I sometimes like to highlight my favorite reader comments. That’s difficult because there are so many great ones to choose from. But in a recent discussion about kids and cash, Mick left this absolute gem. Here’s a slightly edited version:
I wonder what the tweens and teens think of money. How many parents ask their kids what the kids themselves want to know? i.e. Goal-setting with your kids from a kid’s point of view, no matter what age the discussion starts.
We realized my step daughter was way beyond the basics when we found she had been planning, and had saved enough for a junk Karmann Ghia. She intended to ask her stepfather to work on it with her until she was 16, so she would have a car. She figured out early that this would be the only way to get a “cool” car.
We found out when she brought us the cash and paper advertisements at age 11, asking for advice about buying, and for a ride to go see the junkers. Now she’s 16. She sold the car (yes, it was running, but hadn’t made it to pretty yet) because it was more important to use the money for experiential learning: summer-long hiking/camping/rock climbing trip in the Grand Canyon, which the family couldn’t afford.
And yes, we have wondered before whether she was accidently switched at birth!
The mind boggles: An eleven-year-old saving enough to buy a car — even if it is a junker!.
This story reminded me of a short interview I conducted with my friend Ella, who is six. (Her older brother Louis also participated in the interview although, as you will see, he wasn’t very helpful!)
Ella has about $8 saved at home, but she has $127 in the bank. When I asked her what it’s for, she told me, “I’m keeping it until I get a house. It’s for when I grow up.”
In both of these cases, the kids are able to take the long view. They’re thinking about more than just today. While it’s true that Ella might not understand the implications of buying a house, it’s clear to me that she does know what it means to save money for the future. And Mick’s step-daughter, at age 11, certainly understood the power of saving.
When I was a boy, I didn’t grasp this at all. I knew it on some abstract level perhaps, but I could not save money in reality. I remember trying to save, but then breaking into the piggy bank to raid it for cash to buy Star Wars action figures or comic books. My desire for immediate gratification simply outweighed the needs of an abstract future.
As an adult, I was still raiding the metaphorical piggy bank until just a few years ago. I’ve finally learned to save. I just wish I’d been able to do this when I was six.
I love watching kids learn about money. (I’m especially fond of child entrepreneurs.)
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This article is about Budgeting, Kids
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Parents are the most influential on teaching children about money. But, during the boom years, money was easy to come by, so parents taught kids very little about saving and probably how to get another credit card.
Now that we are clearly in a recession, parents are going to return to living on a budget and changing from living paycheck-to-paycheck to stretching-every-paycheck. Kids will learn about money by watching their parents respond to the recession – just like the did in other recessions.
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My young brother is brilliant with money — it’s kind of scary.
He is 9, collects tons of baseball cards (and has an incredible collection), is always bartering for money, has an agreement with me to clean my room for a dollar a day, has agreements with mom and dad to do work for both of them for roughly a dollar a day…
…and he doesn’t spend it.
I have no doubt he’ll do fine in life.
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I wish when I was at that age I was that sensible with money. I don’t really remember being taught the importance of saving until I started my first proper job, by then it was too late. I am not sure of the situation now but I know lessons in managing money would have worked wonders when I was still at school.
I hope you kept hold of those Star Wars figures, it would have been a good investment, lol.
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My two older kids(9 and 7) are total opposites with this. My nine year old is terrible with money…he wouldn’t save any if we didn’t make him! My 7 year old, on the other hand, is a natural born saver. She hates to spend her money down to last penny, even when it’s her spending money. “I don’t want to be bankrobbed!(bankrupt)” she says. lol
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Wow… It wouldn’t have occurred to me at such a young age to save for a house or a car. As soon as we started to earn money (paper route, babysitting, part times jobs — you name it) my parents taught us to put money aside for university (because that was the more immediate concern). We weren’t even allowed to have a credit card until part way through university either. Anything we wanted we had to save up for and pay in cash/debit.
