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When I was young, I got a job at the Credit Card division of a major local bank. I saw how poorly some people managed their finances, but I also saw role models to emulate.

This experience marked me deeply and at that moment I decided to take control of my finances. My quality of life improved so dramatically, I was awed that small decisions can have such a big impact on your life.

I now have a 1 year old daughter. I want to teach her that smart financial management will open many doors in the future, but I'm not quite sure how to do this.

I've heard some kids get allowances (I never did), but to me it seems like getting money for doing nothing and that's not what I want to show her.

Do you guys have any tips or stories you could share with me? I'd be very grateful for them!
 

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I don't believe in allowances either. When I was a child, my "allowance" was in exchange for completing chores that were listed on the fridge. While it was good to teach responsibility, I think chores should be free, because then you're teaching that to help around the house, kids should expect monetary rewards.

Mine are just getting old enough for this. Have you read Rich Dad, Poor Dad? I haven't solidified my plans for how to teach my kids finances, but I love the idea of having them think about ways they could invest their money (however they end up obtaining it) instead of putting it in a savings account.

Speaking of RDPD, the author makes a game for kids to teach financial basics. Maybe that's an option to consider.

I also think that the most telling lessons will be in real life. Your example will teach them more than things you might say to them about finances.
 

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The problem with this is people are so very different. There are savers and spenders. And they usually marry each other. So you could do your very best to teach your kids about money only to have them go marry someone who needs the latest gadget and $200 handbags.
 

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The best thing you can do is not to teach them how to have a poverty mentality.

Make sure they have regular chores. Teach them to care for a pet. Have them do volunteer work.

Have them start a little business for fun.
 

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My son got an allowance for a long time. I started him at age 5. He got $1 per week for each year of his age. He was not required to work for it. But the deal was that I only provided him the necessities + presents for Christmas and his birthday. If he wanted anything like a toy he had to buy it himself.

What I told him was that in a family every person gets a certain amount of spending $$ when the family could afford it. So that was his spending money.

For the first few months he wanted to go shopping every Friday when he got his allowance. So we’d go to the dollar store, walmart or the toy store and he’d spend his whopping $5. What he really wanted was a power ranger stuffed toy… sort of a stuffed action figure. It was something like $20. Well one day we were in walmart .. he was drooling over that power ranger. He made the comment that the good things cost a lot. So that day he did not spend his $5. He could easily add and count by that time so he figured out how many weeks he had to wait to save up the $ for the power ranger. He did it.

Every year he looked forward to his $1 a week raise. He became a big saver from that lesson. When he would save for weeks, sometimes months to get something he wanted.

When he was 15 he got an internship working at a bank. When he got that job I stopped giving him allowance. He worked there for about 6 years. Then quit to go to college. He’s 24 today and a college student. He’s very frugal with his money.

I think that the way I handled the allowance worked out pretty well. He learned what I hoped he’d learn.
 

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I did the same thing. Gave DD22 an allowance but did not buy anything for her other than for birthdays, etc. Today, she'll barely spend money on a lunch.

As a young child, I told her that her allowance was like her job (along with school). It was her responsibility, hers to do with as she wished...but...I also set up a mandatory 3-part system. She had 3 banks - one each for spending, savings account, and charity. I expected her to put a portion of each allowance in each one, her choice, but she was expected at an early age to save some and to donate some. I let her choose, at the end of each year, how to use her donate money.
 

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I think that my kids are learning financial management from my example. I learned the same from my parents. What I mean is finances were never a secret in our home, when I was a kid we went through hard times and good times. My parents never kept that from us or financial obligations from us. We knew where we stood as a family and we all helped out when needed. We got jobs at 16 to have our own money and we learned our lessons about managing that money through our own trial and error.

I have done the same with my children they are learning about real life finances as they grow up. They know how to read prices on the grocery store shelf and they know when it makes more sense to buy generic. We are in great shape the last few years and I have been very generous allowing them finances. However, recently I noticed a pattern I did not like in my 15 year old. Knowing he is a spender by nature, I've decided to again teach him through real life experience.

