Knowing how bad I am with my own money, I’m wondering when and “how much” (pun intended) to educate my children on the highs and lows of financial responsibility. Should they know the difference between macro and micro economics at primary school? Should they be able to tell a spread sheet from a bed sheet at 8? Should they know how to recognise a P&L from an LP before they hit high school? OK, maybe I’m running away with my financial jargon, but seriously… by instilling them with monetary “know how” are we preparing them well for their adult years or are we turning them into materialistic capitalists before they even have a chance?
Personally I’m torn. It’s not that I want my children to turn into mini Margaret Thatchers, but neither do I want them to end up in a world of debt and financial strife because they are unable or unequipped to understand how to manage money from a young age.
In our household, we introduced the concept of earning money with the use of a Chore Sheet (not quite a balance sheet!) and as long as our child completes all the chores within a week timeframe, they get paid “pocket money” at the end of the week.
We felt this was a sensible way of familiarizing her with the idea of working for your money and also ensuring that she understands that chores (by their very nature) can often be stuff you don’t necessarily want to do, but in doing so you get a reward. In addition, we’ve tried to make the “pocket money” value, big enough that she can buy herself a small treat or two each week, but small enough to mean she has to save if she sets her sights on bigger goals. (By bigger goals, I mean something akin to a Nintendo DS, not an Aston Martin DBS).
This all sounds innocent enough, until our daughter asked the inevitable question about loans and advancements! How do you explain to a 7 year old the concept of interest and the relative value of self-amortising loans? And then there was case of “administration charges”! In the end I agreed to advance her 1 month’s worth of pocket money, but she had to do an extra week of chores for the privilege (and if she reneged on any week of chores during the advancement period, she would need to double it before she was back into pocket money territory). It felt like a good lesson and a fair deal!
We have also opened an account for our daughter and we are now thinking about having a (very) small part of our wages deposited into a linked savings account. But even children’s acc
ounts these days are full of questions and caveats:
- Bank Manager – “does she anticipate maintaining a balance of over $100,000 for the life of the account”?
- Me – “are you kidding… she’s SEVEN!”
- Bank Manager – “Does she prefer higher levels of interest over account flexibility?”
- Me – “Come again… she’s SEVEN!”
- Bank Manager – “Does she prefer transacting by internet or in person?”
- Me –“She’s…” well, you get the idea.
I do wonder are we doing the right thing? Is it wrong to try and burden kids with the concept of financial responsibility, or is it wrong not to provide a good financial base for your kids? All in all, though, I think the introduction of financial concepts (basic at this stage, but I’m sure it’ll get more complex as she gets older and asks more questions) has been a success for us. For the first time since I can remember, our daughter is now asking if she can “double-up” her chores?! She’s certainly understood that effort = reward. I’m wondering when I have to have that fateful conversation about household productivity and having to let someone go!
