There is no doubt that our current educational system is drastically lacking in it’s ability to teach our kids about money, let alone how to properly manage it.
But, blaming our schools is a bit of a cop out. At the end of the day it’s our job as parents to give our kids the skills they need in life. And managing finances is an essential life skill that we should prioritize as highly as reading, writing or mathematics. We aren’t doing our kids any favours by shielding them from the realities of finance, quite the opposite actually. We are setting them up for failure.
Unfortunately a lot of todays parents grew up in homes where it wasn’t polite to talk about money. So how can parents who didn’t learn basic financial principles themselves, teach their own kids about finance?
This is a huge problem, and a significant factor in why household debt ratio’s sit at all time highs in many countries. Financial illiteracy is an epidemic with lifelong and generational implications.
Both Mike and I feel strongly about this topic and inwardly cringe when we see parents avoiding any discussion of money with their kids because they, the parents, never learned how to properly manage money themselves. We were both lucky enough to be raised by parents who were willing to talk with us about money. There is no doubt that having that advantage has been a cornerstone in our financial success.
Because of that we’ve focussed a lot of time and energy into coming up with creative ways to teach our kids about finance, and to let them experiment and make mistakes with money during their childhood. Personally, we would both prefer to see our kids make these mistakes and learn from them now, rather than when they are adults and the stakes are much higher.
So every couple months I’m going to take the time to write about strategies that we’ve implemented to help our kids learn more about finances, and how you can start the same process with your own kids, nieces, nephews, grandkids etc. The more our kids understand about finance, the better equipped they’ll be to make the life choices that await them, the big and the small.
When our oldest son was 4, like most kids these days, he loved to play on the iPad, the Nintendo WII, the computer, and watch TV. Basically he wanted to do anything involving an electronic screen, and if we had let him, he would have done it non-stop. As parents we didn’t want to stunt his development and understanding of the technology around him by prohibiting screen time entirely, but we did want to find a moderate balance.
We thought the privilege of screen time was a good opportunity to implement a system that taught him some key financial and life concepts, including work ethic, budgeting, independence, accountability and responsibility .
We talked it through, consulted with a number of other parents on their own methods, and ultimately came up with a cost per use approach that we dubbed “WII dollars”.
We started by very clearly teaching him that screen time was a privilege not a right, and as he had already learned, privileges were something that had to be earned but could also be lost.
We then implemented some basic “chores” that he was required to do every day. The chores were tailored to his age and have grown and developed along with him, but at the start they included making his bed, brushing his teeth, and getting dressed in the morning.
We wanted to make sure we gave him chores that were challenging for his age, but also achievable. So to set him up for success we made a few modifications to his room. We simplified his bedding to a fitted sheet and a single warm down comforter that kept him cool in the summer and warm in the winter. With no flat sheet to deal with, he could easily pull the four corners of his comforter to their appropriate place and “make” his bed.
Secondly we moved his clothing into lightweight fabric storage containers right at ground level. We sorted his clothes into the bins, and he could easily pull each bin out to look inside and pick out his clothes for the day. Now, not all clothing combinations were winners, but it was a small price to pay for helping him build his independence and develop the ability to figure things out on his own. (Like learning to look outside to check the weather before getting dressed, or thinking ahead to what we would be doing that day and dressing accordingly.)
We aren’t big fans of monetary allowances in exchange for chores, largely because we think it’s important for everyone to learn that they are expected to do their (age appropriate) share of the household work. So the “WII dollars” acted as a monetary alternative, while still being something of value as a reward for completing his chores.
Every two weeks, if he had done all his chores, he would receive 10 WII dollars (which were really just some plastic poker chips). If he hadn’t done all his chores, then we would deduct accordingly. He got very good, very fast at doing all of his chores! Each WII dollar purchased an hour of screen time and they were his to manage as he saw fit. We gave him a little guidance about managing resources, but frankly, this was the best part to let him figure out on his own. It’s through mistakes that we often learn the life lessons that stick with us, and when it came to budgeting his WiI dollars, it was definitely a learning process.
