By Kate Alexander for The Sturbridge Times, April 2018.
I love to see my friends’ reactions when I tell them I have no cash on me. “But you work at a bank,” they say. “Right but I have four kids,” I reply. And boy, do kids cost a lot. Like other parents, I am constantly shelling out money to each of my kids for various events, purchases like sports equipment, make-up, hair appointments, team swag, Cumbie’s stops and the list goes on!
This brings me to the topic of this month’s column. How do you teach kids to save?
Each of my 4 children have opportunities to earn. While the youngest child just has a tooth fairy/birthday cash flow, my 2 oldest children babysit, mow lawns, dog sit and shovel snow. My 3rd child, now she is creative! No flies on her. She runs an in-house lunch-making business where the older ones pay her to make their lunches each week. I got in on the gig and she makes all of their lunches for about $3.00 a week.
Each one of my children has access to income and therefore should be SAVING MONEY.
Now they are all very different with how they handle their money. Child #1, she has money spent before she even earns it. Child #2 is a bit more reserved and will shop for a deal. He likes to hold on to things a bit longer and will send me links to sales for future purchases. This kid does his research. Child #3, the household entrepreneur, she is also a loan shark and will loan money to #1. (This kid is going places.) Child #4, she is just a hoarder and does not yet grasp the value of cash.
So, shame on me. I imagine people are reading this thinking. “Wait aren’t you the president of a bank or Credit Union? You can’t teach your kids to save?” Has a dentist’s kid ever had a cavity?
We recently sat down to discuss this and set up guidelines for what things we the parents will pay for, and what things the kids will pay for.
Then we discussed their savings accounts. I am going to share with you my mistakes as a parent in hope you can learn from them.
Kate’s Mistake #1: Leaving cash, checks from grandma etc, in the house. The sooner that you can get it deposited and into their savings accounts the better. Out of site, out of mind. Let them focus on gift cards that they have. If cash sits in the house, it will get used or spent or lost. In fact I am guilty of taking money from one kid’s box-o-cash to pay for another kid’s field trip. I know I am not alone in this bad habit. We have new rules now that all cash gets cleared by mom or dad. Which brings me to my next mistake and corrective action.
Kate’s Mistake #2: Not setting savings expectations. For every child, set the expectation for what becomes their disposable fun money and what immediately gets deposited towards savings. A good rule of thumb should be 50% needs to be saved. Over the years I have seen many different recommendations. I have also seen some fabulous ideas on Pinterest where you set up a jar for saving, spending and DONATING. How cool is that idea? Teach your kids to save and give at the same time. Bottom line is that you need to set this up front so when daughter dearest walks in the door after babysitting for 8 hours there is not an argument as to what is going to happen with earnings. Whatever your percentage allocated to savings is not the point, just make sure to SET a savings percentage goal. Make this a priority with no margin for error.
Kate’s Mistake #3: Not teaching my kids the difference between wants and needs. This one is huge. How would we expect to see our kids great at saving when we, as parents, have enabled this atmosphere of instant gratification? Present company is the worst offender. I have given in to so many guilt-based purchases that leave me feeling horrible. Most recently, I bought a pair of shoes for one of my children as they walked out the door for an event that we were going to be late for in sandals, in winter. So mom paid for shoes. Very cute ones, I might add. Did we need them? No! Bad planning on her part was rewarded with cute shoes, all because mom wanted to avoid an argument. I just showcased why my kids come to me and how we all can fall into this trap of enabling our children’s bad habits.
I am on damage control for #3. I want my kids to understand that while they want things- they do not always need them.
The website www.mycreditunion.gov does a great job of breaking this out by age group and offering suggestions to parents. What a 16-year-old truly has as needs in comparison to what a 7-year-old has as needs are drastically — and dramatically — different needs.
During one recent conversation I spent 20 minutes defending my position on why “Fortnite” (newest online game) is not actually a need. Yet I can understand why a mobile device for a 15-year-old is based on how curriculum is delivered. This continued…gas? Yes that is a need once you have a car, but beef jerky is a want. Gum = want, food = need. And so on.
Listen, I am certainly not the poster mom for teaching kids to save. We are a work-in-progress. It has triggered great conversations and for that I am thankful. Be sure to make your kids part of the process. Make the trip to the Credit Union or Local Bank a reward, and fun. Many have kids’ clubs that reward children for you, and some like SCU will come to the schools to pick up the kids’ deposits! Make it habit. Do your research and as always use a local financial institution!
Let me know how you are doing, and wish me luck too.