8 February 2007

Financial Planning for Children

As children most of us rarely receive very good lessons about money. Either everything was provided when we asked (or nagged) or we received sporadic amounts of pocket money or just never thought about where money came from and where it went. I picked up some of my understanding only after I had made mistakes and thought back how my parents were able to feed, house and educate all of us on a small income. So we do something different with our children.
Each child from the age of five to fifteen receives a weekly allowance of 20 cents per year of age. (That is, the ten year old gets $2.00 and the 5 year old gets $1.00) Of this they are to save 1/3rd with 2/3rds left for spending. The amounts are small so I keep the details as a record on the computer. Birthday and special occasion monetary gifts are added to the spending account.
I have made this easier by using Quickbooks, although Quicken and Money would work equally well. I have memorised the transaction from the expense "Pocket Money" to the two loans per child, Savings and Spending, every four weeks. Whenever the child wants to spend their money we record it and they can see a running tally of money in and out.
This regular method allows us to restrict nagging. If they want something we don't want to buy, but it is OK for them to have, we tell them they can pay for it. At the Berry Show we attended last weekend they all wanted hats. Most of them had received prizes from their show entries and they had funds in their spending accounts so they bought their own hats for $25.00 each. You can probably see that they don't like spending their "spending" account. Clare had money from her birthday last year and quite a few weeks of accumulated spending money. (You can see her very happy with her Pink "cowboy" hat in the accompanying photo.) The boys had funds from special tasks such as mowing lawns and cleaning cars as well as accumulated spending accounts.
The boys also often combine their funds to buy common items such as a computer game or Lego kit they will all play with together.
It actually works out that this method probably costs less than an ad hoc approach. Also, the children are gaining an appreciation of saving and spending.

1 comment:

Bretta said...

Great advice, David! I wish we had done this when our children were young. I'll make sure to pass this on to other parents though.

PS Christa Joy will be TWENTY this weekend!!! I'm old...and wise of course!