Giving kids 'Money Sense'

The first in a series of four true stories

I had a friend called Don. He didn’t read books nor was he all that well educated. Don however did like the finer things in life as did his then young teenage daughter, and Don loves his daughter. He wanted to instil the value of money in her own values as she grew up. What he did was smart and simple and 15 years on as an adult his daughter is prudent with money and well on the path to being financially independent.

“Darling, I’m going to give you a 300% increase to your pocket money starting now”… as he opened his wallet and handed her the cash- a eye boggling amount for a young person. Then he added, “ from now on you are responsible for how this gets spent and this means the sort of things Mum or I pay for when we go out to the mall or to a café, you now must pay for or go without”.

Can you imagine what happened? Yes, she spent it all over the proceeding few weeks and when they then went out to a café they bought themselves drinks and food, and without saying a word, sat down and ate. “Where’s mine?” she demanded. “Well you have the money and this is what we agreed”. “But Dad! I’ve got none left, it’s not fair!” Humph, pout, then a plea, “Please can you buy me something I’m starving and I promise….”. “No” Don said, “You’ve spent it. Make a sandwich when we get home”. They held firm saying 'no' to all arguments, please and requests for an advance or a loan. Don recalled it was hard sitting there eating away, and the 10 minute car ride home felt like half an hour.

Another 5 torturous days passed (and new episodes) before the next payment, and again in cash not by account transfer.

“Darling, here we are…. Would you like some tips on how to make sure you don’t run out next time?” Don only gave her tips IF she wanted to hear them. Being smarter than me he didn’t go into long lectures and education sessions (sure to turn any kid off). Instead he just asked simple questions about how she spent. He asked why and what thoughts did she now have on the things she purchased. He asked her to rank them from 1 to 5 on the value they now have to her, a few weeks on. If she didn’t ask for tips, he let her do what she wanted again, and as is often the case, more episodes of falling short and the cold shoulder etc UNTIL one day, she asked.

They enjoyed a 10 minute chat each fortnight on just one issue at a time. No TV, no phones and it was just the two of them.

Take-aways from Don’s approach. Don has self-control. He didn’t allow his emotional love for his daughter override his parental love and responsibility. He knew that if he really wanted to help she needed to experience the real-life practical consequences of failure, neglect and poor self-control with money.

Don set boundaries. Sooner or later his daughter would respond- and she did. Don set boundaries as to what he and his wife would/would not do something child psychologists say that kids need. They need limits to grow! With no limits and boundaries, they can’t grow. This sounds a bit strange until you think it through.

This is at the heart of bad western parenting, subsidising their man-children; and the topic of our next missive.

Last, Don understood the power of time, repetition and providing experiences (even bad ones) was invaluable to his daughter - well before she turned 18. How old should they be to begin? Now! If that’s 17 or 8, start now. Obviously under 12 keep it simple and tangible, then expand it as they grow. Don had his daughter buying her own clothes, music and entertainment by 15. By 16 she was booking her own airfares (transferring her the funds) for holidays and applying for Visas. More practical life skills with money.

For university, he made a bargain. Complete it and graduate and he will pay for it. Get honours and there’s a trip overseas for 3 months. He was rewarding achievement and commitment to stay a course, but ensured he didn’t penalise his own future by funding her failure to apply, learn, persist and achieve. Go online and use a calculator to see how much $30,000 education fee grows over 20 years to see the real value to Don and his wife in this.

Don was teaching what’s termed ‘cash- flow management’. It causes of a lot of unnecessary financial and relationship hardship in life. Mastering it is essential for wealth and independence.