Monday Chart: Parental Fiscal Motivation

 In case you thought having teenagers with phones is a way to save money:

Making Allowances

About a year ago, we changed the boys' allowance scheme.  They'd been getting something on the order of a dollar or two a week.  At that rate, we had to keep small bills and change around, and it wasn't adding up to money they could actually use to buy things they want.  We heard about an allowance scheme from a family at church that has raised at least two out of three responsible now-grown daughters.  (We know the oldest and the youngest but haven't met the middle one.)  They gave their children their age in dollars twice a month.  That gives the disciplined child a shot at being able to save up for something relatively valuable and promises a definite $2 monthly raise raise every birthday.  
 
We also set up some categories in a Google spreadsheet to help them think about how all money is not the same and that we can parcel money into different funds for different uses.  We distinguished between:

• Spend - for purchasing anything from a snack to a toy, no strings attached.
• Save - to be used only for an item that the child added to a list of savings target items.
• Share - 10% for their tithe.
• Presents - with increased funds comes increased responsibility to spend their own money to buy birthday presents for immediate family members (in addition to the Christmas presents they've been buying for immediate family and whatever extended family with whom we spend Christmas).

Ideally, I would now report that the influx of income and the carefully-constructed Google spreadsheet have turned them into shrewd resource planners.  Unfortunately, that's not true. They spend their money like NBA rookies.  As soon as money piles up to the point that they could buy something, they buy anything.  At 7, Teddy is especially prone to looking around for something to buy rather than planning and executing a purchase.  One of my favorites in this vein, was a little spreader knife with a silver lobster handle that he bought at the Stonewall Kitchen headquarters store in Maine.  He saw it, fell in love with it, had money burning a hole in his pocket (because we were on vacation) and bought it.  He still uses it regularly.  Other purchases like toys sold at tourist site gift shops have thrilled me less; the latest was a stealth fighter plane at the Wright Brothers Memorial in North Carolina.  I'm not sure he's touched it since vacation.

Wright Brothers Memorial gift shop

Charlie has not been much better; his money just accumulates faster.  On a school trip to a roller rink/arcade, he spent all seven dollars he brought on a game machine dangling an iPad Air as the halo prize.  Needless to say, he came home with no tablet and no money.  His discipline has increased more just this summer after nearly a year of the new scheme.  When the Target Nerf gun aisle didn't offer the gun he'd been looking at online, he kept his powder dry and saved his money for another day.

They're not the only ones that have had to adjust their decision-making and behavior.  We visited the Pro Football Hall of Fame in November, and I encouraged the boys to bring their money.  Charlie was interested in a collection of Steeler items including a rubber smaller-than-regulation football.  Something about the items he chose seemed like a bad investment to me; I thought he could probably buy the same things in a store around home.  I talked him out of the items he'd chosen.  He switched to several packs of football cards.  It all happened kind of quickly.  Football cards were clearly more banal and boring than the Steeler logo merch he'd first picked.  But I'd already talked him out of those items, so I didn't want to talk him out of the football cards.  Oops.  If the money belongs to him, and the point is for him to learn which uses of money are satisfying and which ones feel like a ripoff, I should have let him buy the things that first appealed to him. 

And that's the whole idea of this thing - to allow the boys to make their own decisions with small but not tiny amounts of money so that as the amounts grow in their lifetime, they'll have a framework for evaluating their own financial decisions based on their priorities, not just shininess. 

Another upside is that when the kids want something that I don't want to spend my money on - say a soft pretzel at a sporting event - I just ask them if they have enough money for it.  With the steady income they now collect, they ought to.  That means I don't have to weigh whether I want to spend money on that or not.

I'm curious about how other parents set allowance amounts and what input you then provide on your children's spending.

Love, Logic & Debt

A while back in this space, I reviewed the well-known book Parenting with Love and Logic.  That book's parenting techniques focus on allowing your children to make their own choices (where possible) and let them live with the consequences.  While most parents I know who've read it like the principles in the book, the examples can feel unrealistic.  For example, my friend who lives in an "up and coming" neighborhood with busy thoroughfares chuckled at the notion of letting his squabbling kids out of the car to walk the last half mile home as a "natural consequence" of bad behavior.  When I find practical ways to implement Love and Logic, I get excited.


Here's an experience I'd like to share; it takes some explanation to set up.   Sometime last year, Paige discovered the Moonjar, a three-part bank that helps teach kids that money has different uses.  We got one for each boy as a place to put his allowance.  The three parts are Spend, Save and Share, and it even comes with a little passbook if you want to track the amounts in each over time.  Currently, Charlie splits his $1.50 allowance evenly between the three - his idea - setting aside 50 cents to spend, 50 cents to save for gift buying and bigger occasions and giving 50 cents in the church offering each week.  Teddy splits his $.60 allowance 30 for spend, 20 for save and 10 for share.

