While that shielding provided me with comfort, it also provided me with some bad traits. Most of the time while I was growing up, I knew that I could eventually have any trivial thing that I seriously wanted provided I was patient with it. My parents always found a way to make sure I had those things, whether it was for my birthday or for Christmas or the result of some special project.

At the same time, my exposure to situations where people didn’t have the things they need was pretty limited. I was aware of poor and financially challenged people around me, but I was never deeply connected to their situation at all.

The experiences of my childhood taught me many valuable lessons, but one important one that I missed out on was the valuable lesson that having the things that you want is never a guarantee and that the only way to ensure a stable future is to work for it in the present.

Instead, that strong sense of entitlement (for lack of a better word) to the things that I wanted persisted into early adulthood and into a period where I suddenly was earning enough money to have many of those things that I wanted, even on a whim. As that grew to become the norm, I eventually fell into a pretty deep hole of personal debt.

I can’t go back to my childhood and clearly say that being exposed to more of the harsh realities and consequences of poor money management would have changed everything for me, but I can say that they would have had an impact on me, perhaps one that led me down a stronger financial path as I grew up.

Part of my parenting style with my own children is to make a conscious effort to expose them to as many things as possible. The last thing I want is for them to be sheltered from the many different experiences of the world.

I want them to understand that the world isn’t just what they see within the walls of our home. I also want them to understand that success in life isn’t just something that is handed to you – it’s something that you work for and apply your talents toward. I also want them to understand that spending everything you have in the moment is going to end in disaster.

It’s worth noting that I’m currently trying to reach early elementary children with these lessons. I’m looking for broad strokes here, not fine details.

How do we do this? I’ve found a few tactics that I feel have really had an impact on my children.

First, we try to find something new to do every day. Naturally, this is impossible to do every single day, but we strive to match this as best we can. I know that I try to come up with something interesting for them every single day when they arrive home from school.

For us, it’s important to stick to free stuff when it comes to finding new things to do. I try to look for ideas based on what we have already on hand. I’ll fully admit that the winter months are particularly challenging, as most of the good ideas involve heading outside.

Sometimes, the activities are entrepreneurial. We’ve done lemonade stands and many other little things to earn a few dollars through their efforts.

Sometimes they like the activities. Sometimes they do not. In either case, they’ve tried something new and they’ve expanded their view of what’s possible.

Second, we try to expose them to the challenges that people face, particularly children their own age and children in their own community. We watch videos that talk about global poverty. We’ll look for books that describe in detail how children live in other parts of the world. We particularly like stories about resourceful children.

My oldest can articulate quite clearly how valuable clean water is and why we’re lucky to have it in such a convenient way. My daughter often gets entranced by stories and videos about girls her age in living conditions different than her own.

We also nudge our kids toward giving to charity. Both of our oldest children have saved quite a bit for a charitable donation, though they haven’t quite pulled the trigger yet on a charity to give to. We’ve involved them in buying items for the local food pantry and dropping them off.

As they get older, we intend to involve them more in local charities, such as the food pantry. The idea here is for them to understand that life is not an easy road. Things can knock aside your plans and you need to prepare for them.

Finally, we require that they save a portion of their allowance and any other income they generate for the future. We allow them to see the balance of this money and watch it build – in fact, we show it to them regularly.

This is their “emergency fund,” and we’ve even described it as such. We’ve also made it clear that this savings will eventually be used to help them with their later education if other things don’t intervene between then and now.

We assume that there will be a lot of discussion about this later as it builds, but for now they’re really understanding the value of putting a little bit of money aside each week. It builds surprisingly quickly into something much bigger.

Are these lessons perfect? Of course not. All we can hope is that these lessons open their eyes a bit and keep them aware of the reality of the challenges that life can sometimes hold.

The post Sheltered Children and Money Troubles appeared first on The Simple Dollar.

I was at the store recently with my seven year old son. When it’s just the two of us, he’s very quiet and observant of what’s going on around him (he can be quite a bit less so when he’s with a friend or with younger siblings).

Anyway, he watched very carefully as I paid for the groceries with a credit card. I swiped the card, signed the signature pad, and got my receipt from the cashier, and he watched this all with interest.

As we were walking out together, I asked him whether he realized that I had just spent a decent amount of money on groceries. He shook his head yes. I then asked him where the money came from. He said, rather astutely, that the money was stored on my credit card. “So,” I said, “do you think that Mom and I sometimes go to the bank and have money put on the card?” He thought about that for a moment and then said, “Sure.”

I smiled and told him that, actually, the bank was lending us money every time I used the card. “Whenever I swipe the card, bud, our bank is telling the store that they’re covering whatever we spend. Then, later on, I have to pay the bank back for whatever I spent. Now… why do you think the bank would do that? Remember… every business is out there trying to make money.”

He thought about this for a little bit, then said he didn’t know.

“If I don’t pay the bank back very quickly, they start charging me more money. So, if I borrow $100 for groceries using that credit card and I don’t pay it back in a week or so, I’m going to owe the bank $110 or so. If I don’t pay it back after that, it’ll keep going up and up and up. I only spent $100, but if I don’t pay it back quick, I’m going to be paying the bank a lot more than $100.”

His eyes got big. “So you want to pay it back fast!”

I smiled at him. “Absolutely.”

For most of the ride home, he didn’t say anything at all. I glanced at him in the rear view mirror and he seemed to just be looking out the window.

As soon as I pulled into the driveway, he asked me another question. “Are you going to go inside and pay off that credit card right now?”

I told him that I could do that, but that I usually just pay off the whole balance every few weeks, before I get charged any interest. I just make sure that I pay off my full balance before any interest is charged.

A cute story, right? Well, here’s where it gets interesting.

This morning, I turned the calendar page in our kitchen to the next month. The first thing out of my son’s mouth? “Is it time for you to pay that credit card now?”

I have a few thoughts on this.

One, the credit card industry would collapse if every American understood credit cards as well as my seven year old. He doesn’t see any point in paying the banks a dime of credit card interest – and I don’t, either. He understands that using a credit card directly means that you’re borrowing money from a bank and that the sooner you pay that all back, the better off you are.

Two, you can teach good personal finance practices to young children. They want to understand how the adult world works and they absorb information and ideas at a very fast rate. If you just explain things piece by piece, they’ll understand it. If you explain good personal finance habits bit by bit, they’ll understand it.

Three, when they do understand the ideas, they watch how you behave. You need to live up to the standards you explain to your children or else those standards won’t mean much to them. You can teach a child all of the ideas you want, but if you don’t actually follow through on those things in how you live your life, those lessons won’t hold much weight. After all, why should a child be smart about their money if their parent obviously doesn’t care?

The post A Seven Year Old Learns About Credit Cards appeared first on The Simple Dollar.

When I looked at him and greeted him, he said simply, “I make mess in bathroom.”

He’s still in the latter stages of potty training and sometimes he doesn’t do things with grace and cleanliness in the bathroom, particularly when a parent isn’t supervising him. I was happy that he had been aware enough to wake himself up and try to use the bathroom when he felt the urge instead of going in his pants, but I still felt trepidation as I headed toward the kids’ bathroom.

Well, at least I could say that he tried. He used his small potty correctly, but then he tried to handle too much and attempted to clean it out himself. It didn’t go well. Let’s just say I needed a few cleaning supplies, several rags, and a healthy amount of breathing through my nose.

The first cost was my patience. If someone trashed your bathroom in this way, you’d be mad, but this wasn’t a situation to get mad at my child. He’s not really able to distinguish between the fact that I would be upset with the dirty bathroom but simultaneously happy that he went to the toilet on his own and attempted to clean things up himself. So, in my half-awake stupor, I had to bite my lip and start cleaning. In order for him to understand the situation, I told him that he did a very good job going on the potty and that I was proud he tried to clean it all up like a good boy, but he did make a mess. I then had him help me (a little) to clean it up, then gave him a bath.

The second cost was my money. I burned through some cleaning supplies and had to do a partial load of laundry thanks to the mess. Sure, it was only a few dollars for this specific incident, but incidents involving children and messes and cleaning supplies are a routine part of the equation.

The third cost was my energy. It’s later in the day. I’m tired. I only got about five hours of sleep last night and I can feel it.

The above story is just one example of one typical incident on one typical morning. I’m not even touching on the financial costs of food, clothing, health care, entertainment, education, social events, extracurricular activities… the list goes on and on. The time costs are everywhere, too – educating your children, teaching them good manners, spending quality time with them, helping them clean up their messes, transporting them to events, preparing meals. Most of these things have energy costs as well.

Children are costly. All of the rewards of parenthood do not take away from the fact that children cost you in many different avenues of life, and these costs, though individually small, add up to a tremendous cost over the years of their childhood. Beyond daily needs like food, clothing, and housing — consider the lesser remembered costs that add to this: children’s health insurance, transportation, entertainment — it all adds up.

