Monday, June 19, 2006

Teaching Children to be the Master of Money

Many people struggle with financial problems. Conflict over spending is one of the main causes of divorce in America. We feel that as parents one of the most important lessons we can teach our chlidren is how to handle money.


In Alice in Wonderland is the following exchange:

Humpty Dumpty: When I use a word, it means just what I choose it to mean - neither more nor less.
Alice: The question is, whether you can make words mean so many different things.
Humpty Dumpty: The question is: which is to be master - that's all.

We want our children to be the masters of money, not the slaves.


One of the things we've done to teach our daughters some of the basic theory about money management is we've read The Richest Man in Babylon out loud. We read a section every couple days and talk about the main points. It is a quick book to read, and our daughters really listened, especially the older two. They got the main points. Our oldest even started putting more money into her long term savings.

For practice we give our daughters an allowance. The pattern we use is to give each daughter a dollar each week for her age. For example each Monday we give our 11-year-old $11.00. We set aside 10% for church, 30% for long term savings, 30% for short term savings, and 30% for quick cash. Long term savings is for things like college and buying a house. Short term savings are for big ticket items like books or bikes. The quick cash is for impulse stuff like buying a candy bar. The line between short term and quick cash gets blurred a bit. (This program is from Money doesn't grow on trees.)

Much of this money is money we would have spent on them anyways. Our daughters use this money to buy some of their necessities like shoes and clothes, as well as treats. This approach allows them to be involved in the process, and they are learning some important lessons.

There are several lessons we're trying to teach our daughters. One of the points they have learned is that they can't buy everything they want. They are learning to make choices, and the consequences of choices. They like toy horses. They've learned that if they buy candy, they won't be able to buy the toys they want. Another reason for this approach is we want our daughters to have the habit of savings.

In a nation of great wealth it is sad that so many people are stressed by money. If we can teach our children to be the master of money and understand the rules, then they will be much happier and have more productive lives.


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