A few weeks back, the boys had both built up a little pile of money in the Spend chamber of their Moonjars.  They decided to go together and buy a larger pack of Pokemon cards than either could afford on his own and split the cards proportionally to the amount each invested.  It's their money; it's for them to spend.  This transaction passed muster.  After the purchase, however, Teddy was left with around $.43 in his Spend. That Friday was dress-down day at school, a fundraiser for the yearbook.  If you give a dollar, you can dress down; otherwise, you're to wear your school uniform.  Since the boys get an allowance and have money of their own, we've had them pay their own way on dress-down day.  Teddy went to his Moonjar and found that he only had the 43 cents, and he was really bummed.  He wanted to dress down and asked if he could borrow the money.  I told him that he could borrow it under these terms: I would take 40 cents from him that day and then cut the 30 cents he would usually put in Spend out of his allowance for the next 2 weeks in order to pay me back.  He took the offer.

I wish I could say that he learned clearly about paying off debts and the restrictions it places on other spending you'd like to do.  Instead, he kept thinking of other things he wanted to buy, and I kept having to remind him that he now had 3 cents in his Spend chamber.  He engaged in some magical thinking about how he could probably buy some things for 3 cents.  The best learning moment probably came at the next dress-down day (the yearbook needs a lot of money) when I decided not to lend him a dollar again.  He had to wear his uniform when his brother and other friends dressed down.  


It will take more learning opportunities than this one, but I appreciated the Love and Logic framework and a chance to execute it.

Late Mother's Day Post: My Competent Mother

Getting to a post I hoped to post before Mother's Day about the competence with which I was parented. I won't try to cover it all, but my mother's money management and instructions about it kept coming to mind at Mother's Day because my wife just found the Budget Envelopes binder my mother gave me at the end of high school. More on that later. My mother managed and manages all of the money in my parents' household. Although I believe my parents set financial policies together, where the rubber meets the road, my mom still gives my dad an allowance. Both of my parents come from skinflint Scottish stock; my paternal grandfather ushered in the invention of disposable diapers by collecting BOGO coupons and redeeming them to fill a closet with successive sizes for his first grandchild. At half price!

Anyway, the way my mom managed the household finances would make Dave Ramsey quiver with glee. First of all, she budgeted by area - groceries, clothing, entertainment, savings (of course). Second, she withdrew cash and put cash in the aforementioned divided budget envelope binder thing. I don't know where she got them, but apparently when she found a time warp five and dime that sold them, she would snatch up several because the manila envelopes inside wear out with use. Mom would follow the budget pretty closely; when the envelope was empty, there wasn't money for that item until the next payday.

My parents started giving me an allowance when I was about 5. I would mostly save it for vacation spending money. That continued right up through high school, where it constituted walking-around money (not that I ever did much exciting walking around). I never held a regular, part-time job during the school year. I collected seasonal income mostly working at summer camps. In my last semester of high school, my mom calculated how much of the amounts in the budget envelopes would get spent on (or saved for) me and my brother. Then she took that sum and gave it to us with the caveat that we would now pay for everything but room and board. We'd cover our own entertainment and clothes and savings.

When she did that, she provided us each with our own budget envelopes. My wife discovered mine while cleaning out our clotted filing cabinet over the weekend. It still has the entries from the $55 I received from my parents every two weeks that last half of senior year. Here's the breakdown:
$25 - savings
$5 - Norway
$8 - clothing
$8 - tithe
$9 - miscellaneous

A few notes:

• I - like most people - went to Norway with a brass band in May of my senior year of high school.
• Just writing that out, I'm wondering if my parents instructed me that the money I received was after-tax or something like that because a tithe on $55 would be $5.50, not $8.00. I guess I was just precociously pious and generous.
  
• Interestingly, my brother, who received the same allotment, set aside $16 per week for clothes. We all referred to him as a "clothes horse" in this period.

I'm grateful that my mom turned over the reins on this money to me at that point in my life. When I got to college and got a workstudy job, I made about $50 per week, which seemed like a big raise. The reality, of course, was that at that point, I really did have to cover all of my incidental expenses myself. The season at the end of my time at home having to make some hard choices about how much to spend and on what prepared me to make better decisions a few months later when the stakes were higher. While I haven't maintained the cash budgeting system into adulthood, I still admire my mother for her planning and discipline.