With all of those costs, why have children at all? There are a lot of people out there that have made the conscious decision to not have children. It reduces their financial costs along with adding to their energy and time for other initiatives, plus it’s the more environmentally sound decision.

I tend to agree with Christine Overall’s take from her book Why Have Children?

At its core, her argument is that the relationship between parent and child, when done with care and nurturing, is the most profound reason to have children. The relationship there has psychological, physical, intellectual, and moral benefits for both the parent and the child. Parenthood has the capacity to make you a better person and to play a vital role in the shaping of a new member of society.

Parenthood has made me become much more efficient with my money, much more efficient with my time, better at building and sustaining relationships, and more productive throughout a given day. As my children grow older, I see those efficiencies showing up again and again in a positive way in my life, not just in my interactions with them, but with how I interact with the broader world. I am more patient and more forgiving. Parenting has made me care more strongly about the relationship I have with friends and family, with the challenges that others face in their lives, and with the healthiness of the environment. It has pushed me to take specific actions in all of those areas that I simply would not have taken without parenthood.

For this, I have paid a tremendous cost in time, in emotional and physical and mental energy, and certainly in the form of money.

Is the cost worth the benefit? I think it is for some people. I don’t think that it is for others. My sense is that if you are feeling doubt about the idea of parenthood, then you should not become a parent. Give the question serious thought and respect. By choosing to become a parent, you are agreeing to take on a tremendous cost, but there is tremendous reward for that cost.

The post The Cost of Children appeared first on The Simple Dollar.

What made this meal different? For the first time, our oldest son really began to notice the prices on the menus. He looked through the prices and connected them with his allowance, noting that even the children’s offerings were more expensive than what he received for his weekly stipend.

This screamed “teachable moment” to me, so we started talking about the costs of food.

The first thing we did was we started talking about what the cost of a meal in a restaurant actually covers. Of course, it covers the food you receive, but it also helps pay for the service (the people preparing it and bringing it to your table) and the building as well as (hopefully) a tiny bit of profit for the business owner.

We started to break down his meal’s cost in a fairly inexact way. His children’s meal was $3.95, so we decided that out of that $3.95, the waiter would get about a quarter, the people in the kitchen would get about seventy five cents, the manager would get another quarter, the building would get another fifty cents, and the people that owned the restaurant would get a quarter. That meant his food should be worth $1.95 or so.

So, when he received his food, we tried to estimate the cost of it. His meal consisted of scrambled eggs, two pieces of bacon, and some mixed fruit. We figured that the scrambled eggs cost about forty cents, the two pieces of bacon also cost about forty cents, and his fruit cost about sixty cents (obviously, we were estimating here). That left us with a food cost of about $1.20, leaving about $0.75 left over (which we eventually decided would go to the bills we hadn’t thought about, like napkins and ketchup).

As we were eating, we talked about the cost of making that same meal at home. We would have roughly the same food cost – a little over $1.20 for the food. We’d also have a bit of an energy cost, so we tossed in another ten cents, making $1.30.

So what about that difference between $1.30 and $3.95? Obviously, that extra $2.55 is what we save by eating at home.

Of course, eating at home has other costs, too. We have to prepare the food ourselves and clean up the dishes ourselves. Is that worth $2.55?

At first, he wasn’t sure whether it was worth it or not, but then Sarah pointed out that we usually make a meal for all five of us at once and if we were saving $2.55 on each of five meals, we would actually save a bit under $13.

That changed his mind – it seemed like real savings.

Then we talked about the real moneymaker – beverages. Sarah had a Diet Coke which cost $2.49 with unlimited refills. The children each had milk, which cost $0.99 per cup. (I had water, so we didn’t include that part.)

At home, if Sarah had two cans of Diet Coke over ice (which is probably roughly equivalent to what she drank at the restaurant), that would cost us about $0.50, as we can get a can of Diet Coke for $0.25 if we buy a large pack. Similarly, if we buy a gallon of milk for $3.50 at the store, we’d use about a third of it on what the kids drank, cutting the cost down to about $1.16 instead of the $2.97.

In other words, we would have saved about $4 overall just on the beverages. Sure, we would have had to wash the cups and pour it ourselves.

Our son then decided that “restaurants are expensive” and wondered why we would eat there.

Our answer? Sometimes, a restaurant is a nice treat. It means we don’t have to prepare it ourselves and we don’t have to do the dishes.

However, when we choose to do those things at home, we do certainly save a significant amount over going to a restaurant. This meal alone would have easily saved us $20 if we had just prepared the same thing at home, and if one of us could have prepared it in an hour (which could have easily been done), then that’s $20 more for us to use for other things.

“So every time we eat at home we’re saving $20?” he asked.

“More or less,” I replied.

“Then we should always eat at home!” he said with a big smile.

Lesson learned. Now the trick is for this idea to stick with him for the long haul.

The post Teaching Money Values at a Restaurant appeared first on The Simple Dollar.

Let’s say you’re a relatively skilled high school baseball player. You dream of playing in the major leagues someday. Here’s a stark reality for you: only 0.5% of high school baseball players are ever drafted by a major league team. Of players drafted, only about 10% ever play an inning in the major leagues, and significantly fewer than that have enough of a career to be able to make a living off of the proceeds and prestige of their career. Yes, of course, there are other paths to a professional career in baseball, but if you look at the number of players who train and dream, the actual percentage of players that make it come true is startlingly slim. You can see that same type of trimming in many other career paths, too.

The usual advice given to people in such high-risk career paths is to have a fallback career. In other words, if a person gets a scholarship to play college baseball, they’re usually encouraged to pick a major that will offer them an alternate career path should their baseball career end at the collegiate level.

Many people in many different career paths are given that same advice. Writers. Artists. Entrepreneurs. They’re all told that it’s a good idea to have a “fallback career.”

Here’s the thing, though. When I think back to the times in my life where I felt like I truly succeeded, it was almost always during situations where I didn’t have a “fallback.”

When I find myself in situations where I can just shrug my shoulders and easily take another path if things don’t work out, I don’t perform at my best.

When my back is against the wall and I know that I must pull through here, I tend to perform better than ever.

It might sound like I’m advocating throwing a “fallback career” to the wind and just going for it.

For some people, I am.

I wouldn’t encourage anyone with dependents to do it, especially if the dependents rely solely on you. If you have kids, you have an obligation to have many fallbacks in place to protect those little ones. They’re your responsibility.

I wouldn’t encourage anyone with health issues to do it. If you’ve got ongoing health concerns that could easily go awry without medical care, I wouldn’t take a leap into a void where you have to forego that care.

I wouldn’t encourage anyone not willing to live in poverty to do it. When you take on something really challenging, you might very well fall flat on your face. That might mean an extended period without income and it might really challenge your resourcefulness. If you’re not willing to make do with some very lean times, then you shouldn’t take a leap.

I wouldn’t encourage anyone without a dream and without a work ethic to do it. Have you spent many days doing nothing but completing an urgent project? Do you have something inside of you that you want very badly? Some people have these things. Some people don’t. It’s not wrong to not have them… it’s just a matter of personal wiring.

When I think about this question, I think about my own children.

A lot of parents talk big about wanting their children to chase their dreams, but when it comes down to it, they usually push their kids toward “safe” careers.

That’s the last thing on earth I want to do. I want them to take that leap when they have their youth, their energy, their lack of dependents, and their passion. I want them to stand up there and try to make whatever it is in their heart into a reality.

If it doesn’t work… well, that’s a bridge they can cross a little while later in their lives. They’ll still be relatively young, and they’ll have the experience of knowing a lot more about how the world works.

Even more importantly, they’re going to have a set of rather unique skills and some very interesting resume elements for whatever might come next in their life.

For the icing on the cake, they won’t lie awake at night wondering “what if…” They’ll know that they gave it their all.

If it does work… then they’ve launched themselves into the life of their dreams.

If they want that dream to really take off, though, they need to be devoting every ounce of their energy to that success for a while, and that means not building a “fallback career.” They’ll need to throw everything they have at it and then face forward knowing that they didn’t leave anything on the table.

If they fall… then they can look at another path. However, if they spend a lot of their energy preparing a “fallback career,” they’ll never put themselves in position to actually make that leap at all.

The obvious question people will ask here is about a “side business.” What about people who get the ball rolling on a successful career, then dabble in their dream endeavors on the side?

To me, it’s a good compromise. I don’t feel as though it will lead to success quite as often, since your main career is your fallback career, but it provides a way for people who are in situations where they need stability in their lives (dependents, health issues, and so on) to chase that dream. It’s how I got started with writing, after all.

