Teaching Kids Dollars & Sense

I wish we had done this ages ago!

We took advantage several weeks ago of a free service from our bank (TD). We created child bank accounts for each of our teens (14 and 17) and gave them debit cards to access them.

Now, when they want money from their virtual family bank account at Active Allowance:

1. they write us a check from their Active Allowance account.
2. if it’s for more than just a small amount of cash, we log in to our real bank account with TD and do a transfer to theirs.

Quick and simple!

Now, they can pay retailers using their debit cards and not worry about losing their cash or being overdrawn.

I wish we had done that years ago for our 17 year old so she wouldn’t have had to carry so much cash when she went shopping (and sometimes lose it!).

Here’s a list of some of the main benefits:

• No need for older kids to carry a lot of cash when shopping
• No ability to overdraw/borrow
• No charge to get the debit card
• No charge to use it in stores
• No charge for ATM access, if from our bank’s ATM’s
• No need for us to have cash on hand when the kids want it
• Easy to immediately transfer money online from our account to theirs
• Online transfer safely relies on the bank’s mega-million dollar investment in online security
• transfers are free

All free for child accounts (free at our bank - yours may differ)! The only limitation for our bank’s debit card vs a credit card is their debit card doesn’t enable you to buy things online (some banks’ debit cards do work online).

Despite this one infrequent limitation, we vastly prefer debit cards over credit cards for our kids. One of the principles we’re trying to teach them, while we still have some influence, is that they “shouldn’t spend it unless they have it”. And that’s sure hard to do when they have a credit card (especially when I see how undisciplined our daughter can be with her cell phone account! I wish our cell phone company enabled us to create a limit, but that’s a rant for another day).

Oh….and one more thing…..it looks like some of our Teaching Kids Dollars & Sense lessons might be sinking in…at least with our 14 year old son! He deliberately doesn’t transfer too much into his real bank account. He’s a little concerned that if it’s too easily available to him, he might just spend it!

Sometimes, we wonder what lessons might be sinking in. It’s soooooo nice to enjoy those moments when we see some do!

Oh….and did I mention it’s all free

Here’s a good read from Money Magazine: Help! Our kids are driving us broke. The Millers are concerned about how much they’re spending on their kids, not to mention on their own indulgences — and how much their kids are still demanding. If you’re a member of Active Allowance, you’ll probably remember this scenario and have some sympathy for the Millers. Now if only they knew about our service!

In my previous career, I learned that I could do a presentation for five people in a room and have them walk away with five different misinterpretations of what I said. A few key conclusions:

1. OK. Let’s deal with the obvious first. There’s, uhhhh, something, errrr, wrong with my, ahem, communication skills.
   
   And now on to something more useful for you.
2. Repeat with a twist: It’s very useful to repeat a concept, but do it in a different way. You never know what might achieve the “Ah-hah!”. With that in mind, here’s a terrific summary of key lessons to teach your children about money by Leo at Zenhabits. Although I don’t know Leo, he’s obviously traveled down the same road as Leslie and me. Many of the ideas he conveys are identical to what we incorporate into Active Allowance. But perhaps he says it in a different way, so you might get a new Ah-hah today. It’s sure worth a good read!
3. Just because you said it, doesn’t mean they get it: Words are often not a very effective way to communicate. But until we can do mind-melds, we need to find multiple ways to teach our kids. That’s why it’s so important to have your kids learn by doing - a far more effective instructor of life lessons.

As a minor quibble with Leo’s post, I disagree with the black and white position he takes in #8 on what’s appropriate for how your children earn money (eg types of chores). In his defence, this issue is a big one, and it’s hard to do justice to it in a paragraph.

Nevertheless, there are at least two sides to that debate. I often liken it to politics and religion. People may have strong points of view, and arguments are often heated and sanctimonious on both sides. But in my mind, neither is right or wrong - it comes down to personal preferences, beliefs, attitudes, philosophies. I have my own strong point of view, but I accept the fact that others vote for different people (ok, I call them names, but I’ll fight for their right, yada yada).

With that caveat, Leo’s post is a great read

Here are are a few more ideas, following up on last week’s article, to help you implement a chores/allowance system with your teen.

1. Petty Cash = more autonomy

   If you’re using a system like Active Allowance, with a virtual Family Bank instead of a piggy bank, be sure to let them know they can write a check for “spending money” any time they want so they can have cash in their wallet……and they don’t have to tell you each thing they buy.

   In our case, I mistakenly thought our 14 year old understood this but I never explained it explicitly. It was the source of a great amount of unstated frustration for her which festered over several months and created unnecessary animosity towards the system. It took a while to get back on track.

2. Add longer term goals

   Older kids are able to work towards longer term goals. Next week, I’ll write about an idea we used successfully with our 13 year old this past year - the “big-ticket item”.

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A couple more thoughts, mostly specific to Active Allowance members:

3. Make each point significant

   There’s a danger with teens that, if a point’s not worth much, they can too easily shrug it off (“I don’t need to do that thing today”). The type of checklist where there are many responsibility items all in one category, and the total points add up to a small number, usually works best.

   By doing this, you’d be telling your teen “I’ve kept the list small, to relatively few important things, but if you don’t do them, it has a significant impact on your allowance. It’s important to us that you do them”.

4. Consider not including Homework on the list

   If your kids haven’t developed the homework habit by the time they’re teens, connecting it to allowance will not likely make much of a difference.

