broke my husband’s iPad pro last year when he dropped it. Max made a $400 deposit from our savings in order to replace the iPad pro. It was an accident. All the kids were shocked when we took out the cash from his account. Even I was a little nervous about that one. Max was determined get his money back in his savings account. Max learned how the dishwasher works and how to use a shop vacuum to clean my minivan. I have enjoyed driving for many months in a strangely “clean minivan.”
My main goal was to ensure that each of them understood the value and benefits of money, and that they could pay for themselves first. Maybe then they will be able make a conscious decision and start saving for retirement right away they get their first jobs.
We have created a simulation for a retirement account structure. They must save at most 10% of their earnings. We match 100%. They are not fully responsible. “vested”If they use the money to purchase a car, they will be eligible for our match. They can also withdraw from their savings. However, we can withdraw if they do.
They can invest in stock markets through individual Stockpile accounts but must save a certain amount before they can.
They can spend the rest of the money on whatever they wish. Yes, they can still go on the Game Goblins shopping spree but I encourage them to save instead. They can do whatever they want. (We do have rules. We don’t allow electronics, video games or other things that might hinder their schoolwork.
This is a summary from what has been fairly uncontroversial to this point.
• Stop buying kids stuff.
• Define a long-term savings goal.
• Make a deal about how much they must pay themselves first into that goal.
• “Match”This goal can be achieved by opening savings accounts.
• Let them spend the rest.
Let’s now get down to the details of how we get money in our kids’ hands. You will have to judge me. I will accept it. I am humble enough to admit it might be a mistake.
I pay my children to do everything.
I pay them to make food suggestions, read chapter books during summer, go to sleep without me nagging and help me around the house. I pay them if the kids get up in time for the bus at 6:45 am. This saves us from driving them.
This would be a controversial topic for many people. Instead, children should be expected be natural helpers and citizens of the household and should receive a fixed allowance. But if you asked me which system would I choose, would it be mine or theirs? “both.”It is important to know how they get their money. The important point is that they will be able to make informed and properly incentivized decisions about what they do with their money: how to save and how to spend.
Because of the hard currency shortage in 2021, we now use beautiful wooden tokens. You can purchase them on Amazon. One token is converted to one quarter. I have a large bowl that holds the tokens. This is a huge improvement over the jars I used for coins and cash. Each child takes their token from the bowl, which is out in the kitchen. Imagine how much easier it is to reward tokens if tokens can be grabbed from the bowl in the kitchen before being placed in the jars.
Different chores or objectives earn different amounts. For example, to make it to the bus on time you will need 5 tokens or $1.25. It may seem like a lot but they must get up at 6 :15 a.m. to have breakfast, dress, then be at the bus stop at 6.45 a.m.
But, you can take what is given. I can accept tokens for shoes that have been left on the ground, and toys that are left around.
They sort tokens into four piles ($1.00) and then count the amount I can cash out. I then pull up my banking app, transfer money to my savings accounts from my checking account and multiply the savings amount with 2. I then give them the remaining cash to spend.
If each child has saved enough money, I will transfer the money into their Stockpile accounts. They can then buy an ETF in the stock market. They find stock markets unappealing since they started their investing journeys right before the recent downturn. But they trust me and will buy through the downturn.
Big message: Make sure the system is easy to sustain. This means having enough tokens available to buy and keeping large amounts of $1.00, $5.00 and $10.00 bills in safes. “cashouts”When the bowls are full or the children ask for it.
Remember that there is no perfect solution. “system.”We may regret certain aspects of our system one time, but we won’t regret trying to teach our kids money.
Do you have a money system that works for you? Would you share it with us? Send me an e-mail at [email protected]It would be an honor to hear from you.
Sarah Catherine Gutierrez, founder and partner of Aptus Financial Little Rock. She is also the author. “But First, Save 10: The One Simple Money Move That Will Change Your Life,”Published by Et Alia Press. Contact her at [email protected]
Source: Money’s Learn best at home