How Sarah Teaches Her Kids About Money
Six years ago, when our oldest was nine, my husband and I decided that we needed a good system to teach our kids to become self-reliant and independent 18-year-olds. We make a comfortable income, and because of that, I worried that my kids would grow up to be spoiled.
I read the book, "The Entitlement Trap," by Richard and Linda Eyre, and adapted their system to our family. Their basic premise is that we have to teach children the relationship between work and money, so they will learn ownership and responsibility instead of entitlement.
Now our children are 15, 13, 12, and 10, and we're still using the same system. We give each kid a list of eight chores they can do each day, and give them $1 per chore. Then they pay for most of their basic expenses, such as clothing, shoes, recreation, and other extras. (Details below) We want them to learn that money isn't just for fun things, but for necessities as well.
We've been using this system long enough that we've been able to see real results in our kids and the way they manage money. Here are the main benefits:
- They know what things cost.
- They know that when they only do $20 worth of stuff, they only get $20. I’m not generous about it, and they are realistic judges of what they’ve done over the past week.
- They know how to find sales, and they know how to shop consignment.
- They know that if there’s something they really want, they need to seize the chance and buy it when they find it or when it’s available (e.g. swimsuit season at Costco is really short).
- My kids know how to save.
- They know how to go to the bank an get a CD.
- They might soon know how to talk with a financial planner...
- They know how to give—each of them pays 10% of what they earn as tithing to our church.
One of my proudest moments was when one of my kids wanted to buy an Xbox 360. He researched it and came to us with what he thought was the best deal. We told him that we were opposed to it but that it was ultimately his choice. But—if he did not buy it, we would pay him “interest” of $100 on that $500 if he put that money into his savings account instead. (We had never given him any interest until that point.) He ultimately decided to not buy the Xbox, but it took him 6-12 months to decide that was the right decision.
After they reach nine years old, each of my kids has the potential to earn $8 per day, by completing the eight things on their customized list of tasks. They have to complete their lists without any coaxing from us. If I have to nag them to get their chores done, not only does that add to my workload, but it works against my goal to raise independent, capable kids. If they don't do it, they don't get paid, and they incur whatever other consequences result.
Here's an example of my 10-year-old's list.
- Brush teeth.
- Practice piano or drums.
- Read for 20 minutes.
- Get yourself dressed.
- Do your own homework.
- Take your own medicine.
- Get yourself ready for bed.
- No yelling at people in our house.
As the kids get older, become more capable, and have different things to work on, the tasks change, but we try to keep them reasonable and to reflect the specific strengths and challenges of the child.
Our kids can also earn additional money by doing other jobs that are above and beyond their regular chores, such as:
- mowing the lawn
- cleaning out the chicken coop
- cleaning bathrooms
- wash/dry/fold a load of laundry
- manual labor (heavy yard work)
I also get creative with some of the extra jobs they can do to earn money. I've been known to pay Quinn a couple of dollars to make a treat that I'm supposed to bring to an event. And once I paid Dallin to narrate a video presentation I created for a youth conference.
However, we don't pay them every time they lift a finger. We expect them to do some chores just because they're part of our family, such as keeping their own rooms clean, doing the dishes, and picking things up when we tell them to.
We give each of our kids a checkbook ledger with their name written on it, to track their money. I start them with $50 when they're nine. They can earn up to $40/week, Monday through Friday. This is a number that would be different for everyone. It may seem like a lot to some families, but we also require them to pay for many of their own expenses (see next section), so this amount is reasonable for us.
When we first start each child on the system, we're very strict, with checklists and weekly paydays, so they figure out how the system works. Each week, we add up the money they have earned and they enter it into their ledger. As they spend the money, they track that in their ledger as well. When they want to buy something, I pay for it and we subtract it in their ledger.
After a few months on the system, we don't have to do payday every week—they get used to the system and develop good habits to get the tasks done. Now we do payday every one to three months, sometimes estimating what percentage of practicing they've done, etc. If I had a very literal kid, I might have to do payday weekly.
Because we give our kids ample opportunities to earn money, we require them to buy a lot. With the money they earn, they must buy:
- winter coats/ski pants
- all their clothes
- birthday presents for friends
- tickets to movies with friends
- trips to fast food that are for fun (not a family meal)
- random junk they want from amazon or target
- make up
- summer camps —they pay a portion
- ski passes
- skis, ski boots, etc
We pay for:
- socks, underwear
- school supplies
- sports or music lessons (They would have to make much more money to be able to pay for those activities, and I don’t want them doing that.)
If they don’t have enough money for something they want or need, we never give them a loan. We give them job opportunities to earn it.
If they have enough in their “checkbook” and want to turn it into “real” money, I will happily switch it over into their savings account—usually in $500 chunks. We always generally encourage that they save, but don't demand it, mostly because they all tend to be good savers, and deposit money into their real savings account as it builds up in their ledgers. If they get lots of money, we will discuss investing with them. (This month, they are considering opening Roth IRA’s.)
We're new at the teenager thing, now that we our oldest two are 15 and 13. My kids are involved in sports, activities, etc and are very busy, but we still require them to do their chores and contribute to the family in that way.
My oldest has expressed interest in getting a job when he’s 16. He is allowed to drive the third family car, but we have made it clear that it's not his car. He knows if he wants to take a car to college, he will have to buy that.
We feel like giving them a chance to manage their own money now is preparing them for when they go to college and are completely in charge of their own finances.
As soon as I got my first job, I started reading personal financial planning books like The Automatic Millionaire and Dave Ramsey and Suze Orman. These books started our financial plan. I love my job as a part-time pediatrician, and I’ll love to retire from my job and retire with my husband. We plan to travel and visit or kids and do medical mission trips. All that takes money, so I better focus on saving and investing.
About This Mom
Sarah is around kids all day everyday. In addition to her own four children (ages 10-15), she is a part-time pediatrician and an as-needed substitute teacher for her kids’ schools. They have a dog and chickens, and they ski all winter and wakesurf all summer.