   While all family philosophies are different, we don’t include homework on the list for any of our children. However, for the younger ones, we do include “homework finished by 6:00 pm” as a bonus item to earn an extra point. And for all our kids, we also give bonus points for finishing major projects (yikes!) early. And it works! Each of our kids accomplished this herculean task twice this year. And they’ve lived to tell the tale

Here’s a question we often get at Active Allowance:

“Any idea how we can inspire our 13-yr old to actually cooperate with our new allowance & chores system?”

There’s no doubt it’s tougher to get teens started on a new system if they never had chores or responsibilities when they were younger. Nevertheless, we do have members who tell us they’ve had good success. Before I elaborate, here’s a brain teaser: Try to distinguish between teenagers’ “Yecch’s” and the “Yay’s” for the following words:

• autonomy
• chores
• responsibilities
• money
• freedom
• micromanagement

Hmmmm, I think I probably have the same “Yecch’s” and “Yay’s”. We all do some things not because we love them, but because we know we they need to be done. That’s pretty mature and rational.

I know it sounds unlikely to some parents, but teenagers CAN often be mature and rational too……but you may need to connect the dots for them. The key is to accentuate the positives - more freedom to decide what they buy, more opportunities to earn extra, more clarity and consistency from Mom and Dad, as just a few examples.

There are no hard and fast rules as to what will work for your kids and your family since a) all kids are different and b) there are so many different family philosophies on this subject. Nevertheless, here are a few things to consider:

1. Try hard to achieve “buy-in” up front

   This is best accomplished by Involving your teen in its creation.

   For the allowance, create a mini-budget, making it clear how much spending power you’re shifting into his hands and in what areas. Also make it clear what he needs to do to earn extra. This is usually pretty exciting and empowering. For a teen, it’s called “freedom”!

   And - especially important - collaborate on creating the chores/responsibilities list too - don’t just hand her a finished version of what you’d like to see. Seek her input and ideas. You can use it as an opportunity to teach her the importance of sharing the family effort as well as help her connect the dots.

   Out of the box tip: Sometimes teens suggest a tough task (I’ll wash the floor EVERY DAY!). Resist the urge to rub your hands with glee, or murmur mwah-ha-ha. Consider rejecting it or making it easier, at least temporarily. You might say “Let’s agree to add that one next month” or even reject it altogether. You will be modeling reasonableness which, in turn, encourages buy-in.

2. Avoid Micromanagement

   With younger kids, a Chores list is more about getting them into good daily habits so it may need to be long and detailed. But once they’re teenagers, they typically rebel against being micromanaged. I would keep your chores/responsibilities checklist short and focused on those areas you really want to see improved (eg. for our ultra-busy, always-late 14 yr old daughter, we included “eating a healthy breakfast”).

3. Reinforce why and how this system is working for them

   For example, when they buy something you normally wouldn’t have agreed to (eg an extra-expensive pair of shoes), remind them they would not have been able to do this without the chores and allowance system in place. By the way, this goes for the younger kids too but it’s especially important to reinforce it with the older kids.

4. Review and adjust

   Be sure to have an open conversation with your teen about his likes and dislikes about the system, especially after the first month or two (and perhaps check in quarterly afterwards). To be sure, many kids want a totally free ride - get an allowance with no responsibilities. However, assuming that’s not on the table, you may have a useful conversation about how you can mutually tweak the system to work better for your situation.

…..to be continued next week –>

The concept of “earning” - does it really need to be taught?

Here’s an interesting post from an early stage Generation Y’er (born late 1970’s) commenting on a disturbing trend for late stage Gen Y’ers - kids in their late teens. Only 48% of older teenagers have summer jobs, dramatically lower than just 10 years ago. I would imagine she sees much of this “new” attitude in her role as a corporate recruiter.

The connection between effort and results (just like work and income) is not genetic - it’s learned at home and at school. And so is the opposite: the expectation of handouts - the dreaded “entitlement” attitude. Kids are not taught to expect handouts deliberately, but that’s the lesson they receive when there’s no connection between effort and results. These handouts masquerade as “let kids be kids”, or “enhance their self-esteem” - all well-intentioned, but so is that ol’ road to ummmm, heck.

I want my kids to be kids too. I want them to have fun, enjoy their childhood, have carefree times they’ll look back on fondly. But I also want to equip them with what they’ll need to be successful in life. I send them to school for that reason. And I teach them values I consider important - maybe even the concept of “earning”. And maybe even with some humor.

Like how funny it is that hard work usually delivers great results

Now that the kids will soon be (or already are) off school for the summer, you may have noticed their usual Responsibilities Checklist doesn’t make a lot of sense (this comment makes sense to Active Allowance members) - my kids take great delight in putting NA beside “being ready for school”!

Here’s an idea for Active Allowance members:

You can create a special Summer Responsibilities checklist (as Leslie’s doing right now) and then revert to the old one after the holidays. It’s really easy to do - easy as 1, 2, 3. Here are the steps:

1. Click the NEW/COPY button on your child’s Responsibilities Checklist
2. Choose one of the options. You might want to copy her current checklist to start off, give it a new name (eg Summer Responsibilities), then modify it. Later, you can use this same screen to copy it to your other children
3. Tailor it to your heart’s content.

The “active” checklist is the one you see in the drop-down window - select the new one when summer starts. Once the kids are back at school, just reselect the old checklist and you’re done.

That’s it. Have a great holiday!

Harvey