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We started teaching the kids about money at a really early age, and they are amazingly good with their money. They are now 6 & 7, and when it’s time to clean out their piggybanks (around every 6 months or so) they divide the money into thirds: 1/3 goes to their savings accounts (for college), 1/3 goes to spending money which they can spend how they choose (we do still have veto power, if necessary), and 1/3 to the charity of their choice. It’s been important to us to teach them that not only is it important to save, but it’s also important to share with those who aren’t as fortunate as they are. They are really happy to be able to do this, and they have their pet charities that involve subjects that interest them (such as animals and hunger).
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J.D., your interview with Ella is awesome! She’s doing very well for a 6 year old. Maybe you should have more interviews of her. She could probably teach us a few things!!!
Louis’ commentary was pretty funny! For example:
J.D.: “And what do you do with the money in the bank?”
Louis: “You buy stuff with it!”
Though, from a philosophical perspective, he does have it right on. Isn’t the ultimate purpose of money to buy stuff?
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When I was young – about 14 yrs old – my mother would give me $0.35 every schoolday as lunch money (yes that’s 35 cents). I never bought lunch at school – we only had 14 minutes to buy it and eat it anyway! On my walk home from school, I used to buy a package of 2 Hostess cupcakes for a dime and eat them. Then I went home and put the remaining quarter in my piggy bank. I used to keep careful records, like for my parents’ Christmas Club accounts at the bank. More than 30 years later, I am still a pathological saver; I probably still have some of those quarters!
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I pay my son interest every month on the money in his piggybank (allowance money and birthday gifts), so he understands that saving money means you accumulate more money “free.” This has him very excited. He has about $30 in his piggybank at the moment (he’s 7). When he was begging for some toy he’d seen somewhere, I said, “Sure you can have it, if you decide to buy it with your money. What do you think, would you rather have the toy or keep saving?” He thought for a moment and then said, “Keep the money!” He’s learned how long it takes to accumulate a good amount! If I’d learned this lesson at 7, boy would my life have been easier.
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I’m glad to hear kids are interested this day, and I’m glad it is being supported. I had a fascination with the stock market as a young child but it was discouraged as I should just spend my time being a kid.
Oh well.
Thanks,
Bill
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Robert Kiyosaki has a book by the title of “Rich Kid, Smart Kid” about how to teach kids the ins and outs of finances. He also has a bunch of games that teach the basics of finances to kids and adults. I wish they taught this stuff in school.
Caleb
http://www.mefinanciallyfree.blogspot.com
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I think Curt is right on. The stepkids live in an affluent CA area but the family is barely middle-class. Early on, the kids learned about the sacrifices their parents made to keep them in private school, food on the table, etc.
Over the years, the kids helped me paint old furniture and otherwise refurbish things to create their space when they were with us. This side of the family has been always frank about having money and not. When we’re broke we eat hotdogs at home; when we’re not, we eat at Coney’s Nathan’s.
But that’s how she got the idea that there wouldn’t be a “sweet-16″ car in her future, like many of her friends. She “knew” the only way to get what she wanted when she wanted, was to help herself. Presents (generous grandparents), odd jobs, etc. all went into the kitty. She’s like that in a lot of areas of personality–a go-getter. I’m proud of that kid and tell her often.
He older brother, adorable creative one that he is, got his learners and on the way home asked…so, what kind of car am I getting? (His mom was flabbergasted.) He didn’t care about “cool,” just wheels; and, anything was fine–even the 10-year-old family car. But he shares everything with anyone at anytime–which is a big factor in why he’s often broke–unlike his sister who has to be rationalized into sharing anything (even french fries) willingly.
You have to help kids decide what is important to them, make sure they understand the possible consequences of their choices (which is what, in my experience and opinion, most families omit), actually let them test out their choices, and show them how to make modifications along the way.
Just like the rest of us. Kids are but younger humans after all. No separate rules of physics apply.