Still, my biggest regret in life is that I never gave my dreams a wide open chance when I had the opportunity, before other aspects of my life began to require stability. I spent too much time in those days building my “fallback” career and, frankly, wasting time and money because I was lulled by the safety of that “fallback” career.

While I’m certainly not going to demand that my children leap into some risky unknown, I’m certainly not going to stop them from making that leap.

The post The Fallback Question appeared first on The Simple Dollar.

As I’ve mentioned before on The Simple Dollar, we give our children a small allowance that’s not tied to any chores at all. (The chores are a household expectation and other consequences result from not doing them.) It’s really a tiny amount – we give them $0.50 per year old they are, so our oldest child only gets $3.50 a week.

Of that, they have to save some of it for other causes. They put aside $0.50 per week for investing and another $0.50 per week for charity, which leaves them a pretty small amount with which to spend.

At first, we split the remainder up between saving for specific goals and spending on whatever they wanted at the moment, but they honestly never spend it on impulse buys. Instead of spending that allowance money on candy, they are just very careful with the candy they receive at holidays and make it last. Instead of spending it on silly little toys, they all have sense enough to recognize that patience will get them much more enjoyable things.

So, we’re left with kids that save up $2 to $3 a week for expensive items that they might want, like video games for their Nintendo DS or LEGO kits or nice dolls.

The next step, then, is teaching them how to get the most for their dollar when they’re buying a particular item. I’ll give you a specific example.

Our oldest child decided that he was saving for a particular item that costs $39.99 MSRP. That would mean, given his current rate of accumulation via allowance, he’d have to save sixteen weeks to acquire it. We know in the past that he has the patience to do this, as he’s saved up well over $50 to purchase items.

So, when he established that goal and realized that it would cost $40, I told him that if we shop around carefully while you’re saving for it, you might be able to get it for substantially less. This obviously intrigued him.

So, in the ensuing weeks, we looked for the item at various places. We checked several used video game stores when we happened to be nearby to see if they had it in stock. We checked several different retailers when we happened to be near them. We also started looking around online for the game.

It didn’t take us long to start finding prices that were much lower than the $39.99 MSRP. On our first few checks, we found the item for $34.99, and on our first glance online, we found it for $33.

My son recently reached the $30 mark with his savings and was getting excited, so we spent some more time shopping around. We found the item for $28.

So, now he’s looking to save up for the LEGO City Cargo Train, which is a very expensive LEGO kit. Since our best success was with Amazon, we started there… where it listed for $250(!). We started shopping around and pretty quickly, we found it for $70 less.

At this point, my son seems to believe that shopping around is incredibly powerful and well worth doing for every single purchase.

My daughter, who is a bit younger, is beginning to appreciate it as well. She’s been saving for a LEGO horse barn which was $49.99 at the store, but which we found elsewhere for $39.99 after a few stops – and now we’ve found it for $34.

For them, shopping around just means that they get the item they want faster and they can start saving for something else sooner. Their focus is on the toys and other things that interest them, which is understandable.

To them, listening to Dad shop around for the best price on bread is boring. They don’t really care about hearing how I can get trash bags at this other store for $0.03 per bag cheaper, thus saving our family $5. It doesn’t interest or impact them.

What they do see now, though, is that shopping around actually works – and my goal with my own shopping around is to relate it to what they’ve learned about shopping around for their own toys. Just like my son learned how to save $12 on his video game purchase and my daughter is about to save $16 on her LEGO barn thanks to shopping around, I save $5 on trash bags and $3 on dishwasher soap.

All I’m doing here is taking a very basic concept of frugality and making it as applicable to their life as I possibly can. Rather than just taking them to the store when they have spending money, it’s all about defining a goal first and then figuring out the most efficient way of getting there. It’s something they can do with their toys right now until doing it becomes so natural that they simply apply it to everything else as they grow older.

Just yesterday, I was with my two oldest children at a store and they independently found things they were interested in. Independently, they each put the item back on the shelf and said that they should look for it elsewhere because it might save them some money.

Lesson learned (for now, at least).

The post Teaching Kids How to Shop Around appeared first on The Simple Dollar.

Our youngest child is well into the “terrible twos.” As anyone who’s had a child can relate to, there’s this period between the ages of two and three where a child really begins to explore his or her boundaries and they learn that they can, in fact, refuse to do something that’s requested of them.

There are a lot of techniques out there for dealing with this. With almost every technique, there’s a tradeoff. One might be the best long-term solution, but it requires time and patience. Others might be much easier, but they embed questionable long-term ideas in his head.

Naturally, one of the solutions for dealing with a difficult child is bribery. For example, I might offer him an extra bedtime story if he stops rebelling in the bathtub at night.

Bribery is a very simple and effective solution to an immediate problem. The child is sated with the idea of receiving a reward, and the parent no longer has to deal with this mini-crisis.

The problem with bribery is that it sets up a long-term expectation for a reward in exchange for something that should be expected behavior.

Bribery in early childhood grows directly into a sense in early adulthood that you deserve a “treat” for just completing the basic expectations of life – finishing your work day or so on. It’s a very expensive precedent to start setting in a child’s life.

This is our third child to go through the “terrible twos,” so rather than offering bribery for behaving well, our approach is what we call “reverse bribery.”

First, we explain in very clear terms what is expected of the child. The idea is that “normal” means things like taking a bath without climbing out and without throwing soap. I’ll spell out exactly what he’s supposed to do when it’s bathtime so that there’s no question of him not understanding what’s expected.

If the rebelling continues, I’ll stop, look him directly in the eye, and tell him that he knows what he’s supposed to be doing, that this is what people do when it’s bathtime, and I usually use his parents and his older siblings as role models for how to behave.

If that doesn’t end it, I’ll simply tell him that we will put his favorite toy up for the whole day tomorrow and he won’t be able to play with it if he can’t do what’s expected of him.

Rather than bribing him, we reverse the story. If he behaves in a good, normal way, he keeps his privileges. If he rebels, he loses them.

He does not gain a thing by rebelling. The only outcome is losing something.

We’re carrying this lesson forward with our older children. They’re learning new skills and helping out more and more around the house all the time. When they pick up on a new responsibility, they’re not bribed for continuing it. They’re expected to continue it and, if they do not, they tend to lose something they already have.

The key? Neither good nor bad behavior is associated with purchasing something new.

As much as we can, we want to disassociate personal success and normal, expected behavior from special “treats.” Normal behavior is how you act all the time – it’s expected. Succeeding at something is a reward unto itself.

Will we ever resort to bribery? Perhaps on a small scale – no parent is perfect and there are always frustrating situations. However, it’s not our policy and we have other tactics in place to deal with those problems, tactics that teach much more useful life lessons.

The post Children, Bribes, and Reverse Bribery appeared first on The Simple Dollar.

When I turned eighteen and left for college, my parents were more or less finished with their role as parents for me. I only lived under their roof again for a single summer (the first summer after college). After that, I actually stayed away from home more or less for good, working at career-related jobs and taking on internships.

For comparison’s sake, another person I know went through college by spending almost every spare moment back with his parents. He spent his spare hours either not working at all or working at minimum wage jobs near his parents’ home.

Another comparison: Sarah and I paid every dime of our mortgage and our student loans off out of the proceeds from our own work. Meanwhile, another couple we know openly admits, almost in a bragging fashion, that one of their parents pays their monthly mortgage bill, and another family receives about $10,000 a year in supplemental cash from one of their parents.

I don’t begrudge those other arrangements. If all parties involved are happy with the situation, then it’s fine.

My concern revolves around what lessons I teach my children with the help that I do choose to give them.

Let’s step back for a minute. What’s my goal as a parent? My goal is to create self-reliant and independent children with active and curious minds. Any other decisions they make along the way are theirs to make. All I want for them is to be self-reliant and to be independent.

I’m fully aware that many parents do not share this as a goal. They strive for a lasting relationship with their children. I’d like to have that, but I consider self-reliance more important. They also want their children to have access to material things and to have an easier early life path than they had. If this is a goal for me, it’s definitely a minor one.

I think, based on my communications with readers of The Simple Dollar, that many of my readers are on the same page as me with regards to their parenting choices. They want independent, thoughtful, and self-reliant children above all, and they would like a lasting relationship with them as a secondary option.

What kind of “help” does that imply that you should give your children when they grow older?

After a lot of careful thought and reading, I’ve boiled my ideas down to a few principles.

First, I’m doing everything I can to encourage self-reliance now. I compliment them at least as much on continuous effort as I do on any sort of completed product. My two oldest children are both engaged in activities that, in some part, focuses on building character and self-reliance. We encourage play with toys that are independent and allow for creativity and building. We’re strongly encouraging entrepreneurship and we’re teaching them how to do most household tasks by having them actually do them. While we do engage in activities with them, we give them lots of independent time to read and come up with their own things to play with, usually not involving a television.