For his 15th Birthday we opened a bank acct. debit card and all. He gets an allowance deposited into his bank account for which he pays everything, clothes, movies and meals with friends. etc. He only gets his allowance once a month. He must now monitor his spending and put himself on a budget that lasts one month. He can see his spending on line and knows big picture where all his $ is going. I have told him that he has a year to think about a car and gas and insurance payments out of that $. It's only been a month and he has already concluded that he will need to get a summer job (at 15 and a half years old!). He is looking into teaching in a sport he participates in or learning a trade at the ground level. The trade is related to his career goal.

I know he is the only 15 year old in his class with a debit card but this seems to have been a vehicle for him to see the big picture. He went away with a friends family for the weekend and paid all his own expenses from his money, I was surprised he didn't ask for more given the special event. I did not know it would have an effect this soon but I'm glad I'm seeing some results from my boy/man.

I don't think this tactic would work for many kids but just as in all things parents must know thier children's personality and find a solution to teach their child life's lessons.
 

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Thanks everyone this is good stuff. Ms. Spin is of the “No Allowance for Doing Chores” mindset. “They need to do that anyways.”

We’ve got 5 and 8 year-olds so their “needs/wants” aren’t all that great yet but they still should get a token chachki or something when we go to a car show or a state park. I’ll physically give them a $5 or a $10 and tell them that is your budget.

Its interesting to see how their minds work, it can become exasperating looking at the price of every thing in a store and the 8-year-old sounds like he’s joining the Tea Party. I have to keep reminding him that taxes pay for roads, schools and the like.

What I have noticed however is $5 won’t get a little girl much of a toy but if a little boy is into Matchboxes and Hot Wheels $5 is like a gold mine. :(
 

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Spindaddy,
I noticed the price differences with boys and girls toys too. What I did with my daughter was gave her $10 in the "big toy store" where she bought 1 small thing. Then 2 weeks later I took her to the dollar store with $10. She discovered that she could get 9 things with her $$ there. Hair bows and colored pens and coloring books and bubbles etc. She always wanted to go to the dollar store after that. She also learned (with a little reminding) that she would play with the toy and it was soon forgotten but the hair bows and coloring books and pens are things she used or played with over and over. She also found different things there to spark her creativity like sketch pads and craft supplies, things that are only sold in (expensive) kits in the toy stores. This way she used her imagination and I got a lot more mileage out of my hard earned $$ too.
 

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Teaching kids about money is an essential life skill. They have to learn that money does not “Grow on Trees” it has to be earned.

I think I was lucky growing up my parents where "big on chores" all four kids had their daily and weekly jobs and these got bigger / harder as when each grew as did the "pocket money" every week from Dad (either Friday evening or Saturday morning depending on what shift he was working) this could be reduced / stopped for bad behavior or poor grades and "bonuses" where paid for exceptionally good grades / behavior.

My Dad was very good with the family money (my Mum a lot less so we found out after their divorce) and he encouraged us each to open savings accounts and to put money away (for the summer vacation / gifts). I would proudly put my own donation in the collection bag at church on Sunday.

When I was 13 my Dad told me that my "pocket money" would stop after the school holiday but that the local newsagent was looking for reliable boys to deliver the morning papers and I also did jobs (cutting the grass / washing cars) for people in the street. At a similar age my sister started "baby sitting" our youngest brother or neighbors’ kids. All this input helped me to become a lifelong saver.

With my own children my wife and I have gone down a similar route. We pay for all the essentials and gifts for birthdays etc but if the kids want something extra then they save up / pay for it. So far so good. The next big hurdle for the girls at least is deciding about further education as in England the tuition fees alone are £9k pa ($13-$14k) before you think about accommodation or subsistence which will add up to a lot of student debt over 3 or 4 year. I am happy that I did not have that problem as I joined the military straight from school and they paid for mine.

BTW I still allow myself a little “pocket money” each week.
 
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