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When I was younger, I always saved my money. I remember getting money and putting it straight in the bank, because I was more comforted by knowing I *had* money than I ever was by spending it. It also helped that my parents were always supportive of driving me to the bank whenever I wanted to deposit money, and verbally praising me for how impressed they were with how much I had saved up. I never really kept track of it, but by the time I went off to college, I had a decent amount saved. I’m now 22, and the mentality persists. It feels good knowing you have something to fall back on, way better than having “stuff.”
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For my parents, savings was mandatory–gift money that I received during Chinese New Years and birthdays went straight into my (now defunct) Republican National Bank passbook savings account–interest savings rates in the mid-90s were still rather high. She would also put the money into more profitable instruments like CD’s and mutual funds. When I was 11, she opened up a custodial investment account for me to invest in equity with, quasi-independently. I lost money before I learned how to make smart investment decisions. Now I’m a college student and am still considered a dependent for tax purposes. But I’m now in full control of the savings and portfolio that my mother helped accumulate for me over the years–and thanks to this comfortable, financially quasi-independent cushion, I haven’t had to rely on my parents for discretionary spending. On the other hand, the fact that I’m still a financial dependent makes it clear that I won’t be “cut off.” To be sure, my parents’ gradualist, custodial financial management system for my sister and me was merely one part of a frugal system that also involved coupon clipping, growing backyard vegetables, etc.
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at the age of 6 i wrote a thank-you note that said something along the lines “thank you for the birthday money. i bought a new breyer horse and saved $10 so i can go to college.”
for most of my childhood, i was fixated on the idea of becoming an independent woman- and though i barely had a grasp of what college was about (nobody else in my family did, either), i told myself that was the path to take.
i paid all but $5k of my college expenses in cash, but i would have had far more saved had i not left home early.
these 8 years are what i’ve been working toward my whole life, i just realized… wow.
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Sadly, most of the ADULTS I know don’t have $127 in the bank.
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Most adults don’t save up to buy cars or houses.
These kids are great.
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@ susan: you were saving money by swapping out a more nutritious meal for a less nutritious one?
I think it is more important to teach my kids to work and save for something or goal they want; delayed gratification. Simpy saving monrey for savings sake is just pointless.
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My parents had me put away my “lucky money” from birthdays and holidays since I was six. I never once took money out of my “rainy day account” until I was 25 to help pay for Grad School tuition. That’s the only place that money has ever gone, even when I really wanted a new XYZ, it was always there for a rainy day when I wouldn’t be able to make any money to pay for other things.
One of my friends took his lucky money fund and put it towards his first house. I think he’d been saving since he was 8 for a house.
BTW, we both had at least four digits of money stashed away in the bank just from cash gifts over the years. And come to think of it, I’ve reaped the benefits of my schooling a lot more than I would have a new video game in my teens. There’s still a bit of money left in that account and someday soon, I’ll start saving a bit harder to put away some more for a rainy day.
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This is great. A lot of it depends on one’s parents and how they relate to money. My parents were not rich, and though they could afford gifts every once in a while, we were mostly living paycheck-to-paycheck. I remember being very young and wondering if a $5 was too much to ask for some trinket or other.
When I got older, I would save my allowance and my birthday money in a shoebox taped shut, with its own little book where I recorded how much I was actually saving. At 12 my parents finally helped me open a bank account. How exciting it was to actually earn interest!
Back then, I would hardly buy anything unless I really needed it, because I knew how much work it was to actually earn that money in the first place. 10 years later, and it’s not much different.
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As with anything that a kid’s interested in, the parents have to show the way. Many parents are happy to enroll kids on soccer teams or take them to the library and such, but not enough of them teach kids about money.
I loved watching the total grow in my passbook as I made deposits of birthday money, babysitting, etc. to my savings account my parents started. I bought a car for cash when I was 16 (and every car since, too). Passbooks are a thing of the past, but now kids can watch their accounts online with a little help from mom or dad. As my four year old neice can play computer games with help from her parents, I’m sure she’s also capable of learning about the time value of money as she and her savings grow. Even kids not naturally inclined to save (my nephew is the saver, my neice likes to own stuff) will learn the value of saving if their parents help.
