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Financial Planning for Fourth Graders

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So, financial responsibility and money management are big things with us — with me and Jason, that is.  With the kids, not so much, but we’re working on instilling it.

Amid the usual complaints that I am the meanest, strictest, most overprotective mom EVER, Christopher handed out a little badge of praise the other day when he told me that he gets more allowance than most people in his class.  He and Emma both get $10 a week, which seems generous for elementary school kids. What they don’t realize is that most of their friends who get $5 allowances get to actually spend their money on whatever they want, while parents foot the bill for school milk and other delicacies.

In our house, we’ve worked on the premise of giving the kids a bigger allowance but requiring them to pay their own expenses — which usually works out to between 50 cents and a dollar each day for milk at school, and a little more on Fridays when they can buy pizza for $1.25 a slice. They are also required by household law to pay tithe and offering at church, and if they have any left over after that, it can be saved up for toys and frivolous pleasures. The plan is that this is supposed to teach them something about budgeting and money management — like, that even an apparently generous allowance doesn’t stretch that far when you have expenses.

When they were younger, they often accumulated quite a bit of money out of the few dollars left from each week’s allowance, because their wants were few.  As they have grown older, they come up with more and more ways to spend their money, so their savings aren’t as vast.  Another thing I’m tough about is buying toys — unless it’s Christmas or a birthday, I’ll rarely spring for a toy but will insist instead that they buy it out of their savings. (Sometimes I’ll compromise; recently they both wanted diabolos, and since the current diabolo-craze seems like a healthy, skill-building sort of thing, I subsidized those, requiring each kid to pony up $10 for their diabolo while we covered the rest).

So last Sunday afternoon found both kids with wants, and only one with much money. Chris had about $30 saved which he wanted to spend on a light sabre (I thought the Star Wars craze had passed in Grade Four, when he had the two light sabres he already owns, but it seems it’s come back around again).  Emma wanted a Puffle (if you don’t know what a Puffle is, you probably don’t have a nine-year-old, but let’s just say it’s a shapeless plush toy which, sort of like a Webkin, can be registered online to have a whole “second life” as a character on a website called Club Penguin). But she didn’t have much money — only about seven or eight dollars, and she knew they cost more than that at Toys R Us (or, as I insist on calling it, T’ys Is We).

But Emma had a plan! She knew there was a machine at the mall where for a dollar, you could drop a claw into a nest of random stuffed toys, and some of them were Puffles. So she could get a Puffle for just a dollar instead of the usual exorbitant price!

I explained that this was a game of chance and there was a good chance she might not end up with a Puffle, but Emma was determined — the possibility of failure never ever entered her mind.  She blew four dollars on four unsuccessful tries at the machine and got nothing when I insisted she stop spending (she had run out of loonies at that point anyway). Along with money management, she got a free (well, $4) lesson on the Evils of Gambling — bonus, from Mom’s point of view. Off we went to T’ys Is We to get Chris’s light sabre.

There, we found a bin of Puffles for $7.99 (plus tax) each. She could almost have afforded one if she hadn’t spent her money on the machine, but she now only had about four bucks in small change left.  She wanted to know if I’d cover her shortfall.

I said no; the only thing I could do was advance her five dollars from the coming week’s allowance, but I didn’t recommend that course of action, since she would be spending money she needed for the upcoming week’s expenses. I gave a capsule summary on Why Debt is Bad and suggested, as always, that she save for a couple of weeks and come back when she had the money.

But Emma really, really wanted that Puffle, and as I am a big fan of Learning Through Hard Experience, I fronted the money, once again reminding her that she might be left without enough to pay for school milks and treats during the week.  No, she said she’d be fine.  So Chris got his light sabre, and $10 allowance for the week, while Emma got her Puffle but only $5 allowance.

All went well till Friday morning — Pizza Day — when Emma looked in her money box to discover — gasp! — only about 75 cents left in there.  “Mom!!” she wailed.  “I don’t have enough money to buy pizza!!!!”

It was time for a little recap of the whole Debt is Bad, Saving is Good lecture.  “Remember, I told you if you spent half your allowance on that Puffle, you might not have enough to buy things you wanted during the week?”

She didn’t seem to remember.  Or at least it didn’t stop her crying about it as if her heart would break.

