Too much too soon for kids?

[GoodSteward]

So last week we opened a savings account for my two oldest kids (9 and 10). I original idea was to let them use my debit card and pull from the accounts once or twice a month to pay for things, and make them keep up with everything like with normal check book.

Today, I was thinking about a prepaid card. A few months back, I happened to sign up and get a bluebird prepaid Amex debit card with 0 monthly fees or almost any fee for that matter. It was the only prepaid card I could find like it that was available for Ga residents. I considered using this as another Efund while I'm out, but changed my mind. One of the options they have is a family account that allows up to 4 sub accounts to be funded and managed independently from the main account. I thought this might be my ticket to get the kids their own cards, and let them manage it just like a checking account. They are legally too young to have a checking, and technically you should be 13 to have access to this, but I think as long as they will always be with me or my parents its ok. I would just deposit their money into their savings, or let them, and then transfer what we approve into the card account. You can't overdraft, and there is no credit line.

On top of that, I also had discussed with my wife an allowance plan that offered bonuses. lol They would each start with around 3$(hey they are kids!) and offer ways to earn an extra 1$ here and there to a max of around 10 or 12$ a month. Like if they keep their room cleaned up all week, they could earn an extra 1$. All 4 weeks would end up being 4$ extra for the month. This should encourage them to work and watch their paycheck grow, then learn how to save and manage money. I even considered writing out "paychecks" and let them deposit the checks with my phone into their savings (all tied into the same bank lol).

I think it sounds fun, but I'm also a numbers nerd. Is it too much too soon? I have a tendency to over think this stuff, but I really want to start teaching them about money and experience it first hand.

[disneysteve]

You raise several different issues here.

As far as spending, I think the first step in teaching kids is to use cash. If they want money from their account, take them to the bank to make a withdrawal of actual cash. Plenty of adults can't manage spending with a debit or credit card. That's not the place to start. Start with cash and then advance from there.

For allowance, be very careful about offering to pay them to do tasks that are really a normal part of living in your home, like cleaning their rooms. What will you do if they decide, "I don't care about the extra money so I'm never going to clean my room."

If you want to give them the opportunity to earn extra money, do it for tasks that wouldn't normally be their responsibility. For example, I paid my daughter to do shredding for me. Figure out what tasks they can take on if they want to earn a few extra dollars.

[GoodSteward]

You raise several different issues here.

As far as spending, I think the first step in teaching kids is to use cash. If they want money from their account, take them to the bank to make a withdrawal of actual cash. Plenty of adults can't manage spending with a debit or credit card. That's not the place to start. Start with cash and then advance from there.

I think we went over this on another thread about carrying cash. My kids do currently carry a little, but we don't like to let them loose with it. My son also likes to carry it all the time and count it, and he forgets it. I don't like cash because it's too hard to track. Gum ball machines, small vending purchases, etc like my kids like to do with their cash end up making money vanish and they can't comprehend why (Adults can have this same problem lol). I personally think debit cards are better because you can more easily go back and see where all the money went, and I also don't think cash has as much responsibility tied to it. Who keeps a separate ledger for cash purchases? Again, this is my reasons for a card in general.

For allowance, be very careful about offering to pay them to do tasks that are really a normal part of living in your home, like cleaning their rooms. What will you do if they decide, "I don't care about the extra money so I'm never going to clean my room."

If you want to give them the opportunity to earn extra money, do it for tasks that wouldn't normally be their responsibility. For example, I paid my daughter to do shredding for me. Figure out what tasks they can take on if they want to earn a few extra dollars.

You are right, and I thought about this. The problem I have is that we don't really have extra work that they can do they don't already do as part of their house work. Dishes, rooms, outside yard, etc. IT's all part of it. The other side of this isn't just cleaning the rooms, but learning to keep them clean by picking up after themselves. I know they should learn to do that already, but we can't even get most adults to do that. I just thought this would help them form better habits while learning how money works.

