How do you help and encourage your kids to manage their money.
My three kids have a few thousand dollars between them (lucky little ducks – gifts from grandparents and great grandparents). They have two accounts each, one is a working account and one is a high interest bearing account. The interest they earn is (of course) not as high as the interest we pay on our home loan. I’m thinking that their money would be much better off sitting in our home loan account where it would be working harder for us as a family. But I’d feel so bad cleaning them out. But then I feel bad anyway because there is a much better way to manage that money, I feel like I should be modelling that behaviour for them (i.e making the most of your money, not just letting it sit there). So if I do clean them out, when should I let them take control of their money? 10, 12, 16??? I have no idea. And how do I do that? Do we go back to the working account/high interest bearing account thing? Or shares maybe? I was thinking that we’d give each of them a lump sum that would more than cover the money they had “lent” us over the years when they turn 18.
Similiar stuff has crossed my mind. DH and I have arguments, as he wants us to put a lot of money in the girls account each month. I put in a small amount, but he wants it to be larger. Like you, I see getting the mortgage paid off as a priority. It benefits the whole family, the sooner we have that paid off. They get enough to ensure the bonus interest kicks in each month, as there always has to be 1 deposit.
I have been tempted like you, to have the girls money sit in the mortgage. MIL caught wind of that and got upset, which I understand, as some of the money as come from her. It does involve a whole level of trust, that we as parents do the right thing, but I suppose that also applies to where we are trustees of their accounts. I have, in one time of need, borrowed money and then returned it plus extra (Timing issue with new tyres and tax returns). It takes a lot of discipline and honesty to always remember it is their money.
The main thing to consider is the legalities of it. If everything goes bad and you lose your house, well they lose their money. If it is kept in trust for them, it should at least protect it for them. My father has accounts set-up for the girls and he did this on the advice that the money would be theirs, no matter what happens with his will when he passes.
As for the control thing, at this stage that money is for when they hit Uni age to help out if needed. We may revisit that over the years. When they are a bit older they will get their own everyday savings account for pocket money etc. Will probably see a financial planner when the amounts are over $5000 each to see what they recommend
Last edited by Astrid; September 10th, 2011 at 10:11 PM.
: more info
we recently transfered the girls money into our mortgage...DH keeps a spreadsheet with exactly how much is theirs and how much we put towards them, working so far!
we actually plan to use te money for private highschool if thats the route we decide to go or if we dont them we'll keep it and give it as a lump sum to go towards a house
My kids have had bank accounts since their births. They get $10 a fortnight transferred into them. It was a high interest account with no fees, but as soon as they hit $2000 in their bank they started getting slugged $4 account keeping fees each month, so I really need to look into changing their accounts to something else. Yes the interest they earn covers that $4 a month but that is not the point.
We are considering waiting until they are 25 before they receive their money. We would hope they have settled a bit by then and know what they want from life, instead of giving it to them at 18 and having them blow it iykwim. At the age of 25 and just based on the $10 a fortnight with no interest at all they would have $6500 minimum. We're still not sure if we will give them the actual cash or say "We have $6500 for you what would you like to buy or put it to"
This year we opened the boys a bank account each. We transfer money each week into their accounts. $1 for each year (DS#1 is 11 so he gets $11 a week, soon he will get $12 a week etc) of their age.
It is just a kids account at one of the major banks. They don't have any account fees and get ok interest (nothing huge)
At this stage we are happy with that. It can't be taken out unless we go into the bank.
They should each have about $15,000 by the time we give it to them. We will make up DS#1 and DS#2's balance to equal DS#3's balance due to starting his many years earlier.
As best I can, I might not have a lot of money but even if I got to the point of only giving him 5 cents pocket money, I would be explaining him how to manage money.
That might involve him knowing about our household finances as I'm currently a single Mum.
Thanks so much for your replies and for sharing your experiences/ideas.
Well, I’ve done it, I’ve cleaned them out. But I’ve recorded all the amounts so we know who owns what. DH and I will have a think about exactly what we want to set up for them and when. I figure we’ve got a few years thinking time before they really understand how money works and we’ll have something organised before then. In the meantime their money is working hard for us as a family reducing our mortgage.
DH is absolutely adamant that we will not be doing what our parents did for both of us (and what we had been previously doing for them) just chucking it all in an account. He reckons that by the time they’re old enough to use it, inflation will have wiped it out.
Our boys are 5 and 6 now and they are paying attention to their accounts and learning that if they spend the money they are given they save less. When they get older I might let them meet with a stockbroker and invest it but for now they are happy with watching it grow.
We have a kids saving account for DD and I'll set the same thing up for DD2 after she is born. We have separate savings for our home loan (which is not yet a mortgage, obviously). I know DP has suggested in the past we'd be better off using DD's money for our home loan accounts, but since it's only the money we deposit (small amounts) every month, and it's set up on some bonus structure as a kids account, I don't think it's that worthwhile yet.
I don't have any advice on what you've gotten from grandparents, other than that perhaps be open with them about your plans, since this hasn't happened with us.
But on teaching them to manage money, DS1 is definitely old enough (and smart enough!) to start to learn to handle a small amount himself. DD has two jobs that she gets a small amount of pocket money for - she cleans out the chicken coop twice a week and puts the rubbish bins out (and back in) on bin night. She gets 50c each time. She's also asked to now give the chickens clean water every morning, in return for 20c. She takes all of her pocket money and stores it in a money box. When we go to something like the show or her school fete or when the school book club forms come around, she can then get out some of her own money to buy something. She is already understanding the concept of when you save up, you can get something better, as opposed to if you take small amounts out to use at school canteen, you use it all up with not much to show. Either way, she is free to do with it as she chooses. We talk to her about what might be good value, or good saving, but leave the end choice to her. She had nearly $30 at the Easter Show this year! She talks about saving up next year so that she can buy something for her little friend too, because she's seen this modelled by his big sisters.
I really like her attitude to pocket money so far. She suggests ways to help out (above and beyond expected chores, like tidying, setting the table, etc, for which she is not paid) and earn money and then is learning ways to manage that money once it comes in. The big money issues can wait until she is older IMO. This is the foundation.
In regards to managing smaller amounts for the children to learn check out Money Savvy Kids - you can google it. They sell piggy banks with four slots....each for a different purpose - Spend, Save, Invest & Donate - a great idea for teaching basic managment skills and decision making.
DS#1 and DS#2 are at the age where they like seeing the money building up in their accounts and we are hoping this will instill good savings habits in them. At the moment they haven't got much but when it starts to build up in to the thousands we are sure that they are going to be very excited and motivated ! So at this stage thats what we are happy with. Maybe when they are older the money will be invested...
How do you help and encourage your kids to manage their money.
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But I’ve recorded all the amounts so we know who owns what. DH and I will have a think about exactly what we want to set up for them and when. I figure we’ve got a few years thinking time before they really understand how money works and we’ll have something organised before then. In the meantime their money is working hard for us as a family reducing our mortgage.
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