Dear Readers —
I am overwhelmed and touched by the letters you sent in response to the column about the children's book "Lucky the Golden Goose". Through witty rhymes and colorful pictures, author John Wrenn is able to explain how compound interest works so that even a child can grasp the concept. (Here's the full article.)
From your letters it's clear that a lot of folks — parents, grandparents, concerned aunts and uncles — are struggling with how to teach children about using, saving and investing money.
Many of you are deeply concerned about the values our children are learning from the consumer-oriented culture we live in. Or, as one reader put it, our "Spend-It-If-You've-Got-It" society. Several of you lamented the fact that you, yourself, only began to understand basic financial concepts when you reached adulthood because you were never taught even the basics as a child.
Among those of you who are giving a child an allowance, I was impressed by the amount of thought that you put into what, for too many parents, is a mindless routine. (As in, "Here's your allowance, now don't bother me.")
Instead, you've set up a program which usually entails making the child responsible for certain household chores in order to teach the idea that money must be "earned," that it doesn't just magically spew out of ATMs.
Many of you have taken this a step further, making allowance time into a family ritual, with the money doled out to the children on the same "payday" each week and then immediately divided among different containers. Whether you use multiple piggy banks or glass jars, each represents a different savings goal and has a specific percentage allotted to it.
Categories range from "Spend on anything you want" to "Save for future use" to "College Money." The letters from Chris, Dale and Elaine explain how they've handled this and the impact it's had on their children.
One recurring theme is the requirement that a portion of each allowance be set aside for charity. Although we tend to think of children as creatures who endlessly chant "I want, I want, I want...", as you'll read in the letters below, most kids are naturally generous and desire to help others. All we have to do is foster this inclination.
Your stories also demonstrate how much children need and want to be included in the financial affairs of the family. I'm not saying you should turn over your pay stub to your 10-year old so he knows exactly what you're earning, but I do think it's important that children be included in basic family discussions about money.
What's wrong with gathering everyone together for a discussion along the lines of: "We have X amount of dollars to spend. We can use it all for a family vacation at a theme park. Or, we can go camping instead and use the money we save to buy a big screen TV for the family room. Which will it be"?
You're not doing your kids a favor by trying to hide family money problems from them; they have an uncanny ability to sense something's wrong and their imaginations will work desperately to understand what's going on.
Instead of trying to shelter them from the reality that mommy just got laid off, it's a lot healthier to tell them the truth and be frank about the need to reduce spending. Reassure them that the family will get through this and perhaps give them an idea of how they might help. Several of the letters —check out those from Tami, Robert and Larry — detail how willing children can be to pitch in for the sake of the family. The key is to make sure the information you give children is both reassuring and on a level appropriate for their ages.
Letters from Candy and Glenda demonstrate that children can surprise us with how well they grasp financial concepts. Even if they don't get it the first time around, at least they become familiar with the "lingo" of money and investing. Later in life, they won't be intimidated by the terms.
Finally, in letter after letter, there were examples of how much of an impact our own actions and attitudes about money have on our children. As Catherine and Monica discovered, kids really do learn by example. What kinds of money behavior are you teaching your children?
Piper Jaffray broker John Wrenn, the creator of Lucky, has generously doubled the number of books we can give away. It was tough to narrow down the entries, but the following twenty readers are the winners and will be receiving their very own copies. If you would like to purchase a copy of "Lucky the Golden Goose," you can order via Amazon.com.
Lucky is probably the only goose with his own Web site, so you can learn more about him there at lucky529.com.
My heartfelt thanks to each of you who took the time — and in some cases poured out your heart — to share your "kids and money" experiences. Congratulations to our "Lucky" winners!
We pay our kids a weekly allowance based on how old they are. $5 for 5 years old; $13 for 13 years old, etc. We have them divide up the money as follows:
5% — for taxes
10% — for charity
20% — fun money - money that they could spend on ANYTHING
25% — long-range savings
40% — college fund
When they were little, we had 5 containers, with the percentage and the amount of money on the outside. They had to "make change" until they had their money divided up. When they wanted to spend their "fun" money, I always took out a calendar and counted into the future to show them how long it would take to earn that money back. They would usually decide to just add the item to their Christmas or birthday list.
