We've decided to start giving the girls an allowance. This is causing great angst in our house. We want to make sure the girls have an earlier financial education than we did growing up as neither one of us thought much about money until it came to spending our first paychecks.
My mom is a retired banker. You would think she would have taught us the financial ropes, and she did to a certain extent. The problem is that those rules no longer apply. She encouraged us to get a job at a company with a good pension. She never talked about saving for retirement in a 401k because it never applied to her. Mom talked about saving for long-term goals, like a house. I have to admit that this lesson stuck. When we bought our house, I kept repeating, "We will put 20% down. We will not pay PMI. We will get a 30 year fixed rate mortgage." We bought at the height of the "flexible" mortgage plans. When I told our mortgage broker these things, you would have thought I had two heads by the way he looked at me.
So now we're trying to navigate the new financial order by teaching the girls the importance of the four money buckets -- save, spend, donate, invest. My friend Julie told me about a piggy bank she bought her son that has four slots, one for each of these options. She has been drilling these lessons into him for a while now. In fact, he brings his own money to the store so he can buy a treat or two.
Us? Well..the girls are only five, so it's not like we're behind on the topic. The girls understand that we're not buying anything at the grocery store that is not on sale or has a coupon. They know that when we say, "No" to a purchase, we mean it. We talk about donating money and why, so they have a basic understanding of that. The problem is all these things happen with Mom and Dad's money.
We started by purchasing banks from the Money Savvy Generation. The web site is a great resource for raising -- here it comes -- a money savvy generation.
We opened their banks last night. Of course, one is pink and the other is purple. We talked about what each section means and gave them some coins. We talked about how much each coin was worth and the girls triumphantly deposited their allowance.
We haven't settled on a weekly allowance amount yet. We're debating how much is appropriate for five-year-olds. I read somewhere a dollar for each year is a good amount, but that seems like a lot. We're toying with $4 per week because it works out nicely with the four different categories. For me, the biggest problem is going to be remembering to have the money on hand. Once we start this, the girls will never let us skip a week.
We don't have all the answers yet, but we're working on it. This is an ongoing process, so we have time to figure it all out.