Why your 8 year old should have a checking account.
Does any of this sound familiar?
At the Store:
“Mom, I want a toy”
Driving down the Road:
“Mom, I want to stop and buy a treat”
At the dinner table:
“Mom, my friend has a whole box of Pokemon cards and I don't have any!”
There was beginning to be so many hours of my day consumed by incessant whining that I believed I was going to lose my mind. Logically I knew my children were far from neglected but if you listened to them drone on about what they wanted and DIDN’T have you would be sure they were living under a bridge with only earth worms to sustain them. It really didn’t seem to matter how much stuff (toys, treats, time with friends, video games, TV, etc.) they had it never seemed to be enough and they always wanted more. The truth was evident; I was raising a bunch of entitled brats! Something had to change, and very soon.
I can’t even count how many times I tried to explain to my children that “stuff costs money” or “you already have SO MUCH” or “you should be grateful for the things you DO have” but my words always landed on deaf ears. Apparently this wasn’t one of those parenting issues you could just sit down and have a talk about. My kids needed to learn for themselves how to want something, to work for it and to eventually win their reward. Just like adults, kids must understand that nothing in this life is OWED to them, but rather THEY are RESPONSIBLE for the accumulation of their own desires. Even though I am my kids mother and I love them, my sole purpose in life is not to shower them with treats and trinkets; my job is to teach them to function as adults and to be accountable for their own successes and failures.
Last summer I felt I was on the path to having children who demanded everything and contributed nothing, using real money seemed to be the only way to get rid of the entitlement that was infiltrating our lives. Learning how to earn money AND how to spend it is one of the most important lessons a person will ever learn, but before I could succeed at reining in my privileged little children I had to do two things: first I had to STOP FEEDING THEIR CRAVINGS and second, I had to GIVE THEM SOME NECESSARY TOOLS.
STOP FEEDING THEIR CRAVINGS
Every effort on the planet to teach a child to WANT, WORK, and WIN will fail if parents buy them everything they ever ask for. Sometimes we even buy things for our kids when they have no idea the item exists, when we do this we completely take away their opportunity to WANT the object before they own it. If you take away their WANT they lose the motivation to WORK and they never learn how it feels to WIN. When our children are whining in the shopping cart we think they are whining because they want something but in reality they are whining because they expect something to be given to them and they are put out because it isn’t happening fast enough. By the time a child is 5 years old they will very rarely throw a fit because they WANT something, unfortunately they will continue well into adulthood to throw a fit because they EXPECT something (this phenomenon is called entitlement). Buying things FOR your kids destroys their ability to WANT and reinforces their habit to expect.
Does this mean we never buy them anything…. Ever? Of course not, we still have Christmas, birthdays, and special occasions to introduce wonderful new things. Kids are smart and they know the difference between Christmas morning and a trip to Walmart for groceries. Kids are also selfish and they are naturally attracted to bright shiny new things, don’t confuse their attraction with true wants; attractions will disappear when the object is removed, real want is long lasting.
So what DO I buy my kids? The answer is simple; food, clothing, shelter, and education. They are responsible for toys, treats, birthday gifts, vacation souvenirs, and all other unforeseen, unnecessary, and non-life threatening expenses (I even made them pay 50% of their Disneyland tickets when we went to California a few months ago…. They had to work REALLY hard and I LOVED IT!)
Tools to Financial Success (for children and adults)
Now that we have decided we aren’t going to buy things for our kids we must give them the necessary tools to buy things for themselves.
Personal finance is something I have a bit of experience with and something I spent a great deal of time studying during my college years. I already had an overabundance of books and materials on budgeting and finance for myself but teaching kids about money is different, isn’t it? Actually, the more I read and studied the more I realized that it doesn’t matter how old a person is, everyone learns money management best through real life experience. It only makes sense that the earlier a child starts making financial decisions the fewer life threatening consequences they will have if they make a few bad choices. The time to start teaching my children about money and entitlement was yesterday, I was already a day late.
This part of the process took the most time. Through a lot of thought, study, and preparation I created a Family Financial Theory as a basis for teaching my children money management. This FFT will be different for every family as there are so many different parenting styles and philosophies, but if children are going to learn how to manage money, they must first have access to it. When trying to decide how I would allow my children to obtain money the idea of an allowance was immediately thrown out the window. The last thing I wanted to do was agree to pay my children a set dollar amount each week simply for being alive (my kids breathe well, but not THAT well). My next thought was to pay them for doing their chores; each morning before school they are responsible for getting showered and dressed, making their beds, emptying the dishwasher, and practicing the piano. We have worked for years to make these four things a matter of habit and the last thing I wanted to do was to ruin this habit by placing a dollar amount on it. I decided these four daily chores were not optional and would not be rewarded with money.
Soon I was back to the question of “What AM I willing to pay my children for?” The answer came surprisingly quickly. I was willing to pay my kids to do anything that I didn’t want to do myself. This meant I would be willing to pay for any chores done in excess of what I felt they should be doing simply for being a member of the family. I know that sounds really vague but that’s the beauty of it, as the parent I’m in charge and I get to decide which chores are ‘extra’ and which chores are required. I won’t spend forever giving examples but I will give a few:
· Everyone who eats helps clean up the table; however, I’m happy to pay someone to sweep the floor after dinner.
· Everyone who wears clothes does their own laundry; however, I’m happy to pay someone to fold the dish towels and put them away.
· Everyone who rides a bike and would like to continue to own a bike cleans off the sidewalk; however, I’m happy to pay someone to scoop up the dog poop.