Our oldest child is seven and all of these things apply to him. Our next oldest child is five and most of these things apply to her. Many of them even apply to our preschool-aged youngest child.

Second, I want them to have open-ended opportunity. I don’t want educational opportunities for my children to be blocked by financial hardships, starting right now with extracurricular activities and moving forward until they’re done with schooling. If they choose to block it themselves by their individual choices, that’s their decision, but I don’t want financial obligations out of their control to block their pathway to higher education.

That means I’m willing to help them with some of their educational costs after high school, particularly if any are needed for them to get into their desired school, but I don’t intend to just write a check for their education.

Once their pathway to the workforce is clear, my help will be extremely limited. I will provide a place for them to live only provided that they are either working, spending the equivalent of a full-time job preparing to work, building a business, or involved in an internship position. If they’re not working to improve their situation, I have no problem ending any shelter or food that I provide for them.

It is more important to me that they learn to spread their wings and fly than that they’re close friends with me for the rest of our lives. While I would love a continuous strong relationship with our children, I’d rather that they be able to handle the difficulties of a career and adult life themselves without our help.

We hope that the result of all of this is self-reliant children who enter into adulthood seeing it as full of possibilities, not as a prison or a straight path to follow. We want them to be able to take on anything on their own without our help. That might mean not handing them things that we could easily give them, which might be hard, but it richly rewards their life over the long run.

To me, that’s the best way to help my children.

The post Helping Your Children appeared first on The Simple Dollar.

At the same time, there are reasons why I still take them to the grocery store. Sometimes, it’s necessary to do it so Sarah can have some time to work on projects without child interference. At other times, grocery shopping seems like a reasonable family excursion if we’ve been cooped up in the house too long (this often happens in the winter).

The biggest reason why I take them grocery shopping sometimes, though, is that a grocery trip is loaded with opportunities to both teach and demonstrate strong and sensible personal finance skills.

Here are some of the things that I do on most grocery trips.

I show the children how to comparison shop. When we’re at a selection of, say, trash bags, I’ll call the two older children over and ask them which bags we should buy. As they look them over, I’ll tell them exactly what I’m looking for – the lowest price per bag on bags that are actually reliable.

So, I’ll point out some types that we won’t buy, and that leaves us with several options. How do we then figure out which one is the best for us to buy?

I walk them through how to figure out the price per bag. We’ll also check for coupons to see if that changes the equation a bit. Eventually, we’ll figure out the right item and put it in the cart. I’ll usually figure up right then and there how much we saved versus buying one of the other options and tell them.

I don’t do this with every item, but I try to do it with one or two items per trip, just so they understand the benefits and the reasoning behind it.

I prepare a grocery list – and then use it. Our kids have a weekly chance to observe the process of making a grocery list, where we look at grocery flyers and dig through recipes to develop a list of things we need, and then we actually use it at the store.

It’s not quite enough for them just to watch, though. We usually solicit some input from them during the process by talking about the ingredients that are on sale as well as talking about potential recipes. “Hey, guys, looks like rice and broccoli are on sale… what do you think about some kind of risotto?”

I’ve even turned the grocery list into a spelling bee by asking our five year old how to spell “rice” and our seven year old how to spell “broccoli,” for example.

In the store, I refer to our grocery list while shopping by saying things like “Only two more items left on the list, guys.” I’ll also state that the reason we’re skipping some impulse buys is that the item they’re looking at isn’t on our list, so we don’t really need it at home.

I buy generics, unless there’s a specific reason not to. My children are brand-aware. They will want me to buy a certain name-brand item – say, Cheerios. Most of the time, I’ll pick up the generic instead and point out to them that it’s the same exact thing except we pay less money for it.

My oldest child has doubted this a few times, but I’ve actually shown him side-by-side ingredient lists and nutrition facts labels, which usually show that the items are either identical or extremely close to the same thing.

When I point out to him that if we buy fifteen generics and save $1.50 on each of them, that’s over $20 saved, he starts to really pay attention, because he’s a pretty good saver on his own. He’s saved $50 out of his $2 weekly allowance in order to buy a single item in the past, and he’s currently up to $24 saving for another expensive item.

Sure, taking children to the grocery store can be a lot of work. It can be distracting at times. However, if you take it as a learning experience and make sure to keep at least some of your focus on making purchases based on your grocery list, it can be a positive and valuable experience for both parent and child.

The post Some Thoughts on Shopping with Children appeared first on The Simple Dollar.

Children in early elementary school are enormously influenced by the ideas of their parents, but the importance of the ideas of their friends and classmates is rising as well. The result of that is that children of that age bring home all kinds of strange ideas and questions from school, questions and ideas generated by their friends, their teachers, classroom guests, and many other people.

My daughter, for example, is convinced that you can tell how much one person loves another person solely by the size of the diamond that they give. My son told me recently that he had heard that only poor people shopped at some stores and that must mean that everything there is really really expensive, right?

It’s easy to see where they get these ideas from. You can also see how these ideas were half-baked to begin with. It’s also easy to see how they’ve been mutated by being re-told and then shared by young children.

Still, these ideas are part of the bedrock of the ideas our children will carry with them for much of their lives. Many of the broad strokes of what we know to be right are set in place during our childhood and it can be very hard to undo those assumptions.

How do we combat these ludicrous money ideas (and other false ideas) that they drag home from school? Here’s what I’ve figured out, both from experience and from continually reading parenting and personal finance books of all stripes.

Nip it in the bud
As soon as you hear a bad money idea expressed by your children, politely and kindly explain to them why that idea is a poor one.

For example, if your little girl expresses the idea that diamonds are needed to show someone that you love them, embrace your spouse and tell your children that you don’t need a diamond to show love. A kiss will do, or a hug, or a kind word, or a thoughtful action.

If your son expresses the thought that only poor people shop at a certain store, talk to him about the more important reasons people choose various stores, with the prices being a big one. Present it as options: one store offers the same item at a lower price than another store, but perhaps the other store treats its employees better, has more helpful employees, or has a cleaner and more orderly shopping environment. There’s no wrong or right answer to these questions, just different choices, and different people value these attributes differently.

Use actions, not just words
It’s easy to talk the talk when it comes to these things, but actions speak louder than words, particularly to children. Show your children that you live by the things that you tell them.

If your daughter is concerned that love is expressed by material things, you should show that your relationship with others isn’t based on those material things.

If your son thinks that poor people shop at a certain store, shop at that store sometimes. Even better, shop at a consistent store and explain exactly why you shop at that store.

It’s not enough to just walk the walk for a little bit, either.

Live by the principles you want them to have
If you want your children to adopt principles in their lives, you need to live by those principles yourself. Just telling them things doesn’t cut it. They emulate your behavior, not your words.

Live frugally. Don’t rely on material items to express love. Do your shopping based on value. Live by all of the things you find to be important and that you want your children to live by, too.

If you talk about things, but then don’t regularly follow through with action, your children are not only going to fail to adopt the things you’re talking about, but they’ll grow to not value your words, either. Children may not have acquired the knowledge of the world that adults have, but they are astute observers of human behavior.

Remember their life isn’t your life
The old “when I was your age” story hasn’t inspired children or teenagers for a very long time.

My children have six times as many kids in their class as I had growing up. They live in a town, whereas I lived in the country. I had three or four television channels, while they have hundreds. I played Pac-Man on the Atari 2600 using an old black and white 13″ CRT television, while my children play Mario Kart Wii in HD (or close to it) on a 55″ full color flat panel television. My children have a library within walking distance of their house, while I had to travel several miles to the nearest one (and it was tiny0. I barely knew anyone who continued with education after high school, whereas my children are surrounded by college graduates.

At the same time, there can be a bit of a temptation to live vicariously through them. It’s vital to remember that you’re the parent, not the buddy. That doesn’t mean you can’t engage in their interests with them, but you’re still the role model and the disciplinarian, no matter what.

Keep those principles in mind and you can go a long way toward erasing bad money ideas from your children’s minds… and other questionable ideas they pick up, too.

The post Correcting the Wrong Money Lessons appeared first on The Simple Dollar.

I recognize that, for my children, I’m going to be a role model, both consciously and unconsciously, but I also know that I’m not going to be their only role model. Far from it. They’re going to draw on a lot of people for ideas on how to live their life, and they’ll be exposed to them in a lot of different ways.

The challenge for parents is that positive uses for money are rarely lauded in popular culture. Instead, the media tends to shine their light on expensive items or people with exceptionally high incomes who can afford to spend in a way that’s inaccessible to most of us.

What can I do as a parent to ensure that my child has money heroes that behave in a sensible fashion?