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I got my first job when I was 12. I earned $10 a week feeding horses. Then I got a regular babysitting job at the same time. I had never had an allowance, and this new income made me feel so responsible. I started putting every cent I earned into a box by my bed. I also started a little notebook ledger of every penny I earned and spent. I gave money to my church. And I bought an occasional splurge at walmart. By nine or ten months, I had quite a stash. I felt really good about what I was accomplishing, and enjoyed explaining my little accounting system to my friends who thought it was weird. I finally took all that money and went to a travel agent. I paid for a two week visit to help my aunt and uncle when they were having a baby. The whole trip, out of my own pocket. It was the beginning of a financially aware lifestyle. 14 years later I’m the CFO of my home, and thinking about how to teach the values to my daughter.
Kids can be smart about money if financial responsibility is modeled as the better way to live.
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My little girl (aged 5) got extremely upset when she realized that she wasn’t getting paid to go to preschool. After all, when I go to work or her father gigs and records we get paid. She was upset that she wasn’t contributing. When I asked her if she hadn’t wondered where her assumed pay was going she said she figured it was directly deposited into the bank (like my own checks) and used for groceries and house stuff.
She was even more mortified when I explained that on the contrary, we were paying for her to go.
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I believe it is more significant to educate my children to work as well as save for somewhat or goal they wish for. Just saving cash for reserves sake is just senseless for them.
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Ivy, that is so cute! Your daughter is a gem. To have that concept at such a young age–that she was working and helping to support the household–she is wise beyond her years and not to mention has an amazing sense of responsibility!
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If only my parents were that supportive when i was younger… I would probably have a car, have left for college, perhaps graduated, and been working.
Instead, I’m saving my money to be able to afford college.
I’m 19 years old, have a good chunk of change in a savings account, and was thinking of opening an RRSP. Even just opening it, and putting 1000$ and leaving it until I’m done school.
How young is too young to think about retirement? Like I said, I haven’t even gone to college yet…
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I’ve worked hard over the past couple of years to put into practice Kiyosaki’s (Rich Dad, Poor Dad) famed passive income. In learning and applying his principles, I’m able to teach my kids the same. My son at 12 is learning graphic design, and he and my 2 daughters (10 and 7) are learning passive income one quarter at a time thru vending machines they have placed around the community. My goal is for them to never have to work for someone else (EVER) if they don’t want to. They will also pay for their own cars and college with what we’ve begun at such early ages.
It took me years to learn all this and I made tons of mistakes along the way due to my ignorance. It’s my hope that my kids can avoid these mistakes and start out much further along in the process!
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I have always tried hard to work with my 9yo DS on understanding all about money. When he was 3-4 and had his first savings account (started with all the money in the piggy bank of course), we would make an event of going to take out some money to buy gifts at Christmas. He gradually learned to budget his spending with this type of activity. He is much better at thinking long term & not blowing his money all at once.
Now that he is older and has an allowance & money for odd jobs I helped him to plan more on his long term goals, sometimes offering the I’ll match what you save model.
He makes lists of what he wants…a baseball glove, his own computer, and now he too wants to save for a car!
He looked online to see what low priced used cars cost, figured how many months he had to save & calculated the amount to save per month. He has over $500 saved already, with almost 6 yrs to go!
I wish I had learned that kind of money management when I was young!
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My mom got me to watch a 20/20 special in my early teens, something like “The World’s Cheapest Millionaire.” It underlined the idea behind The Millionaire Next Door, which I never would’ve read at that age. We talked about the show, how being humble and living simply can be one solid path to wealth. And whenever we’d go shopping and score a great deal, she’d remind me, “See? It’s that cheap millionaire thing, hon. You don’t have to spend a ton to live well.”
It was just one of many factors that me financially responsible at a pretty young age, but the fact that I still remember it tells me that it had a big impact on me.
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Parents are very influential. My family immigrated from Europe when I was young. My parents worked hard and saved and saved and saved. I was around this and learned. While my parents never sat me down and told me to save, I always knew that this is what I was supposed to do. I am now 29, married, and own (no mortgage) my home in an upper middle class suburb.
