As a CFP® and a mother of three teenager’s and one young adult, I am often asked how I taught my kids to be “money-wise.” It is mostly assumed, because of my credentials, that I have done it right and my kids have never made a foolish financial decision. As much as I wish that was the case, we have certainly had our ups and downs in teaching financial wisdom. With #3 (my 16-year-old daughter) I believe we have stumbled upon a strategy to teach financial responsibility that works. Allow me to explain:
My oldest two children are boys. Now, I don’t mean to stereotype – and I know it’s not always the case, but my boy’s never spent much money growing up. They both had summer jobs beginning at the local park district when they were 15 which provided them with adequate spending money throughout the year. They rarely bought clothes and simply threw on the jeans and sweatshirt found on the floor each morning. I never had to worry about them overspending on clothes, hair products, etc.. It actually got to the point where I would go shopping for clothes for them pleading with them to wear the new pair of jeans instead of the pair they had worn the last 41 days. Most times they refused. The most they spent their money on was at Portillo’s or Los B’s (local fast food teenage favorites in town) and then they had adequate resources to pay for it. They were cheap and didn’t like spending their money.
Then my daughter came along… and it was a whole new ball game. Her first month in high school she was invited to the annual Homecoming dance. She informed me we needed to find just the right dress, shoes, jewelry, make an appointment for her hair at exactly 3pm the day of the dance AND get her nails manicured the week before. Here is where teenage girl meets CFP® and financial coach Mom. My boys had attended all the dances and that was easy – one suit bought freshman year, let out maybe around junior year, a new shirt maybe every other year and a new tie for each dance. My biggest splurge was the tie. That was easy because then the tie would float over to my husband’s closet where he was soon wearing hand me down ties from his 16-year-old son. I put my foot down on the nails and hesitantly dolled out the funds for the new dress, shoes, jewelry, hair and boutonnière for her date.
After the first dance I vowed never again and began to brainstorm ways to fund her high school years, and most importantly, not fight our way through these turbulent years over expenses. By the end of December I had the plan together and I sat down with my daughter and explained to her the word “budget.” Now, this was no “budget for dances” kind of budget. This was BUDGET. This became every expense to her. I had done a little research on what we had spent the prior year for this child -clothing (including coats, underwear, jeans – everything), school supplies (including those t-shirts you have to purchase for every team, club, organization), retreats, dances, sports equipment, etc… Anything that had been considered a parent’s responsibility.
After a little tweaking and dividing it by 12 I arrived at her monthly budget. She now receives this money on the first of every month – just like a paycheck. She needs to pay for all of her own expenses – and I mean ALL. She runs cross-country and a cross-country runner needs to replace their running shoes about every 300 miles – she has to buy her own shoes which cost the equivalent of one month’s budget. She now plans for this purchase and saves the month before she needs them – she even saves coupons and looks for sales. In the summer before school starts and all the new school styles are coming out she has the decision to make – do I spend on new school clothes or buy a new dress for Homecoming? She doesn’t have the funds in the budget to do both without dipping into her savings from work – unless she finds a big sale. Now she usually will borrow a dance dress from a friend or will find one on the sale rack.
This all-inclusive budget has produced three results:
1. My daughter has become money-wise. She rarely wastes money anymore. Last week she walked in the door and said, “I am never going to Burgertown (fictitious name) anymore. It cost me $15 for dinner there! That is such a rip off!” I guarantee you if mom had been footing the bill she would not have even noticed how much it cost. Mindless spending rarely happens anymore because it’s HER money. The less she spends money on Burgertown, the more she has to buy that cute new sweater – or those much-needed school supplies. She wears out clothes, coats and shoes much longer because she is CHOOSING to spend her dollars on higher priorities in her 16-year-old mind. Learning about consequences of good and bad choices at a young age.
2. She has learned to plan for the future and is on her way to being money-wise. On Black Friday last month (which I am pretty sure is a day to buy gifts for others..) she left the house at 5am and returned by 10am to reveal all of her amazing deals. She was ecstatic. While watching her display all of her new clothes I gently reminded her of some expenses in the upcoming months – including the turnabout dance. She replied, “Oh, Mom, I have that all figured out. I am borrowing a dress from Liv, I’ll do my own hair, wear the shoes I already have so that I have enough money left over for the ticket and dinner.” She has learned to anticipate upcoming expenses in the future and plan accordingly for them- and still have enough money to shop the Black Friday bargains.
3. She is the envy of all her friends. About a month ago I over heard her explaining her budget to her friends. She said, “I love it! I have learned so much about money. I love the responsibility of having to pay for my sports equipment and school supplies – because if I watch it and don’t spend too much, I can buy clothes with the left over!” I even heard her best friend say, “I wish my parent’s did that…”
4. We never have fights about money, she never asks me for money and parenting is about guiding, training and teaching my daughter again. Now our discussions are about HER choosing between funding options. She might ask me if I like a new pair of shoes and the discussion encompasses the price and weighing the desire vs. the need for the shoes. It never becomes a discussion of whether Mom is in a good mood and will spring for the shoes. Never. I teach her how to look for deals and coupons. We have a blast spending the day together now, because Mom isn’t guilted into just spending money on her. Most importantly, she has learned delayed gratification on her own terms. She may desire a new pair of Birkenstock’s but those shoes would take up a full month’s budget. Maybe she will save $25/month for a couple of months until she can afford them – or, better yet, maybe she’ll continue wearing her existing pair – just like Mom has worn her’s for the last 10 years.
Each child is different and teaching financial wisdom looks different for each one. My oldest is a young adult now and we are encouraging him to only use cash instead of beginning a habit of a life on credit cards. My second boy doesn’t like to part with any of his hard-earned money – push the “Easy” button for him. My daughter’s are different. They like fashion and new things. I am debating when to begin the 12-year-old on “The Budget.”
I am thankful they are learning how to enjoy all that life has to offer them with the principles of delayed gratification, the value of each dollar earned and wisdom in choices and planning for the future.
By Cris Kalivas, CFP®
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