First, I need to act in a financially responsible way at all times, not just when my children are watching. This is true for any aspect of parenting. If you don’t live what you’re telling them, they’re smart enough to ignore the words and watch the behaviors.

The person you are when no one else is watching is eventually revealed to be the person you are when everyone is watching. Putting on a show works for a while, but as people see more and more of the full picture, your true nature is revealed.

At the same time, though, you can train yourself to behave better and naturally make better choices. The more times you make the conscious choice to act in a better way, the easier it becomes to always naturally act in that way.

So, the first step for establising money heroes for my kids is to simply make financially strong choices as often as possible until those choices are completely natural for me.

Second, I need to watch for and identify those who make smart financial choices. If I read about someone who has made smart financial choices and put themselves in a secure place for the rest of their life, that’s something I’m going to save for later.

The flip side is also true, to some extent. There is value in the cautionary tale of people who spend their money foolishly and end up without anything at all.

Once I’ve identified people who have achieved financial success in their lives, I filter those people to find those who might be role models for my children in other ways.

Tony Hawk is a great example of what I’m talking about here. My son has a fledgling interest in skateboarding and has enjoyed watching videos of exceptional skateboarding talent on YouTube.

Not too long ago, I read a great article concerning how Tony Hawk has wisely leveraged his skateboarding success into long-term financial security. In that article, he talks about how he took some of his skateboarding earnings and invested them in Tony Hawk Inc, building lasting financial security for himself and his family by bridging what he was good at (skateboarding) with financially lucrative opportunities.

“Tony Hawk is an amazing skateboarder, but he’s also smart. He figured out how to turn that skateboarding skill into money that will last for the rest of his life. He didn’t just blow what he earned on more skateboards. He saved and built something lasting, and now he can skateboard for the rest of his life without worry.”

It’s a lesson my son gets. It connects something he’s interested in and thinks is “cool” to the idea of financial security, so financial security becomes a “cool” thing.

My children see Sarah and I making constant financially sensible choices (budgeting, careful thought about purchases, etc.), and they see the positive outcomes of those (my career freedoms, a lack of worry about making ends meet, etc.). They also learn that some of their heroes and role models do the same thing.

Our goal is to present financially sensible choices as the “good” and “normal” way to behave, and overspending as the “bad” and “abnormal” way to behave.

With a little bit of Tony Hawk’s help, of course.

The post Finding Money Heroes for Our Children appeared first on The Simple Dollar.

The book’s focus is a straightforward one: how do you raise children so that they have a healthy relationship with money? Godfrey breaks this question down into ten basic money skills, then looks at the actions a parent can take at each age (early elementary, late elementary, middle school, high school) to teach those skills.

This brings me back to my own children. My oldest child is a first grader and roughly in the middle of the age range that Godfrey describes in her “early elementary” bracket. Our middle child is right on the bottom of that bracket. How are we doing in teaching these children basic money skills?

Without evaluating, I’d guess we are doing well overall, but are weak in a few areas here and there. Let’s take a detailed look, though, and see how our teaching lines up with Godfrey’s ten basic skills.

1. How to save
Godfrey’s first suggestion is to simply give your children an allowance that’s not directly tied to chores. An allowance is a tool used simply to teach money skills, not to reward (or punish) behavior at home. We do this by paying our children an allowance equal to $0.50 times their age.

With that allowance, one should establish three containers for weekly allowance: spending, saving, and giving. We do this, too, and we even add a fourth slot for investing. Right now, we require them to put a certain amount of each week’s allowance in each container.

You should talk about savings. We talk a lot about the value of saving for the future, both for short-term goals and for long-term goals. We help them think about their own short- and long-term goals, too.

The final tactic here is to visit a bank and open a savings account, and to stop by regularly. Our plan has been to open a savings account for each child when they turn seven, which means we’ll be doing it in the next few months for our oldest child.

2. How to keep track of money
When your child collects money from some source, have your child count that money. Your child should also count the money he or she spends and keep track of all of it on a piece of paper. We have them count up the money they receive and save (sometimes with help from mom and dad), but as of yet, we haven’t started to make a log of it.

You should choose something your child really cares about and make them aware of the regular cost of it. It can be anything, but it should be something your child cares about and something that you have to replace regularly. We don’t really do this at all with specific items, but we do discuss the expenses of groceries overall with them.

Godfrey also suggests having them count change and even roll it up as well as buying your child their first wallet. We do have them count change with each allowance as part of the routine and we have a change roller that they have used. Our oldest child has a wallet, but he very rarely carries pocket money with him, so it doesn’t really have a purpose yet.

3. How to get paid what you are worth
Godfrey’s one suggestion here is to post a list of “extra credit” household jobs that your child can do to earn a small bonus on his or her allowance. We don’t have a formal list of these, but we do offer these occasionally. This is definitely something we’d like to do.

4. How to spend wisely
When you go to a store with your child to spend money, plan in advance how they’ll spend it. Have them figure out how much they’ll spend, and have them identify things they actually want. This is something we do very, very well.

Godfrey also suggests having a budget for pet care, but as of yet their only pets are fish which have very low costs associated with them. She also suggests giving your child a calculator so they can add up the costs of items as you go through the store, but we often don’t shop with the children, so this is something that rarely has the chance to happen.

A final tactic is to be a model of sensible spending, which is something Sarah and I do well (at least, I think we do).

5. How to talk about money
How do you talk about money with a young child? Ask your child how money is used. What do you use money for? Talk about what food pantries and homeless shelters are for. Sometimes, say that you can’t afford something or that you can afford something, but it’s not a sensible purchase (and why).

We do all of these things. Money is a fairly regular topic with our children.

6. How to have a budget
The first step is to start an allowance program, which is mentioned above.

Beyond that, Godfrey suggests giving your child a menu and a dollar amount and having that child order food (with some guidance). In other words, turn restaurant visits or take-out night into a money lesson. While we haven’t given such control to our children, we have talked about how the bill really adds up in a restaurant and why it makes sense to order less-expensive options.

Of course, part of that is letting your child see the consequences of going over a budget. We have done this before. We allowed our oldest child to “borrow” money once a year or so ago to buy an expensive item that he thought he had enough money to buy. It really hit home for him the next few weeks for allowance, when we scooped up the money that should have gone to his allowance to pay back the loan. Neither child has even attempted to do this since, and the older one tells the younger how bad the idea is if it ever comes up. Lesson learned, I think.

7. How to invest
Godfrey’s big suggestion here is to open a 529 account for your child’s educational future, which we’ve done for our kids.

After that, she suggests talking about compound interest and using your child’s savings account as a learning tool for this topic, something we need to do. She also suggests talking about the idea of equity by working together on a project that will earn money, such as a lemonade stand. We’ll talk about this in a second.

8. How to exercise the entrepreneurial spirit
You should encourage your child to take on entrepreneurial projects, such as the aforementioned lemonade stand, and help your child figure out what to charge, and you should praise them when they step up to the plate and act entrepreneurial. Our children have run a lemonade stand several times over the past couple of summers. In terms of the idea of equity, they used the proceeds from the stand to buy the materials used from us, so they did understand the cost, although it was more along the lines of a loan.

Another tactic is to highlight entrepreneurial children for your own children, something we could really work on.

9. How to handle credit
Godfrey’s first suggestion is to get your child their own library card. We do use the library all the time and we have such a fixed routine with it that this wouldn’t be very beneficial to any of us. It’s a sensible idea, though, especially for families without a strong library routine.

You should allow your child to borrow small amounts from you, something we’ve done, as described above.

You should also show your child any bills related to them when they come in, such as an item on a credit card bill, so that they understand that “buy now, pay later” has real consequences. This is a solid idea. As of now, we use cash for most purchases directly involving the kids, but it makes sense to do things this way.

10. How to use money to change the world
Godfrey suggests having your child donate food at Thanksgiving. We actually donate food as a family much more regularly to a local food pantry, so this is more than taken care of.

You should also have your child contribute to a charitable gift during the holiday season. For the past two Christmases, our children have each given some of their “spend” money to the Salvation Army. This year, they’re going to each “cash in” their “giving” savings and give a nice contribution to a charity of their choice at the end of the year, too.

A final tactic is to volunteer some time as a family for a community project, something that’s actually on our schedule.

Things for us to think about
Here are some of the key items that we’re not yet doing with our oldest children that we should consider.

First, we should consider having them start a “money log” of money they receive and spend. This helps them be more organized with their money.

Second, we should talk about the routine cost of something they care about, such as milk. This helps them understand that everything has an expense and it’s usually a regular expense.

Third, we should post a list of “extra-credit” tasks (and their value) for our kids to do. This is going to take some real conversation to get right, because we have some tasks around the house that are simply “expected” tasks.