[Fishindude77]

I wouldn't want young kids using cards. Let them learn how to handle cash first. A good old fashioned piggy bank or lock box isn't a bad plan for kids that age.

If they blow through the cash and end up temporarily broke, that's a great lesson in money management.

[GoodSteward]

I wouldn't want young kids using cards. Let them learn how to handle cash first. A good old fashioned piggy bank or lock box isn't a bad plan for kids that age.

If they blow through the cash and end up temporarily broke, that's a great lesson in money management.

I have used that as a way to encourage saving, and my kids now save money. They don't like having money, and then having none. They will figure out how much is left if they buy something bigger (big toy). once they realize how little would be left, they put the toy back...and then ask us to buy it. lol

By "handle cash" I'm a little lost as to how much that needs to be encouraged. You either spend it, or save it. Either way, unless you keep track of receipts (gumballs don't give those), there isn't much to really teach until it is gone. I am thinking they might have learned about as much as they can from a cash side of this. Money has a lot to learn, cash..not so much.

My biggest concern is if using cards this young is a good idea. I'm not really sure. But I'm also not sure what else to teach them without moving up to a debit card as far as money management. I suppposed I could slow down, and just work on the savings side, but this is kids. they will want to spend some (and should).

[DaveInPgh]

For allowance, be very careful about offering to pay them to do tasks that are really a normal part of living in your home, like cleaning their rooms. What will you do if they decide, "I don't care about the extra money so I'm never going to clean my room."

If you want to give them the opportunity to earn extra money, do it for tasks that wouldn't normally be their responsibility. For example, I paid my daughter to do shredding for me. Figure out what tasks they can take on if they want to earn a few extra dollars.

This is similar to what we are doing with our daughter this summer. She has her normal chores that she doesn't get paid for. Cleaning her room, putting away her laundry, folding and putting away towels, helping with the dog, etc.

Then there are chores that have traditionally been divided between my DW and I. My DW has been making a list each week of ways our daughter can make money. Some of the items are normal chores of ours she can do instead. Some are more along the lines of mini projects.

She isn't going full out on the list to maximize the earnings potential, but she is making some money each week.

[Outdoorsygal]

I think there is excellent advice in this thread. Start with cash.

9 and 10 years old is pretty old. When my son was younger, he burned thru cash also but we weren't giving him enough.
Once we did, he saved 50% for some personal goal then spent the other 50%.
He earned it thru his chores so it wasn't my business to tell him how to spend his spending money. He earned it

He is now 25 and is Senior Tech Support for Apple from home. Not his major, he obtained a 4 year degree in exercise science and 3 AA Degrees.
None include any computer classes. But learning how to spend, count money, earning it so he could spend it as he desired, is part of what we adults do.
And that is what he was preparing for, adulthood. He's pretty frugal now and hardly utilizes any sort of debit cards or credit cards as payment.
Uses cash mainly because then it feels like real money spent so he spends less.

[disneysteve]

When my son was younger, he burned thru cash also but we weren't giving him enough.

This is a great point.

The rule of thumb I've always heard is $1/year of age/week. So a 10 year old would get $10/week allowance.

We never quite met that guideline. We were always on the short side of it but not by a whole lot. But I think it's important to regularly reevaluate how much you're paying them. If they are making reasonable decisions with their money and just don't have enough, it might be time for a raise.

[Jluke]

To further encourage saving (and naturally thwart spending), I would implement a matching policy but they need to run the numbers.

At the end of a period of time (6 months? 1 year?), they figure out how much they earned, how much they spent, and how much they saved.

Assuming the math is right, then you match savings on whatever basis (dollar for dollar, $0.50 per dollar, etc...). gets them used to accounting, tax forms, etc.

You could also base any bonuses on quality of work, complexity of work, etc...

Hopefully the kids are into the numbers as much as you are.

