Life Skills

I was having this discussion with someone the other day, and we were talking about the different ways that kids can learn independent living skills.  With changes in technology, I've wondered what exactly people need to know to successfully navigate the world around them.  It's as simple as going to the store and buying what you need with a card...you really don't even need to know how to count money or balance a check book anymore with the advent of debit cards, credit cards, and online banking.  You technically don't really even have to go to stores or interact with people, as the internet can be used to buy just about whatever you need, including groceries.  It's amazing, really.  However, there is one major life skill I want to teach my kids, and it is all about money.  How to budget, how to shop smartly, how to save, how to invest, and how to not get taken advantage of and/or lured in by credit cards.  I was not always as good with money as I am now, and I can really think K for that change.  He is absolutely one of the best money hoarders savers and investors that I know, and I really appreciate his financial smarts, as they have enabled us to do so many things without having to finance them, and that is a really, really nice thing to not have hanging over your head.  I also owe a lot to my parents for paying for my education, and I know we hope to pass the same advantage along to our kids.

Soooo, I had some free time and devised a plan on how I would like to teach my kids about money (K does the compounding interest/investing stuff).

There are so many charts out there that breakdown what a household budget should look like, and I basically adapted that to a kid's budget.  I still remember my first nursing job, thinking my paycheck would be like $500 more than it was.  Taxes, insurance, all that jazz...yeah, I didn't think it would be that much, and bills, what???  I might have been a wee bit spoiled in that respect and pretty much naive.  I made pretty decent money, but I had no idea where most of it went...probably to clothes and going out.  Oh, to be young, dumb, and fun again!  Anywho, I'll get to the point.

Here are the rules:

Each kid starts getting allowance of $50/month at age 5.  Allowance goes up by $10 for each year of age.  If you don't do your chores, you don't get paid, your next pay period might even get docked.  If you save more than the set amount, we match that amount at 100% (essentially a kiddie 401K funded by yours truly...or truly K).  A's on the report card = a bonus (this will probably start low and  increase as they stop caring so much about making us happy :).  They can do whatever they want with cash gifts for birthdays, holidays, etc.

Here's the breakdown:

Rent: 30%  = $15
Mom & Dad Tax: 10% = $5
Household/Food/Utility: 10% = $5
Savings: 20% = $10
Spending: 30% = $15

All of this will be paid out in bills of $1, $5, $10, and the kids will need to count out what they owe and pay up (ha! - isn't it a clever way to get half our money back?)

I don't want you to think that we're going all boot camp on the kids or anything, the chores will be simple, age appropriate things - cleaning room, making beds, feeding dogs, putting laundry away, etc.  We will obviously pay for things like sports, dungeons 'n dragons (dear god, please no!), or whatever their extracurriculars are, and anything they need to be healthy, happy, and well adjusted. 

Our hope with all of this is that they will learn the value of money and how important it is to save.  As what they have in savings at age 16 will determine what kind and if they can afford to buy a car or any other pricey toy that they want at that point in time. 

* A caveat that I add to this, for J especially (but J2 will have to do it as well) to work on interaction skills, (something that I saw recommended on a forum) but if he saves up for a specific toy, he will have to take his money with us to the store, pick out the toy, greet the cashier, count out his cash to pay, and tell the cashier 'thank you.'

Any feedback is greatly appreciated or feel free to share what you plan to do with your kids.