Fourth, we should find examples of entrepreneurial children to share with our kids. Time to do some research here!

Finally, we should use a credit card for some child-related purchases, then show them the bill when it arrives. This shows them that eventually you have to pay the money when you use a credit card.

We’re doing well, but we have some things to work on.

The post Evaluating My Parenting Skills When It Comes to Money appeared first on The Simple Dollar.

In any case, both of our children ended up creating a list that was thirty or forty items long. They kept coming up with things that they wanted to add to their list.

Sarah and I struggled with how to handle the situation, but Christmas morning provided a great opportunity for it.

When they opened their gifts from their grandparents, their parents, and Santa, they found themselves gravitating toward just a few toys that they received, leaving most of the rest of the items in a pile.

I took our oldest child aside after a while and asked him why he wasn’t playing with those other toys. He thought about it for a minute and said that they weren’t fun.

“Then why did you ask for them?”

He thought about that question for a long time. We brought it up a few more times over the next few days, and it became a pretty valuable lesson for him.

* * *

So, now the holiday season approaches. Before too long, our children will be thinking about the holiday season and making their Christmas lists.

This year, we’re instituting a new rule: no more than four items on your Christmas list.

Why? This simple restriction will make them think about their impulses and desires. What items do they really want? Which ones are less important?

They’ll learn to separate their actual desires from their fleeting impulses, and that’s a valuable thing to learn.

* * *

This idea carries forward into our adult lives.

There are many things I see in a given day that I would enjoy having, but the feeling is fleeting. I’ll see an interesting book on a blog that I read. I’ll hear about an interesting new board game at Community Game Night. I’ll notice a pack of gum at the checkout aisle.

If I gave into all of those impulses, I would be broke. Not only that, I would quickly become numb to the pleasure of something new.

I’ve learned that it’s far better to occasionally enjoy a splurge than it is to constantly splurge.

For starters, being patient and slow with the splurges allows me to filter out the things I actually want versus the things that are short-term impulses. For example, going to a coffee shop is almost always a short-term impulse, so I very rarely do it (usually only in a social situation).

It also helps me appreciate the splurges. Instead of gorging on constant small impulses until I’m numb to the joy of a splurge, I spread them out a bit and enjoy the anticipation.

There’s also the factor of gaining a financial edge. The fewer splurges I have, the less I spend. The less I spend, the more money I have for the future.

Will all of this pay off for our children? I think, to some extent, one has to experience these things to really appreciate them, but we can certainly do our best to lead them down the right path.

The post The Giant Christmas List: Curbing Impulses appeared first on The Simple Dollar.

A few weeks ago, there was a kidnapping scare in our area. A student was walking home from school when a person in a car pulled up next to her and asked her if she wanted a ride. The student didn’t know the driver, so she ran away and reported what had happened to a teacher, who then informed the police.

The situation turned out to have an innocent explanation. The car driver actually had two of his daughters in the backseat and those daughters actually recognized the girl as a friend of theirs, so they encouraged their father to give the girl a ride home with them so they could hang out with a friend for a little bit. The girl who was approached was never close enough to the vehicle to see her friends – she just saw an unfamiliar adult asking her for a ride.

Still, the situation is a reminder of one of the realities of being a parent. Kidnappings and other such disturbing events do happen to children.

The response of many parents is to become overprotective. They keep their children indoors as much as possible and give them supervised activities with which to spend their time. (Often, that activity involves television.)

There’s a problem with that, though.

When children are outside and at least a little bit away from supervision, they learn a lot of things. They get the opportunity to explore the world around them a bit. They are forced to make up their own games. They learn how to interact with others.

A few days ago, our children came running in the door with a giant luna moth caterpillar they had discovered. The caterpillar was riding on a stick. The children were amazed at the size and deeply curious about it. While finding it, they had taken up different roles: one child had discovered it, another got up close and inspected it, and a third figured out how to carry it.

They likely would have never found the caterpillar in a supervised and organized situation. They would have never examined it up close. They would have never worked out a plan to bring it to show us.

So often, the children (and their friends) make up games to play in the field behind our house or in our yard or in an adjoining yard. They interact with an ever-changing group of children. They find their own things to explore. They make up their own questions and seek out answers.

When they want to know more, they come running to us. However, we’re not right by them when they invent a new game to play in the grass or gather together cardboard boxes and sticks to make a castle or find a frisbee to toss around.

There’s so much valuable growth going on when we do this.

The other children they can play with are limited. There are many younger kids who live near us whose parents won’t let them outside the door without a parent beside them.

They don’t learn what I consider the most frugal value of all: the ability to come up with something enjoyable or valuable out of whatever you have on hand, with no additional costs. It requires imagination and independence and self-reliance. Those things are extremely difficult to help your children to build if you’re constantly by their side or you don’t give them open environments.

My children know exactly how to handle a situation where someone they don’t know – or even someone they vaguely know – wants my children to follow them. They don’t follow. They come to us instead. They know how to handle other common dangers as well.

I’m not willing to sacrifice their self-reliant growth just so they’re a bit safer.

The post Fear, Frugality, and Parenting appeared first on The Simple Dollar.

This is both a selfish and an unselfish goal. It’s unselfish in that I want them to have a great life that doesn’t rely on anyone or anything, but it’s also selfish in that I don’t want to be committing my resources to enhance their lives.

My retirement plans do not involve supporting an adult child.

In order to accomplish this goal, it’s very important that I foster self-reliance in my children all throughout their childhood.

Doing this doesn’t mean that you’re letting your children run wild and do whatever they want. It actually requires a pretty good amount of parental attention to foster true self-reliance, which is quite a lot different than children merely running amok. Without structure, children will self-organize, but they often do so in a non-productive or destructive fashion.

How do you encourage self-reliance in your children? Here are the tactics we’re using.

First, we give our children tasks and hold them accountable for them. Cleaning up their toys is one major task for them. Our oldest child has a large repertoire of tasks, including taking showers by himself and making his bed.

If they don’t do these things, there are repercussions. Toys are taken away. Activities are lost. Again, our oldest child understands the connections most clearly, so he’s the one that’s far and away the most responsible with the tasks assigned to him.

However, it took a long time for him to become accustomed to responsibility. The younger children are still lacking the maturity and time that their older sibling has attained. Don’t expect success with this overnight, especially with young children.

Second, teach them to do household tasks, then share those tasks. Teach your child how to prepare meals, how to clean the kitchen, how to do dishes, and so on. Do it with your child a few times, then start having your child do these things on their own. Then, start sharing household tasks with your child.

This teaches several things beyond the task at hand. It teaches them the value of sharing responsibility for household tasks. On the whole, it also teaches that there are a lot of things to do to keep a household going.

When your child tries something new, don’t hover. Let them do it on their own. When they run into difficulty, they’ll ask you for help. Save your help for those moments.

It can be really difficult to not say anything when you see your child making a mistake, like running the dishwasher without any soap in it. Unless the result is going to be a major disaster, let the mistake happen and then talk about the results together. What went wrong? How can it be better the next time?

Let your child make choices. Within reasonable limits, let them choose their own clothing. Let them decide whether or not they want to take piano lessons or not. Talk about pros and cons with them, but let them make as many decisions as you can reasonably allow them to make, and then abide by those decisions and their consequences.

This can be a hard thing to do because it may conflict with the vision you have for your children, but autonomy leads to self-reliance.

A final tactic: work on goals. Talk about things your child wants over a longer term than the next day or two and help them figure out a plan to get there. You can gently nudge them to stick to the plan, but you shouldn’t do the work for them.

This has worked very well for our oldest child, who has established multiple long-term goals and achieved them over the past year or so. He’s saved his allowance for six months for a single item and embarked on a long quest to achieve a youth-level black belt in tae-kwon-do, a goal he’s pursuing with impressive diligence.

These are the tools of self-reliance and independence, and if you want self-reliance and independence for your child, it is worth your effort as a parent to foster these traits.

The post Building Self-Reliance in Your Children appeared first on The Simple Dollar.

Some of your recent articles have touched on an issue that has really troubled me for a while. I have two children, both in college. The oldest one is starting her senior and is likely heading to graduate school, while the younger is about to be a freshman.

Each month, I’ve put $500 in a checking account for my daughter’s use, so that she doesn’t have to work while at college and can focus on her studies. I plan on doing the same for my son.

Is this the right thing to be doing? What about when they graduate and are out on their own? When should I stop giving them money?

There really isn’t a “yes” or “no” answer to this question. Most of the time, I would lean toward not giving stipends to my children, but that’s far from a hard stance.

The biggest factor of all when thinking about whether to give a stipend to your children is their personality and success. To put it simply, are they in a position where they would be able to thrive without the stipend or putting themselves into that position? Are they actively advancing a career? Or are they not pushing themselves and relying on your stipend to maintain their standard of living?