We also made them reimburse us when they did something wasteful, like pour shampoo down the drain.
A couple of years go my son read his financial statement and realized he would get a higher percentage of interest if he invested his money into a CD, rather than leave it in a savings account. He not only has one, but on his recommendation, so does his sister.
Recently, both children took gift money and invested in the stock market with Grandpa's help. To encourage this, my husband and I are adding $50 each month (over and above their allowance). Our children have become very cautious in spending their money and save more than they spend. I hope this continues when they become adults!
The company that I was working for went out of business last summer. I got another job, but am making much less than I was before. To compensate for the loss in pay, I work a second job in the evenings. It helps, but I now get to spend about 15 minutes a day with my children. I am hoping that this will not go on much longer but I have to pay the bills.
Recently, I had gotten home from my first job and was getting ready to leave for my second job when my 3-year old daughter came up and said: "Daddy please don't go back to work"
I told her that I had to go to work to get money so that we have a house to live in and food to eat. She then left and went to her bedroom. I heard her piggy bank rattle and she came back and handed me a nickel. She said "See, I have money, now you can stay here with me."
I must tell you that I was totally heartbroken. It makes me wish I had learned money management when I was younger so that I wouldn't be in a position of having to work all the time just to get by. I don't know if this is the kind of money-related story you are looking for but I thought I would share it with you.
Gail, I truly enjoyed your article about "Lucky".
Here's a story about finances and my son. It happened a few years ago in the midst of a very hot, dry Texas summer when we were under water rationing and our water bills were very high. As a result, we limited our 3-year old to one hour of "sprinkler" play per day.
One day my son asked me why and I explained to him that we were low on water and that is was too expensive to leave it on all day as he wished. He accepted my answer but with a funny look on his face.
The next day, my son walked up to me and my husband and handed us his piggy bank. When my husband asked him why he was doing this he responded that the was paying for a day's worth of water! The two of us broke out in laughter. My son got an extra hour of water time that day!
Thank you for your helpful and beneficial article.
Dear Ms. Buckner,
Our daughter was four when we sold our modest first home and moved in with my parents while our house was being built. She was six years old by the time we moved into our new home.
I am not exactly sure what prompted her thought process, but one night at dinner, she asked, "How did you pay for this house, Mom and Dad? Did you use money? " (meaning "cash")
"Did you write a check?"
She was getting impatient."Oh, you used a credit card."
We then proceeded to explain in simple terms the concept of a mortgage.
"Yes, we did use cash for a down payment, but the rest is paid monthly to the bank for many years."
She seemed to get it. "You have to pay each month."
"So if you stop paying the bank, we can't live here anymore."
Ouch. A child really knows how to get to the heart of the matter.
Thank you, Ms. Buckner for your sound advice.
My wife and I were raised in middle class families. Our parents placed an emphasis on hard work and education, but did not know much about investments. As we grew up, we realized the potential of investing and have started our own accounts.
Our dilemma is how to teach this information to our children. Much of the information is geared for adults. Your column on "Lucky" was very helpful.
We tried to get family members to give our children monetary gifts in the form of contributions to an educational IRA, but this was not well received. In a last-ditch effort, we decided to talk to our eldest son, age 7.
He has always been interested in saving money, as he has an acute case of Lego-itis, so he was very interested to learn that your money could grow all by itself. I told him about EE bonds, which you can buy in small denominations. We spoke about the rate of return. On his birthday (much to the chagrin of my family) we bought a $50 bond!
Sadly, on his sister's birthday, he realized that he would not be able to buy as many toys as his sister because his money was tied up in his bond. He will be 14 years old when he will ask about that bond again.
Hopefully with the help of this book we can encourage his natural curiosity and help him understand investments a little better.
Thanks, and I hope you enjoy our true and unfolding story -
When my daughter was two years old, she followed me upstairs. When I went into our bedroom, she headed into hers. I didn't think much of it. When my husband got home, about his money and I replied: "What money?"
He explained that he had cashed his paycheck, about $400, and left it on the table. He looked everywhere, his dresser, his wallet, his pants pockets. We were frantic. We worried that perhaps someone had seen it and come in to our house, but nothing else was missing. We had no idea what had happened, and we really needed that money to buy groceries and pay our bills for the week.