The first time he got his WII dollars, he blew all 10 in the first 2 days. It was tempting to warn him, even to send him outside to play after the first couple WII dollars were spent. But, we held our tongues and let him learn this lesson on his own. For the rest of the two weeks he complained vigorously about not having any left, testing us to see if we would let it slide. Instead of caving and letting him have more screen time, these instances became opportunities for Mike and I to have conversations with him about planning ahead, and budgeting his resources. We held firm to the fact that he would only get ten and if he spent them in one day, so be it.
Even at 4, he figured out really quickly that he needed to manage his “money” better. He began to think ahead and would try to make sure that he had a least a little screen time available for each day. He even started asking if he could spend just 15 or 30 minutes of his WII dollar, and save the rest for another time.
Over the years we’ve steadily built on the original chores. Now that he’s 8, he still does his original chores everyday, but also makes his breakfast, packs and unpacks his school bag, takes out the compost bin after dinner, and does one rotating task each day. The rotating tasks include folding and putting away his laundry, changing the bathroom garbage bins, cleaning his room, cleaning the bathroom (a very simplified version), and unloading the dishwasher.
Depending on where you are from, this may not sound like not very much work for an 8 year old, and to others it likely sounds like a ton! Really it breaks down to about 30-45 minutes of “work” each day, so it’s far from overwhelming, but it does require some diligence on his part to get it all done. The degree and difficulty of the chores can certainly be tailored to your individual child, and the expectations of your home. I would however encourage parents not to underestimate what their kids are capable of. Making it easy negates a lot of the lessons involved.
On occasions when he has run out of WII dollars before the next “pay day”, he has approached us about doing extra work to earn additional WII dollars for the week. If we have something specific for him to do, then we will take him up on the offer, but we don’t ever “create” work that doesn’t need to be done. There have been occasions when he has asked to do extra work and we have told him that unfortunately we didn’t have anything for him to do. We both agree that it’s important for him to learn that you can’t always count on “extra hours” being available to bail you out of overspending, you need to manage the money you have based on your known budget.
From the foundation his management of WII dollars has created, there will come a day when we will eliminate them and turn over management of his screen time completely. It will come with a long talk about responsibility, common sense, and trust, as well as the potential to lose that privilege if he can’t manage it maturely.
In fact we regularly trial this when we go on vacation. Anytime we have a vacation, WII dollars don’t apply, but he’s expected to manage his screen time reasonably. Always with the understanding that if he doesn’t manage it at a reasonable level, then his father and I will manage it for him. This was a struggle early on, but his understanding and ability to manage his time has developed in leaps and bounds. On our last trip this summer he told me that he had come up with a plan that he would only use a single charge on his IPAD over the whole trip. So he literally managed his time by the battery percentage available to him, thinking ahead to how many days he needed that single charge to last. This was a completely self imposed limit that he came up with all on his own. I’m not going to lie…..I felt pretty proud!
I have no doubt that fully eliminating WII dollars and turning over control of his screen time entirely will come with some bumps, and he may lose the privilege once or thrice along the way, but I also know that with the financial lessons he’s learned and continues to learn, it will be a responsibility he will value, and therefore he’ll rise to the challenge.
The self-discipline and accountability he’s developed through this process has transitioned seamlessly to his management of real money, and in the future, will form the foundation when we move on to how to manage credit.
There are endless ways to tailor this approach to meet the age and financial stage/understanding of the child(ren) in your family, but there are 5 core rules that should be maintained if you want them to take away the underlying financial principles:
- “Payment” is earned only if the work is done;
- Once the “money” is spent, it’s spent, and you have to wait until you earn more;
- It’s their responsibility to manage their “money”, you won’t do it for them;
- If they lose their “money”, it’s lost, it won’t be replaced; and
- Let them make mistakes.
Implementing systems like this will generate a wide variety of opportunities to have great conversations with your kids about all areas of finance. You’ll be surprised with their ability to get creative and work hard when they are challenged. Not to mention the questions and insights they will come up with about money. It’s never to early to start talking finance, and it’s an invaluable gift that will pay your kids dividends through their entire lifetime.