I would be much more likely to give a living stipend to a child who is clearly working toward a situation where they don’t need that stipend.

So, for example, I would be willing to give a stipend to a college student who was demonstrating that they were building up a career for themselves. Are they getting solid grades? Are they engaged in extracurricular activities? Are they trying for and participating in internships? If they aren’t doing these things, then I would expect that they would have a job and wouldn’t need a stipend.

For people who have graduated from college, the situation becomes a bit less clear.

If you give someone a stipend, it becomes very easy for that person to treat the stipend as part of their income and inflate their lifestyle accordingly. For example, if you give someone $500 a month, they might use that to make their mortgage payment, making it possible for them to save up for a $6,000 vacation that summer that they wouldn’t have taken otherwise. That $500 isn’t really going toward the mortgage. It’s going toward the vacation.

While that example is sustainable if a person removes the vacation, many people take it even further and do things like take on more debt for more purchases, leaving them with a debt load that’s unsustainable without the stipend to help take care of the payments. If your stipend is putting the recipient into such an unsustainable situation, you’re actually doing them more harm than good.

This is where character comes into the equation, and for me, it makes all the difference. You have to be able to trust that your children are using the stipend in a positive manner.

What are some examples of what I mean? A person might use their stipend to make an extra payment on their student loan or their mortgage. They might use it to save for a down payment. They might use it to save for their next car to avoid the costs involved in an auto loan. They’re using it to save up for the foundation of a small business.

In each case, they’re living their life just as they would without the stipend. They’re merely using the stipend to accelerate improvements in their financial state.

To put it simply, rather than giving my children a stipend, I’d make a deal with them. Every month that they make their full mortgage payment, I’ll make an extra $500 payment on their mortgage, for example. Every $500 they save for their down payment, I’ll kick in $500. For every $500 out of their paycheck that they put into their 401(k), I’ll give them $500 to make up for the smaller paycheck.

In other words, I’d use the stipend to encourage good financial behavior. If my children naturally make good financial choices, this would be a bonus for them. If they don’t naturally make good choices, this might be a big enough carrot to cause them to change their behavior.

In any case, the stipend wouldn’t directly lead to worse financial choices. Yes, it’s true that they might be able to take out a home equity loan or something like that, but there is no way to give someone a stipend or a financial gift that eliminates such a possibility. The best you can do is use your stipend to point them in a sensible direction.

What about a child that’s going through hard times? I’d be willing to hand them a stipend if they’re showing me that they’re trying to escape from that hard situation. Depending on the situation, it might involve a job search or rehab or something else. People can take actions to solve the difficulties of their situation. If they’re not taking those actions, then they shouldn’t have a stipend to cover up the consequences of not taking those actions.

Always remember that you’re a parent, not a buddy, and that the most valuable thing you can give to your child is developing their ability to succeed in life for themselves. A stipend can go hand in hand with those things.

The post Should I Give My Adult Children Cash Gifts? appeared first on The Simple Dollar.

Our three kids are really blessed. They have involved parents that are in a solid enough financial state to provide for them without worry. They have two sets of grandparents and a great-grandparent that dote on them, and they are the first grandchildren of two of the grandparents, so they get a special helping of attention. They have a small army of doting aunts and uncles, great aunts and uncles, cousins, and family friends that care deeply for them.

With all of these relatives and friends that care for these kids, holidays and birthdays sometimes turn into an overwhelming cavalcade of gifts. Even outside of those events, people will sometimes pop in with gifts for the kids.

The challenge that we often face as parents through all of this is entitlement.

How do we keep all of this from rounding a corner into a sense of material entitlement, one that will cause them to spend their lives, on some level, feeling that material abundance is normal and worth spending a great deal of money for? It’s a challenging issue.

What I do know is that a large portion of my sense of right and wrong came from my childhood experiences. I was influenced greatly by what my parents told me and what actions they took themselves. I think that’s a typical result of a childhood with involved parents who showed love, kindness, and attention.

Because of that, Sarah and I are really mindful of how we can use our day-to-day actions and the things we discuss with our children to constantly nudge them away from a sense of material entitlement. Here are some of the things we’re actively doing.

Remind them to be thankful. When someone gives them a gift, we not only remind them to be thankful in the moment (encouraging them to say “thank you” and telling them that they’ve done well later if they remember to say thanks on their own), we also remind them to be thankful later. We encourage the writing of “thank you” notes for gifts or pleasant occasions.

Expose them to others in need. Right now, our children really don’t have a skill set where they can do much effective volunteer work with the disadvantaged, so our goal right now is to simply make them aware that they have more than most of the people in the world. The constant accumulation of “more” can seem less important when compared to the plight of others, and being aware of such situations makes an enormous difference.

Encourage them to give some of what they have to others. We give them an allowance, but a portion of that allowance must be given to a charity of their choice. Every so often, we do a “toy purge,” and out of the purged toys, we give many of them away at Goodwill, and during this purge we involve them in the choice of what to eliminate and also remind them of where these items are going.

Do enjoyable things without material items. Most of our evenings are spent out in the yard. They do a lot of things I did when I was a child – play in the sandbox, help in the garden, play tag, run through the lawn sprinkler, and so on. We go to free parks all the time. You don’t have to have a bunch of stuff to have fun.

Talk about the issues involved. What is a gift? A gift is not something that you should ever expect. A gift is something given to you by someone as a way of showing they care. What are possessions? They can be nice to have, but the fun comes from within you. You can have fun with anything. These are the types of discussions we have regularly.

These are the tactics we’re using to reduce a sense of material entitlement in our children. Will it work? Only time will tell, but I feel pretty good about things when I see our kids choosing to play in a state park instead of hoarding their toys or getting excited about giving some of their allowance to a good cause.

The post Children, Personal Finances, and Entitlement appeared first on The Simple Dollar.

About two weeks ago, we had a snowstorm that covered our driveway with about two inches of snow. While it wasn’t really enough to require us to get out the snowblower, it did need to be cleared off so that our driveway didn’t turn into ice.

When my six year old got home from school, I handed him a snow shovel, grabbed my own, and the two of us went out there to clear it.

He’s six. He’s not as strong as I am, nor does he have the endurance of an adult. However, he stuck with me the entire time we were shoveling, then suggested that we clear the driveway of one of our neighbors that might have some difficulty clearing their own driveway.

When we were finished, I told him that he had done a good job. I also considered financially rewarding him with a dollar or two.

I decided not to.

This led into a series of discussions between Sarah and myself concerning the role of allowances and chores and how exactly we should handle “above and beyond” effort.

In the past, allowances were not tied to chores, and we’re going to keep it that way. Our children receive a trivially small allowance – $0.50 per year in their age. The reason it’s small is so that if they want an expensive toy, they have to actually save for it.

To us, allowance is not compensation; it’s a tool for teaching about money management. They learn the value of saving from it. They learn the challenge and reward of putting aside money for charity. They learn a little bit about investing, too.

What about regular chores, then? We’re already starting these, but these are things that are just expected of them due to the fact that they’re living here. If they protest, we don’t pull away allowance. We explain to them all of the things that Mom and Dad do around the house – as well as our professional work – to keep a roof over our heads, food on the table, and the things we enjoy.

Their role in that is their chores. It’s simply expected that there are certain things that they do as part of living at home. It’s not tied to allowance.

If they don’t follow through on their chores, there are non-monetary consequences. Prized toys are put away for a while. Time-outs happen. Taking away their allowance deprives them of the opportunity to learn about money management, while taking away toys or free time doesn’t deprive them of anything of significant importance.

What kind of chores do we give them? We’re talking about a six year old and a four year old here, so chores are pretty basic. They clear the table after dinner. They pick up any items that they left out. They aren’t physically strong enough or dexterous enough for many tasks, though our oldest is starting to grow into some of them.

This leads us to the “above and beyond” tasks, like the aforementioned shoveling of the entire driveway. Much like regular chores, we don’t compensate for these. They’re simply irregular chores that need to be done for the upkeep of our home. Irregular challenging tasks are part of everyone’s life, and thus they should be part of their lives, too.

In short, we don’t believe in compensating our children for regular household tasks. We aren’t compensated for those tasks, so neither should our children be. Also, compensating them sets up a precedent where they expect compensation for those tasks, which stretches out for as long as they live here and perhaps into their adult life.

The thing to keep in mind is that a parent’s goal is to raise their child to be a fully functional and independent adult, if possible. By giving them an allowance, we’re teaching them saving and basic money skills. By requiring household chores but not tying them to compensation, we’re teaching them that there are just things that a person has to do in their daily life. These are valuable money and life lessons.

The post Chores, Allowance, and “Above and Beyond” Tasks appeared first on The Simple Dollar.

