Let me share a little story with you this Monday morning…
I find it very impressive to see the number of things I can learn from my kids. The most impressive is that not only do I learn life lessons, I also learn about money too! Since it’s summer time and we are all thinking about vacation, let’s start this Monday with a lighthearted story about saving money…
Not so long ago, my son turned 7. Each year for his birthday, we bring him to Toys “R” Us and let him buy what he wants (according to a specific budget, of course!). He always receives gifts but we find it interesting to let him choose one of them. I think that just the fact that he can walk around for an hour in the store and pick whatever he wants is already a gift!
This year was different since both he and his sister wanted to get a trampoline. Since it’s a big gift, we told him that we would not give him extra money to buy another gift at the store on top of it. However, we told him that he could use his own money to buy something. So he could still have “his moment” at the store.
He didn’t have much left when we had this discussion and this was one month prior to his birthday. Kids are kids and are not so good with saving money. This is why every time he reaches $10-$15, he wants to spend it right away.
For his birthday, he wanted to buy a NinjaGo (young parents will know what I’m talking about 😉 ). Since he is currently making a maximum of $4/week for small chores, we told him that if he saves his money during the whole month, he could buy the toy he wanted so dearly. But doing all his chores for four weeks in a row was quite a challenge for him. We actually pay him $1 per chore per week and if he does the three of them perfectly, he gets a $1 bonus. So reaching $12 in four weeks was quite a feat.
But he didn’t get discouraged and started strong with $4 for his first week. He kept on saving his money each week and calculating how much he had after each “pay check”. A week prior to his official birthday, he had his birthday party. One of his friends gave him $20 instead of buying a gift. He was ecstatic; he had worked hard for a month and got a “bonus” of $20 right before his birthday. Instead of buying a NinjaGo, he was able to buy the Wii game he wanted even more (but costs a lot more too!). When he went at the store, the Wii game was only $23 with taxes. He was pretty happy to be able to a) buy the game, b) keep money in the bank for his next purchase.
Morale of this story; when you work hard and save systematically, good things will push your savings to a whole new level. It’s a sort of law of attraction but less esoteric! Hahaha!
It’s been a year that I’m trying to show the importance of money to my son. Last year, I wrote about how I’ve introduced the concept of money to a 6 year old. I can tell you that now that he can earn money, save money and spend it, he completely understands the concept of “expensive”. When we go to the store to buy him clothes, he understands that he can’t have everything in the store. Kids these days are super spoiled, it’s a good thing that sometimes they realize it!
Next year, I think I will offer him the possibility to “invest” a part of his money in “Dad’s bank”. I’ve read this suggestion a few times around the web and like the concept of paying “interest” on your child’s savings. It can show him the concept of interest and (even better) compound interest. I hope that my son can learn that if he saves money and hustles, he will gain more than what he actually saved. Have you tried this technique with your kids? How did you introduce them to investing and saving?
Very nice! It’s really fulfilling when you see your kids think about the purchases and balance the purchase of different items. I have found that I sometimes have to just get them to wait and look at other items to create that mental conflict.
So far, I have been transferring the money in their bank account as opposed to give coins every week. It has definitely helped towards their savings and they have been able to buy an iPod Touch that way. They tend to have cash on hand but it’s not a growing amount except for the bank account.
We have not tied money to chores at home as I believe chores are necessities. However, extra work above and beyond can be compensated. For example, if they help return the bottles, the get to keep the money.
They have their bank account and they are getting a bank card in the coming weeks for the first time now. They have a high interest savings account and I have them setup with 3 shares with Computershare (Telus, BMO, Fortis).
@Passive Income Earner,
we ran into the “I don’t get paid for this” the first week we put this system in place. We rapidly told them that chores are part of living at home and that while they do things “for free”, they don’t get charged for supper (that was a winner argument with my oldest son 😉 ).
I can’t wait to have an investing account that we will “manage” together!
Hi Mike,
A great blog! But I do definitely see passive income earner’s point of view. I might go with him about “giving” money. I recycle a lot, so he recycle with me (collecting alumni cans and loading up the truck), I may have him keep the money.