Monday, October 24, 2016

Kids and savings

Like many parents, I opened savings accounts for my kids. My credit union requires a five dollar minimum balance and so I donated $5 to each child. Accounts opened. We then took their stash of cash they had from Christmas and birthdays and selected some for savings. They each kept about $20 in cash and decided to deposit the rest.

Because their balances are so small and interest is so low, none is currently accruing. I decided to help them out a tiny bit and I have one dollar a month transferred to each account. It's a whopping $3 a month from my account to theirs. If I go broke from that, I do have financial woes.

Here's how I've chosen to handle their accounts. Yes, they are for saving money. But why are they saving it? In reality, adults  save for the next purchase or event. And so, my theory is they can get money out when they want it. When we head to the beach, they can pull some of it out and take it with them. If they don't spend it, we can put it back. If they go to their MeMe and PawPaw's house, they can take some. Not that they NEED money there, but they have some.

My kids are 7. I try for them to have no more than $20 in cash at home. We don't have an allowance yet. Nor do I pay the kids for chores. We use the bell system.  They get cash from grandparents for minor holidays and other things. They occasionally get a random dollar from me that they can keep or use for ice cream at school. And their biggest money maker right now is the tooth fairy and her $1 gold coins.

Usually they are good at saving their money, but they have permission to spend it at will. D2 went through $20 buying ice cream every day at school for a month. She was upset it was all gone, but it was her choice. I didn't know until it was done. And even with her tears, I didn't replace it. Now she thinks twice before she spends.

When we went to Daytona last summer, we went to the flea market.  I allocated each of the $15 of my money to spend as they wanted. Anything else they wanted had to be their money. D1 spent all mine and 12 of hers. When she saw something she liked, she HAD to have it.  I thought some of her purchases were wasteful, but sadly kids have to learn about quality on their own. D2 spent mine plus $2. She didn't buy anything until the end when she had seen everything and then asked to go back to the purse booth and get a purse and a wallet (I'm a bit jealous of the wallet-it's really nice). And then there was my son. He wanted "boy toys."  He was very price conscious. He chose pretty well as we went. He skipped one big purchase but then went back for it at the end. I think he spent mine plus $1.

It's hard to watch them make mistakes with money, but I think it's important for them to know they can control their money. As things tru bought at the flea market tore up, we discussed the purchase choice. D1 who bought everything in sight has been more cautious since then and asks me if I think it's a good purchase.  I don't always give an opinion as I think it's important for her to make up her own mind, but I will talk about how it is made and ask her how she plans to use it.

And so, kids save. And spend. It's about both. Their savings accounts have more in them today than when they opened them a year ago, but that's thanks to my dollar a month. Even so, they know they have money there and it's theirs. That's important. Kids need to learn to manage their own money and control it.

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