Today, I’m going to talk about my daughter.

In many regards, she’s a pretty typical four year old girl – at least judging by her peers. She likes to play dress-up – in fact, we have a dress-up tub in our basement just for her. Her favorite place on our property is the sandbox, and the part about winter that she hates is that she really can’t play in that sandbox. She loves to sing and dance, and we can rarely drive more than two minutes without her bursting into song in the back seat. Her favorite toys are building blocks, from which she can build giant towers and crazy sculptures. She seems to believe that a day isn’t complete without an art project, preferably one that involves paper and glue and markers and pens and clay.

Of our three children, she’s often the one I have the hardest time relating to. I grew up in a household that held nothing but boys. All I have is brothers, and all of their friends and most of my friends growing up were boys. The only children close to my age that lived near us were boys. I’m used to the “boy” experience and I understand how boys respond to most situations. The behavior of my oldest child and my youngest child – both boys – makes sense to me based on my own experiences.

My daughter is a bit of a different story. I find myself often watching how she acts more than the other two simply because she often reacts and does things in ways that I don’t expect. She’s a beautiful enigma to me at many times.

After her fourth birthday, we started giving her an allowance, just like her older brother. They both use Money Savvy Pigs and divide up the small weekly allowance (paid in quarters) among the slots.

My oldest son has always taken the “invest” slot in the bank for granted. He puts the minimum amount of quarters into that slot and, although he occasionally asks about it, he actually focuses more on the “save” and “donate” slots. He’s not much of an impulse spender, as he’s already been able to save up for a few very expensive items, and he’s proud to be saving his nickels and dimes for Jump for Joel.

My daughter, on the other hand, was immediately curious about that “invest” slot. What will we do with that money? Will we spend it? What does “I-N-V-E-S-T” mean?

I told her that the money in that slot was for saving for things when she was much older, like college or a car or something like that. We talked a little bit about how many quarters would be in that slot by the time she was sixteen.

Then, I set the hook. “You know, the money in that slot has the power to grow on its own.”

Her eyes lit up. I explained that we could take that money to a bank and put it in a savings account, and for every four quarters she left in there for a while, the bank would give her a penny. I mentioned that there were other things you can invest in where you might even earn more than that, but you might also lose some money, too.

She was fascinated. She wanted to start “invess-TING” right now. Right now.

Before I had a daughter, I didn’t know what to expect. Now I do. This girl is a thoughtful, intelligent, quick-witted, vibrant person who deserves every chance in the world to take it all by storm. She has all the ability in the world and a skill set that is different from but at least equal to that of her siblings.

When I hear that there is still a pay discrepancy between genders, I shudder. She’s growing the passion and skills needed to take on practically any job thrown before her, so why should she not receive equal pay?

When I see that an opportunity discrepancy still exists (whether in fact or in perception), I shake my head. She’s incredibly capable of taking on impressive challenges, even at her young age. Why shouldn’t she get that opportunity as she reaches adulthood?

One of the personal goals that Sarah and I have for our children is to ensure that they can follow any educational path after high school that they wish and they won’t be limited by money or economic opportunity. Part of achieving that goal is to make sure that they have every skill and every piece of knowledge that we can give to them as they grow up. I want every single one of them to swing for the fences, and the biggest thing I hope for is that they’re each judged by and are given opportunities by the level of their skills and the content of their character, not by their gender.

How do we do that? We have well-funded 529s for each of them. We spend a lot of time engaging with them on educational endeavors – a trip to the Science Center of Iowa is a family event, for example, and we’re constantly doing writing activities and math activities and science experiments together as a family. In contrast to a lot of what we see around us, we’re encouraging our children to take control of tasks and projects and assert their independence. For example, our six year old can find his clothes, take a shower, get himself dressed, brush his teeth, pack his backpack, and get out to the bus stop in the morning (I’m around to converse with him, but he does this himself).

This little girl (and her two siblings) deserves every opportunity in the world, and it’s our job to make sure they have every tool we can give them to grab ahold of those opportunities and run wild with them. Doing that is a financial commitment and a time commitment and an energy and patience commitment, but it’s one that has giant rewards: independently functioning and thinking adults who can make a positive impact in the world.

That, to me, is “invess-TING” at its finest.

The post Finances, Opportunity, and the Path of a Little Girl appeared first on The Simple Dollar.

I have a question I think it would be interesting for you to attempt to tackle. You approach so many decisions with a methodical and disciplined calculus that often leads you to great time and money savers…Can you address what I’ll call ” the children paradox” and maybe provide some insight that I am not seeing.

Children paradox: “Children cost lots of time and money, so maybe on an individual basis we have incentive not to have them. But in the aggregate, we need them (to sustain the species, economy, etc.)”

On a personal basis, I see having children as a money and time drain. At the very least, it will be an alteration in lifestyle. I question the return on investment in going down to one income (for at least some period, up to five years), incurring the cost of child care, inconveniences to lifestyle, increased living expenses, and paying for college. Where is the upside? I don’t see what my incentive is for having children. How is this in my personal best interest?

I have thought about it in terms of national duty, as in perhaps an educated person of means has a duty to help support the country’s population and pass those “striver” genes on to the next generation. I have even thought about it in vainer terms, as in some kind of personal legacy. I have even considered the need for a much older and senile future self to have someone (my offspring) check me into retirement home. I just can’t get on board with my wife, whom I believe just wants to have a child out of evolutionary instinct. She wants the experience of pregnancy and motherhood. I wouldn’t want to deny her anything, but having children seems such a weighty thing to do in order to “have the experience”. It is a huge commitment.

I know you have children that are clearly a priority for you…but how do you reconcile that investment/opportunity cost with others (being able to travel, own your home sooner, etc.)?

I think there are a mix of answers to the questions you’re asking.

For one, I think some number of parents simply fall into parenting. Being a parent isn’t really something they hold as a deep personal value, but when the child arrives, they feel a natural obligation to do the best that they can to care for that child. It’s a big responsibility and one that comes with quite a lot of emotional reward along the way, so it’s not surprising that when some people become parents, they try to do a good job. (Of course, as we all know, there are a good number of parents out there doing a poor job, too.)

Simply put, as long as there are males and females around in sufficient quantities, there will be children around in sufficient quantities. It’s just a natural outcome.

I think what you’re asking, though, is why would people choose to and plan to become parents? Obviously, parenthood is something Sarah and I thought a lot about and made a conscious choice to take on in our lives.

In many ways, it simply comes down to what’s personally important to you. For some, the process of being a parent is an important life goal. I believe that part of what I was put on this earth to do is to raise three productive and capable people who will have a positive impact on the world. The privilege to be a steward to these children as they grow into adults is a privilege I’m very proud to have and that I enjoy very deeply.

Other people have other things that are personally important to them. Some want to see the world. Others want to start a business empire. Still others work to make the lives of others better. Yet others seek to accumulate personal wealth. There are a lot of personal goals that others have that I frankly don’t understand (much as you seem to feel about parenting), but I see such goals as a positive (assuming the passions aren’t destructive to people who don’t choose to be involved in them).

I don’t think it’s a bad thing for some people to not want to be parents and to have other things that are important to them. The key thing is that you’ve found something in your life that is important to you, whatever that may be, and that you’re investing your resources into it because it fulfills you. Without that, life would be a pretty empty place, I would think.

Most of us spend our lives working for those things that are important to us, whether it’s parenting or something else entirely. It’s the motivation to get out of bed in the morning. It’s the motivation to push ourselves a little bit more.

Is choosing to be a parent an economically challenging choice? Of course it is. However, most of the things I listed above are economically challenging choices. If we hadn’t had children, for example, Sarah and I probably would have traveled a great deal more than we have, which would have eaten a lot of the money we “saved” by not having children. Instead of having our oldest son, for example, I might have memories of visiting the Temple Mount (a place Sarah and I have always wanted to visit).

Simply put, people invest their resources (time, money, energy, skills, and so on) into the things that are personally important to them. For me, one thing that’s very important is my children, so I invest my resources into caring for them. For others, children might be of little or no importance, so they choose to invest their resources elsewhere.

The purpose of The Simple Dollar is to look at ways to be more efficient in investing your resources, particularly in areas that are less important to you. For example, no one wants to have a high energy bill, so energy savings is something that all of us can use to reduce the resources we invest in our energy needs and thus raise the resources available for the other things in our lives.

Whenever I see someone doing something they obviously love, I usually think to myself that it’s a pretty awesome thing (I was actually just thinking this the other day when I watched a skilled person making sidewalk art). Most of the time, when you see a parent, you’re seeing someone doing something they love (even if it might be frustrating in the short term, which parenting can often be). Use it as inspiration. If they’re doing something they love, even when it’s challenging, why can’t I?

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