Give children money to manage. / JOSE LUIS PELAEZ INC. | GETTY IMAGES
Offer incentives for saving. / GRANGER WOOTZ | GETTY IMAGES
Our electronic allowance
By Jake Chatzky, 16, and Julia Chatzky, 13
(with comments by their mother)
Jake: Our mom was bad at giving us our allowance regularly. She always fell behind on payments, and this caused disputes over how much she actually owed us.
Julia: She used to always forget when she owed us money.
(Jean: Embarrassing, but true.)
Jake: And because we never had our own money, she dictated what purchases we could make.
(Jean: Also true.)
Jake: However, now we have debit cards linked to an account, which is set up so money automatically transfers from my mom's account into each of ours.
Julia: It's made life a lot easier. We never have to worry about getting money on time.
Jake: This is great, because now I have money when I want to go out with friends (though often I can still trick her into giving me a few extra bucks).
(Jean: Not anymore, you can't!)
Jake: I don't drive yet, which makes getting to the ATM difficult. So when I need cash, I can ask my mom for money and she will give me cash and transfer the money back from my account into hers. But when I start driving, having the card will be good because I will always know that I have gas money.
Julia: I appreciate having a debit card because as a shopper, I can go online and check my balance. I used to always have the feeling: "Where did all of my money go?" Now, I look online and I see: "Oh, well, I got a drink from Starbucks and new Converse sneakers at Nordstrom, and three packs of Hubba Bubba gum at Justice."
(Jean: Sounds about right to me.)
Julia: Then I realized I actually only ate three pieces! I wasted my money and could have saved it for next time I go shopping. That's why having a debit card is so useful for me.
Jake: I think this system has taught me how to manage and save my money. This is a skill I will need when I go to college in a few years.
"There is a big difference between money I give them...and the money they earn." / PETER CADE | GETTY IMAGES
Jean Chatzky and her children, Jake, 16, and Julia, 13. / Robert Deutsch for USA WEEKEND
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We don't want our kids to make the same mistakes we did. When it comes to money, that can be a tall order. Before I was a “financial expert,” I spent more than I earned, started saving too late, racked up half a year's salary in credit card debt and cashed out a 401(k). I want my children — ages 13 and 16 — and yours to avoid those missteps. I want them to grow up knowing how to live within their means, put something away for tomorrow and reach for a financial goal.
Many U.S. schools don't teach basic money management, but the only way to guarantee that your offspring absorb this important life skill is to teach it at home. I wrote Not Your Parents' Money Book: Making, Saving and Spending Your Own Money (Simon & Schuster) to start teens on a path to financial success. Here are five tips for raising money-smart kids:
Give children money to manage.
In focus groups I did with middle-school kids around the country to see what they know — and want to know — about money, I found that even 11- through 13-year-olds are pragmatic about finances. They want to know how much it will cost them to live independently, what jobs pay those salaries and how they can earn money today, “besides babysitting.” What they don't know is the cost of things, from a pair of jeans to a bag of groceries. To build a sense of real-world prices and values, give your kids some money and let them decide how to use it.
In my house, we do this with an allowance. But take care: Sometimes, with the best intentions, we tell our kids they'll get their cash on Sunday, then don't have the correct change or put them off because we're busy, incidentally teaching them that it's OK not to pay your bills on time. Or we give our kids an allowance but continue to hand out cash when they ask for it, teaching them that there's always more where that came from.
An allowance should come with a list of types of purchases that now become their responsibility. For younger children, it may be candy at the checkout counter or the latest Silly Bandz-type fad. For older kids, it could be movies or gifts for friends. As responsibilities grow, so should the allowance.
Offer incentives for saving.
Instill the habit of saving for the future and for things they can't afford on a week's allowance. Learn from companies that offer incentives to customers and employees to lose weight, stop smoking and contribute to 401(k)s.
Decide how you want to reward your child for setting and achieving a savings goal, whether for an iPod or college. That's good practice for saving for a house or retirement.
I've found a dollar-for-dollar match to be effective. Or you could say: “For every $75 you save, I'll add $25.”
Strongly encourage work.
My children will attest: There's a big difference between the money I give them (even as an allowance) and the money they earn. When it's earned money, a night of ice skating isn't just half their allowance — it's two hours of work. That's an important difference to appreciate, and the only way it will resonate with your children is if they work. Unless your kids are logging more than 20 hours of work a week, research shows, it won't hurt their grades.
Talk about money.
Many of us were taught that talking about money is taboo. It needn't be. It doesn't have to mean sharing your salary, but it should include discussing the cost of things like dinner out, vacations and college, and which things are family priorities and why. If times are tough in your house, explain to your children that cutting back to ensure your needs are covered is a family affair. Don't worry that a frank discussion will stress your children. Knowing and feeling as if they're doing something to help can reduce stress. (Consider Sept. 16 to have “the talk.” I partnered with American Express to launch National Money Night Talk. You can download a free toolkit with talking points to get you through it at moneynighttalk.com.)
Let them fail.
One way to ensure that financial lessons sink in is to let kids make and live with mistakes, like a $60 video game that turns out to be boring. Do not cave in and buy him a different game. You can point him to the program at the game store that will buy back used games at a discount. You can suggest he try to find someone to take it off his hands at swaptree.com. But don't bail him out.
Children, much like adults, need to learn: Only by carefully considering how to make the most of our money will we, and they, make the right decisions with it — at least most of the time.
Cover and cover story photographs by Robert Deutsch for USA WEEKEND - Jean's wardrobe: Top, Lilly Pulitzer; necklace, Sonya Renee. Jake and Julia's wardrobe: Aeropostale; Julia's necklace, Guy & Eva. Grooming: Patrycja, Halley Resources. Styling: Sadia Seymour, Halley Resources.
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