Now, 50 cents would not have been much for me to pass over at that point, but I thought if I did, the impact of the Valuable Life Lesson would be lost. So instead I helped her make a sack lunch and sent her off to a Pizza-less Friday at school.

As always with these wise parenting moments, I’m left with more questions than answers. Will my daughter grow up to be a terrific money manager who never spends more than she can afford, and will she live to thank me for the excellent life lessons I taught her? Or will she someday wind up on a therapist’s couch moaning, “My mother was so mean, she wouldn’t give me fifty cents to buy pizza at school in Grade Four!!” ??

Hard to tell, at this point.

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5 thoughts on “Financial Planning for Fourth Graders

  1. I think your strategy is great, Trudy.

    Darrell and I are starting this discussion now about allowances and such. My problem is my husband is a pushover who freely buys the children treats and toys. Guess what – his parents didn’t set an allowance!

    Your strategy sounds very similar to my parents’. We received $5 a week for school lunches, milks, etc. We also received a slightly larger allowance than our friends. BUT we were required to buy for ourselves anything and everything that we wanted. We would get new clothes at the beginning of the school year, but any clothes after that came out of our own pocket. We were expected to bring donations to church and if we wanted to donate to a charity or buy a raffle ticket it came from our allowance. We paid our own way at the movies. And, of course, we bought our own treats and toys.

    My kids are still a little young to understand an allowance system, but what you’re doing with Emma is going to pave the way to a much better understanding of finances than most young people have. She’s probably at that age where she doesn’t quite understand consequences unless they actually happen – so letting them happen is key to her learning.

    And no, Trudy, while I know there were times I needed only a little more money to get something I felt was neccessary and my parents didn’t give it, I don’t actually remember any specific moments. I do remember learning about saving, advance payments and debt. And I gratefully remember the few times they generously gifted me with a small amount to help me out – like when they paid the taxes on my new bicycle after I saved enough for the sticker price. I also remember truly appreciating the gifts my brothers gave me at Christmas and birthdays because I knew how much they costs and how many weeks of allowance they had to save to buy them.

    So don’t worry about that future imaginary therapists couch! Be proud of yourself for teaching your child something that will provide long-term liftetime benefits even though it hurts you both in the short-term to do so! One day Emma will appreciate these lessons and feel sorry for all her friends who didn’t receive the same caring instruction.

  2. I agree with Dara — right down to the hubby who always caves and who was never required to learn money management as a child. In fact, despite the fact that he has an MBA in finance, guess who does the money at our house now that the recession has forced us to cut back?

    Tough love is hard, but it IS love. Giving in isn’t love at all, it’s enabling.

  3. Congratulations on holding your ground … but I wouldn’t hold my breath waiting for the thanks to come from your child. (It will come, but you’ll have long inhaled by then!)

    We use a merit-demerit system for things like toys for a few years, and it works quite well. Nicholas picks a target (he has changed his mind midway through, but we adjust), we agree on a set number of points, and he earns through good behaviour and actions, and loses them as consequences when he does things he knows he should not. We’ve really liked how he’s gradually been learning to put value on things, and to see how long it takes to “earn” something substantial (like a Lego set).

    As for his allowance, we give him $5 per week- when both of us remember, and he forgets as often as I do. We pack his lunch every day, except every 2nd Friday, when he can order from the cafeteria, so he uses his money on books and comic books. It’s been interesting to see him learn that he still needs to save up to buy more expensive books. We’re hoping, in any event, that he’s learning how to manage his money before he really, really needs to know.

  4. It’s interesting to see other parents struggling with these same issues, and the different solutions people come up with. And I agree, we’ll all be waiting a long time before we get any thank-yous, if at all!!

    I think the first time I consciously thanked my parents for any of their parenting was in college, when my roommate got 98% on a test, called her dad to tell him, and by the end of the conversation she was in tears because he had given her such a hard time about the 2% she didn’t get. If I recall correctly when she left the room, I called my parents and thanked them for holding high standards without being completely insane (on the other hand, it’s possible I only thought about making that call, and if my parents don’t remember it, maybe I never did. In which case thanks mom and dad, for teaching me financial responsibility, for not being completely crazy, and a million other things).

  5. I suppose as mothers we run the risk of being blamed for everything. I’m dreading it, myself, since I’m the heavy in this house. But SOMEone has to be the heavy! Otherwise, we’d be raising a holy terror, and that just wouldn’t do. At least, I don’t feel alone anymore. 🙂

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