After I had made the commitment to stop buying things for my kids and I had a clear understanding of what my kids could do to make money, I needed to create a system for paying them. In years past when I had made a halfhearted attempt to teach my children about work I would keep some dollar bills in my desk drawer so when I thought of a job they could do to earn a dollar I could immediately give it to them. This proved to be a very flawed system as I soon ran out of dollar bills and was terrible at getting more. This idea was also bad because it taught my kids to expect money the very second they finished a job which was not only annoying but very impractical. We also tried to keep a ledger of earned and spent dollars but no one (myself included) remembered to fill it out so it never served much purpose. Cash wasn’t working, there had to be a better way.
My parents took me to get my first checking account when I was about 13 (I still have the same account). This was before the days of internet banking so when I would earn money I would sit down at my desk, fill out a deposit slip, enter the deposit into my register book and have my mom drive me to the bank to make the deposit. Then, once a month I would receive my bank statement and I would sit down to reconcile my account using the form on the back of the statement. Thirteen is a bit older than eight but I decided age didn’t matter, my kids needed to learn to balance their income and expenses every month just like I had. So one day, without explaining anything I took them to the bank. They filled out the paperwork, chose a design for their very own checks and debit cards and left feeling a bit confused but very grown up.
The following Sunday we sat down for the first of our Sunday Family Finance meetings. I explained to them that I would no longer be buying anything for them (except for the necessary items listed above) and that from then on they would not only be responsible for earning their own money but they would also be responsible for getting paid for the jobs they completed. Just like a real job in the real world they would be required to find a job to complete (I wasn’t going to beg them to earn money) get the finished job approved by a parent, fill out a time card and wait until payday.
We have a small box that we call The Bank, it is kept in a special place and is used only for tracking family finances. Inside the box are the kid’s check books, check registers, blank time cards, and filled out time cards. Every Sunday night at 7pm we get out the box, calculate the amount owed to each child from the time cards, fill in their check registers, and transfer the money online from my checking account to theirs. Once a month this meeting lasts a bit longer as we enter all of the transactions from the paper register into Quicken and then reconcile the statement on the computer. This process helps the kids categorize their expenses so they can see where their money is disappearing to. When I have counseled adults on managing their personal finances this has proven to be the number one most important thing to do to avoid financial distress.
Because my kids aren’t always prepared to buy their own stuff (my 7 year old doesn’t carry a wallet everywhere he goes) our paycheck system works both ways, I fill out time cards for them just the way they fill them out for me (I also fill out a time card for them if I have to make their bed or do their dishes. I figure if I’m going to pay them to help me with my work they should have to pay me to help them with theirs). I keep their debit cards in my wallet so if we are ever at a store and they want to buy something they can or I can fill out a time card for them to pay me back. It was a hard lesson to learn that if time cards aren’t filled out before the meeting there is no payment. Part of this process is being responsible for completing the necessary paperwork that comes with a job.
We have now been using this system for 8 months and I can honestly say it is the only system I have been successful at maintaining. I’m excited to look back on how many Sunday Paydays we have had and see that because it is so easy we can continue with this plan forever. My two older kids (8 and 9 years old) are active participants and my five year old is learning step-by-step how the system works (I still pay for most of his things but he can fill out time cards and get paid in cash on payday).
My daughter is a saver, through and through and my eight year old son is a spender. The minute he has $30 in his checking account he spends 20 of it (I told them they had to keep a 10 dollar cushion). Sometimes it is difficult for me to watch him throw away his hard earned money but I know that if he is going to learn any financial lessons from this he has to be able to make his own decisions and I have to keep my mouth shut. He is already starting to see how quickly his sisters’ account is growing and how his is always low. Now that baseball season is in full swing he really wants to buy catchers gear, but it is expensive and when we went to the store he realized he only had enough money for a mitt. If he truly WANTS it AND if he WORKS really hard he should have enough money to buy the rest of the equipment by the end of the season.
The biggest downfall I have seen to this system has been a constant inquiry about how much money they will make if they do something for me. Part of me thinks its bad news for your kids to say, “What will you pay me?” every time you ask them to do something, but the other part of me realizes how important it is that they learn to work and manage money. To deal with this problem I have to quickly consider if what I am asking them should be rewarded with money or if they should do it to honor their mother. I am getting better at making this decision instantly and my reply now is either, “I’ll pay you one dollar” or “I’ll pay you nothing, but I’ll let you eat the dinner I just cooked” (or I’ll let you sleep in my house rent free tonight, etc.). (Over time this problem has dimished greatly!!)
Without a doubt the very best part of this Family Financial System is that I never, EVER, have to think of an answer to the question, “Can we get one of those?” The answer is always the same, “if you want it, you can pay for it”. No more discussions, no more whining, no more entitlement. I’m almost a little embarrassed that I didn’t start doing this when my kids were 6, it just makes so much sense, AND I get a lot more help around the house and the farm.
We have used two different time cards during this process; the first one was a sheet of paper with four rectangles printed on it. We cut out the rectangles and the kids used one time card for every job (like using a sticky note). I liked to use this at the beginning because it was a physical demonstration of how many jobs they completed, if they had 6 time cards that meant they did 6 jobs. However, after we had some practice and everyone was pretty clear on how this worked we moved to a more traditional time card where each job was listed on one large sheet of paper. This way uses far less paper and the time card is easier to keep track of, but if it gets lost all of the jobs are lost with it rather than just one.
Sticky Note Time Card PDF HERE
Traditional Time Card PDF HERE
My ultimate goal was to help my kids understand that they were responsible for their own wants and to teach them to manage their income and expenses in the least time consuming way possible. Internet banking and online checkbook balancing has saved me tons of time and effort in my own finances, it only made sense that it would be the most efficient process for my kids as well.
Good luck! I’d love to hear how it goes.