Christmas and birthdays are frequently a time of instant wealth for children. A money windfall, can make learning about money management even more difficult. Kids don't connect work with money and may plan on the next big holiday for replenishing their piggy bank. Having an upfront plan can go a long way to money management success.
The video below gives five tips to parents which are very useful for teaching kids about money. Instead of kids keeping their money in one container, there are four labeled spend, save, invest and donate.
I have two children who are very responsible with their money, and one who spends every cent she receives. My first two kids think about their purchases well in advance and stick to their plans when shopping. In contrast, my youngest child goes to the store and wants everything she sees and is willing to immediately part with her cash. Dividing money between the four containers was a way to limit the amount of money she was able to spend on trinkets and food at festivals in a way that she would still have money available for future use.
In addition to money management, my youngest child preferred to let others clean up after her. Ok- So most of us prefer this, but my youngest was a master at letting others work while she watched.
After meals we typically did the dishes and cleaned the kitchen. Each child had a job; sweeping, drying dishes, clearing the table, and emptying the garbage. Since some jobs took longer than others, the kids helped each other until all the work was done. My oldest two were always finished eating and just began cleaning, but my youngest, would eat slowly and help herself to more food until the work was nearly finished. Not only was she happy to let others do the work, but she was a master at manipulating the system in her favor.
I liked this system because I believe that kids should be expected to help and receive money for work they are able to choose whether or not to do. My kids are expected to clean the house once per week with the other family members and expected to clean-up after meals. They can choose to empty the dish-washer, vacuum mid-week, fold laundry, or clean the bathrooms mid-week to earn money. If they do these things they are paid, but if not they don't earn money. To me it makes no difference. To them it only matters if they want to buy something, or save money for future use. The system worked great for my oldest two children, but due to my younger daughters superior thinking and master manipulation skills, this system wasn't working for her and needed to be changed.
My youngest needed to be in control and able to decide whether or not to work. Therefore, I began paying the kids a small amount for cleaning up after meals, and told them they would now be responsible for paying their own entrance fees to our local swimming pool (which we visit 2-4 times per month.) I paid them enough to cover the entrance plus a little extra. That way, they could decide not to clean once or twice and would still have enough to go to the pool.
Despite the fact that I was now paying for kitchen clean-up, my youngest still rarely choose to work. Therefore, although she earned some money, it was not enough to cover expenses to the pool as frequently as we went. In addition, all three kids had quite a bit of birthday and Christmas money which caused a great delay in understanding the effect of this system, but the time eventually came.
Finally, my youngest ran out of money. On a Wednesday I asked, "Do you want to go to the pool tomorrow?"
She quickly shouted, "No". Well it turned out she was out of money. Since my husband had to work, nobody was available to take care of her, so I changed our pool day to Sunday. This gave her a few extra days to earn the entrance fee and provided a back-up plan if she choose not to go. Again, she choose not to work in the days between Thursday and Sunday, so when the time came to go swimming, she couldn't afford it.
I felt really bad leaving the house without her since she was crying and really upset, but I left. Before we left, she told my husband, "Dad, I know what we can do when they're at the pool. We can go to Spiel and Spass." (That's one of those indoor play places with trampolines, etc.)
His response; "That costs more than the pool. We will go on a bike ride and go to the park."
They had a nice afternoon, and the older two had a wonderful time swimming. When I got home my youngest was emptying the dishwasher. She doesn't plan on missing swimming time again.
............... Update .....................
After several months the system is still in place. My youngest barely earns enough money to go to the pool each week. She works the minimum amount, but now ensures she can afford to swim.
In addition to this change, the system ended up as a math lesson for the two younger children. Once per week the kids are paid for their weeks work. They track their income on self-made charts which they tape to the kitchen cabinets. Each child has developed a unique system to note their work. At the end of the day they add up their earnings, and at the end of the week they create totals. I noticed on my son's chart that he was creating estimates of future earnings based on work he planned to do around the house.
Finally we have a process that's working and I plan to continue its use until the kids find a way to outsmart the system. (It may happen sooner than I expect. My oldest two have found outside jobs which pay much better than I do.) One teaches piano lessons, and the other is mowing lawns. I see raises in the future and giving the kids the responsibility to pay for more than just entrances to the swimming pool.