Laurence said:
Nords, I used to spend money the way your daughter does, my mom just kept an envelope in the drawer with 20s in it and told me to let her know if it ran low (it was rough to be me, let me tell ya). Soon as the gravy train ended and I had to earn every cent, and my first late payment on a credit card, and my first bounced check, and things changed quickly.
2B said:
Your daughter sees everything as "free" once she makes a withdrawl from the Bank of Dad. In her mind the amount of money available is infinite. You and your DW are simply the ATM machine that tells her she has reached her limit.
She's in the phase where she's focused on "fitting in" and finding her status with the "pack." She has no concept of money or value.
I hear what you're saying, but my original post didn't rehash our kid's system which has mutated evolved over the last five years.
I was raised in financial ignorance with a small allowance while spouse gained knowledge but was expected to beg for spending money. So we're waaaay overcompensating with our kid's financial education. With that disclaimer:
The Bank of Dad ATM does not exist in this family, but we did get a lot of our ideas from David Owens'
"First National Bank of Dad".
Our kid has received $5/week allowance since she was eight years old. She gets $3 of that $5 allowance in her checking account (or in cash) for spending on whatever she wants. She gets it whether or not she's a productive member of the family. It's not even for her benefit-- it's for our parental instruction in teaching her about managing money.
Of the remaining $2/week, $1 is dumped into a "Bank of Kid CD". This CD used to pay one penny per dollar per month-- 12% simple interest-- because that math was easy to grasp. Today it pays 6%/year and "matures" each April & October. October is her birthday month and she knows she'll score at least a Benjamin from indulgent relatives so the only significant withdrawal is April, and that's usually in amounts under $75. When a cash windfall drops into her lap she usually puts it in the CD to compound a while.
The final $1/week goes to the Bank of Kid 401(k). It has the usual fancy matching rules and all the other 401(k) crap (with a zero expense ratio!) but the basic teaching concept is that it's money you can't touch until "forever". At age 16 it'll mature with $5000 to be used however she wants (guess what she'll be spending it on). Since at that point she'll probably only be staying in Hawaii for 18 months before attending a Mainland college, she'll also have the option of banking/investing the $5K and "owning" the family Taurus wagon.
She's had a checkbook since she was nine years old. She's had a credit card ($300 limit) since her 13th birthday-- she tracks her spending in Quicken and she pays her bills online. We started her clothing/toiletries budget at $300 every six months, and we're about to expand that to another $60/six months for school supplies. Appeals for higher budget limits require Quicken documentation and budget reports broken down by category/month. (A major PITA, which holds down appeals for higher spending...) By the time she's 16 I hope to give her one checking-account transfer a year and let her do her own budgeting. I move money between our accounts by EFT and she balances her checkbook in Quicken (no math errors and no sloppy handwriting).
She's expected to keep up with the usual teen chores of emptying wastebaskets, taking out the trash, emptying the dishwasher, clearing the table, cleaning & maintaining her bathroom & room, doing her laundry, cooking an occasional meal, and keeping the water conditioner stocked with salt. If chores aren't done then she can't do jobs.
She's encouraged to earn $10/hour at jobs like washing cars, cleaning windows, doing yardwork, word processing, creating spreadsheets, and some home improvement tasks. $10 is pretty high but it keeps her motivated. It also lets me pontificate on quality of work, keeping a focus, having a positive attitude, and other things that I've never had to learn because I've never had a
real job.
She's tinkered with putting her Bank of Kid CD money in stocks. She's made some money-- more money than me until recently-- but she's lost interest in it. She's starting to learn about index mutual funds (the MF Investment Guide for Teens) and she'll be doing more of that for her 14th birthday.
What's really tripped her trigger is hearing us talk about a CD ladder. She came up with the idea of breaking her remaining CD money up into college-prep chunks. She's built a five-year ladder (through April 2011) at interest rates from 6.5-8.5% to make sure that she has a known quantity of spending money for each year of high school/college. She's more interested in security than she is in IPOs so I'll support that.
Other things she's come up with on her own:
- Caring for neighbor's pets.
- Instead of putting all her spare change into a savings jar at the end of the day, she takes all the $1 bills out of her wallet and puts them away.
- She tries to change her small bills up to bigger ones because she's less likely to spend a bigger bill (but extremely quick to spend a $1 bill).
- She wants her monthly allowance in her checking account, not cash, because it's more work for her to write a check or use a credit card.
- She aggressively shops Goodwill & garage sales and then fills out the cracks in her wardrobe from Wal-Mart or the mall. She's probably at Goodwill & Wal-Mart every month and the mall every six months.
- She doesn't give a crap about fitting in with the pack, occasionally to her detriment. With her "It's all about the gear"™, whether or not the other kids think it's fashionable. She is not a girly girl and she has a contrary streak a mile wide. It must come from her mother's family.
- She researches the heck out of her purchases. Basketball shoes were a six-month research project that started at $250 and worked their way down to a $75 pair that she stalked until they went on sale for $49. I was heartily tired of being lectured on shoe technology by then but I admire her persistence.
- She's planning to tutor Kumon as soon as the instructor thinks she's old enough-- $7/hour for roughly 10 hours/week.
- She recycles beverage containers for 5 cents each, and she even dumpster dives at high school events.
- At age 16 she wants to kick in her $5000 to help us buy a used Prius, which she'll drive until college and then sell back her share to us. We're still working out the details of this proposal.
Sure, she's bounced a check and paid the penalty fees. She's paid her Kumon teacher late a couple times and had to eat the $5 charge. She's emptied her pockets on gimme junk and had to slave away for more "necessities". She's come up short on the occasional budget item and had to limp through the rest of the month. But NFCU just sent her an ad for "College Campus Survival Tools" that include a checkbook, a credit card, online account access, and a used-car loan... we shared a good laugh over that.
Like every teen, she's still extremely generous with our hot water and our electricity. (The solar systems are cushioning the blows.) Otherwise I think she appreciates value in the things that she considers important (especially if she's paying for them). What continues to surprise me is that our ideas of what's valuable are so divergent, but I guess it's age-appropriate in a consumerism era of "you can get anything you want". We keep giving her the tools, so we shouldn't be surprised at what she builds with them!
![:-\](https://www.early-retirement.org/sk/forums/images/smilies/undecided.gif "Undecided :-\")