This is all due to my parents who taught me that I do not need stuff (or at least not stuff that I can’t get 75% off). This is among the best gift my parents gave me. Certainly it is a little of a downfall as well since I do tend to be overly concerned with how my husband and I are spending, but I can say that I will certainly be teaching my children to be wise savers and spenders. I only hope that I do as well as my parents did and provide my children with a strong foundation.
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Sure, teaching kids about money and saving is great, but kids need to be kids. What are they saving for, just savings sake? In most cases it’s not a substantial amount of money that would make a bit of difference later on in life either. So why not let them work a bit, save a bit, then get the reward (toy, whatever). That way they learn about saving, and that saving pays off. Perpetually saving with no reward as a pre-teen is as bad as spending as soon as you get it.
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Nick, I think you’re right. In addition to saving for school, my parents let us save up for fun things. I had to deliver a lot of newspapers to save up for my walkman — but it was a lesson in smart shopping as well as saving. My dad spent a lot of time helping me research which one to buy, so I learned about the process of making a wise purchase. The model I bought was a good brand and ended up costing a bit more, but I had it for nearly ten years.
I think it’s important for kids to be smart consumers, and to have realistic expectations.
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I grew up in a house where no one had any money or ever talked about money period. When I grew up I read every finance and business book I could get my hands on. The result is that my kids (6 and
have been known to talk openly about what they will do when they grow up and run the businesses that Daddy and I started. We make sure that they see everything that we do so that they will learn by example – the result is they already have a clue and will hopefully have it easier than we did when we started out.
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I do honestly feel that the responsibility is on the parents. Kids strongly imitate what they see their parents doing and talking about. All parents should be making great steps early in their children’s lives to ensure that they grow up with a strong set of values that will benefit them in the years to come.
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A lot of finance sites (not here, of course) talk the talk about saving young, but don’t follow through. Most of the calculators I find don’t go any younger than 35. They tell me to save for retirement early, yet I will have to wait almost ten years to be able to use the tools on the site. WTH?
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I started saving for a car as soon as I turned thirteen years old, and by the time I was seventeen I had saved up $3000 dollars, enough moolah to buy myself a nice little used Jetta. I like to think my parent’s smart parenting moves about money and how to handle it gave me the power to be able to do it all.
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PizzaforaDream #27…
Don’t suppose you’d be interested in adopting an er…older kid?
Wow. Kudos. Be interested in hearing more about that philosophy.
Cheers!
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As I read through all of these, I think back to when I was young(er…i’m still only 21) and trying to pinpoint when and why I became a saver. I remember the savings passbook and depositing b-day money and allowances when my mom would take my dad’s paycheck to the bank. I guess it probably started then, but I have always been a patient person (saving the cherry from my Shirley Temple til the end or the marshmallows in my Lucky Charms) and I think that just saving the best of something for last made me appreciate things (including money) more.
I was also the geeky kind to track my savings and spending when I got my first job around age 14 (filing invoices for my aunt’s business). Another factor in my saving and working ethic was my parents’ divorce. As my mother went back to work after nearly 15 years, I decided that I did not want to be anymore of a burden than I had to be and continue that attitude. Because of my habits I was able to buy a car at age 18. I was shy of buying it outright by about $1000 dollars and then some after taxes, etc and so had to take out a loan which i paid off in half the time it was taken out for.
I continue to save and track my spending (and yes i may have a little OCD as my boyfriend says) and I do contribute it to my parents. I was forced to grow up, but mainly because I was ready and saw how my parent’s always struggled and fought about money. I decided that I never wanted to be in that position whether on my own or in a relatioship. My sister’s, who are younger, on the other hand, were too young to benefit from what the divorce forced me to do, but they are both money hoarders. Unlike myself, who bought things like clothes and a car on my own as a teen, they just ask mom for money and save all of their own. But i guess they have the savings mind-set as well!
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