[GoodSteward]

While I agree to start with cash, for the sake of my particular situation, I want to point back to my previous statement that they have been using and saving cash for a long time. My daughter has learned how to stretch birthday money in June to December, and back again. My son is a little more spendy but is getting better. They haven't had an allowance given to them yet. Again, all the things they can do around the house are being done already. The only way to earn an allowance is to shift some of the chores they don't' do so well into ways to earn something and learn to do them better.

[disneysteve]

To further encourage saving (and naturally thwart spending), I would implement a matching policy but they need to run the numbers.

I totally forgot about this. Yes! I did this with DD. I set her up with an account at the Bank of Dad. She earned a very high interest rate. I think it was 5% per month (not an APR of 5%). So if she deposited $20, in one month she got $1 interest. I wanted the money to grow fast enough for her to see the value of saving. In the bank, she'd only get a fraction of that much which is a lot less motivating.

I can't really comment on the debit card thing. DD didn't get a debit card until she was 18 and got her own account (not a custodial account). Up until then, it was all cash.

[GoodSteward]

This is a great point.

The rule of thumb I've always heard is $1/year of age/week. So a 10 year old would get $10/week allowance.

We never quite met that guideline. We were always on the short side of it but not by a whole lot. But I think it's important to regularly reevaluate how much you're paying them. If they are making reasonable decisions with their money and just don't have enough, it might be time for a raise.

You're kidding, right? What 10 year old needs 40$ a month? I'm not giving out 80$ a month between my two kids. Ten dollars a month to kids who currently get nothing(outside birthdays and christmas) is plenty to teach them how to handle money. In fact, I'm not sure I want to give out more than 20$ a month together. I guess if I had a lot more disposable income, 40$ wouldn't feel like so much money to me.

I didn't get an allowance growing up, and the only money I had was money I earned cutting other people's grass..mainly family. I didn't get as much as my own kids for Christmas or holidays. This is a privilege, not a right, so I think anything is better than nothing. I also don't want to overpay them. They will get the impression their work is worth more than what it really is. It's like kids today that get trophies just for participating to avoid hurting their feelings. hah.

[GoodSteward]

I totally forgot about this. Yes! I did this with DD. I set her up with an account at the Bank of Dad. She earned a very high interest rate. I think it was 5% per month (not an APR of 5%). So if she deposited $20, in one month she got $1 interest. I wanted the money to grow fast enough for her to see the value of saving. In the bank, she'd only get a fraction of that much which is a lot less motivating.

I am trying to take this in strides, but I really like that idea as well! Thanks for the info.

[Fishindude77]

I realize this is a money management forum, but don't forget these are 9 & 10 year old kids. You won't turn them in to accountants overnight. Sounds like you are doing great.

All you really need to get across is:
1. Money is earned, not given.
2. If you spend more than you make, you're soon broke.
3. Save for big purchases.
4. Keep a nest egg, or cushion to fall back on.

I wouldn't worry about debit cards, check books, borrowing, interest, etc. for a while. When they start driving is a perfect time to implement that training, and if you've done good with the above, it will be easy.

[GoodSteward]

I realize this is a money management forum, but don't forget these are 9 & 10 year old kids. You won't turn them in to accountants overnight. Sounds like you are doing great.

All you really need to get across is:
1. Money is earned, not given.
2. If you spend more than you make, you're soon broke.
3. Save for big purchases.
4. Keep a nest egg, or cushion to fall back on.

I wouldn't worry about debit cards, check books, borrowing, interest, etc. for a while. When they start driving is a perfect time to implement that training, and if you've done good with the above, it will be easy.

yeah, I don't want to over-complicate this. I did a little reading on the side to see if I am off my rocker, and apparently, this is getting to be more common around the 8-10yr range. "Professional" advice like from Mint.com thinks it is good to get a preteen introduced to credit cards(I think it was that site..it was referenced in an article). That I do not agree with. I won't let either one of my kids have access to my credit card. I watched my brother rack up 20k$ and my dad got stuck with it.