Finally, I asked my daughter if she had seen the money. She had indeed. When I asked if she had done anything with it she nodded her head. Thrilled, I asked her to show me where she put it. We followed her upstairs to her bedroom rocking chair. Then it hit me: We kept her piggy bank behind her rocking chair!
We often gave her small change and talked about how money belongs in the bank, etc. She learned that lesson so well that when she saw $400 sitting on the kitchen table, she knew exactly where it went — in her bank!
Dear Ms. Buckner;
My son, Ben, began earning his own money at the age of 3 1/2 by pulling weeds in the back yard. We told him that he could earn a penny for each weed he pulled, thinking that he would soon tire and move on to playing with his toys.
Instead, he earned $1.00 that day (100 weeds!) and has been earning money, on and off, ever since.
When he turned 8 we began "rewarding" him for doing his chores around the house. His chores are broken up into 4 areas and he gets $.20/ area. If he does all his daily chores around the house for the day he can earn up to $.80/day. As an incentive, we double the amount to $1.60 if he gets all his chores done for the day. If he's consistent for the week he can earn up to a total of $8.00/week.
From these earnings we encourage both savings and charitable giving. We also expect him to be responsible for a small amount of his own upkeep such as buying socks and underwear. Usually he buys these from his mother at a discounted rate (after she has bought them on sale). The rest he's free to spend (or save) as he wishes.
So far he has saved over $100.00, which is our trigger point for our children to open a savings account. Neither my wife nor I had much financial training while we were growing up and are learning about the world of money saving and investing from the school of hard knocks.
Dale and Julie
Six months ago my wife and I started construction on a new house, and began keeping a journal of everything we spent to help us save for the new house. Not only did this help us know where our money was going, it made us less likely to buy something unnecessary because of the embarrassment of entering the purchase into the spreadsheet.
Our two children are 5 and 6 years old. For 5 months, whenever they asked us to buy them something frivolous they were repeatedly told that we were "saving our pennies for the new house".
About a month before the closing on our new home, both kids walked into the living room with one of their savings banks. To help, they had emptied the two banks, separated the pennies from the silver and paper money, and brought us their "pennies for the new house".
It was funny and cute, but it also made us very proud that they wanted to contribute and sacrifice to help the family.
When my daughter, Emily, was about 4 years old we started a "star" chart. She earned pennies for stars received for good behavior and doing her chores.
One day in the car, we were talking about going shopping to spend some of her money. Emily stated, "I'm going to buy some things that I want and some things that I don't want." Curious, I asked, "Why do you want to buy some things that you don't want?"
Emily replied, "Well, I don't want to spoil myself by getting everything I want"
We started our son, Taylor, with an allowance when he was 3 years old. Every other week we would help him separate his money into savings, tithing (for church), and spending money.
When he wanted some candy at the store all I had to do was ask if he brought his spending money. At first he blew all of his money on little things. Then when he was four years old he decided he wanted a two-wheeler. We told him that he had to save and pay for part of it.
After that, whenever he wanted to buy something on a whim we asked him to go home and think about it, telling him we could come back and get it if he wanted it more than he wanted his bike. He always decided to keep saving.
After a few months he was able to purchase his bike, and he got the saving bug. When he was five he decided that he wanted a Buzz Lightyear doll. Since I thought it was unnecessary, I told him he had to save all $40 himself. He worked with our office delivering flyers, and saved all his spending money.
For four months he couldn't wait to get Buzz. After his birthday he finally had enough money, so we took a special trip to the store. When we got there Taylor looked at Buzz, told me how cool he was, and then said that it was too much money. On the way out the door I asked him if he was sure, and he said, "I don't want to waste my money".
The best part of the story is that two days later a family friend was at Goodwill and saw a Buzz doll for $2.00. Taylor was able to get his Buzz, and not "waste" his money.
I started my children early with an allowance. At first, it was only for them to learn how fast money is spent. I then added more money with 'strings' attached. I gave them clothing money, book money, etc.
Now, I don't buy any more clothes and such for them. My oldest son has a checkbook and savings account.
He was given $500 from his grandmother, and he put it into a CD which is now worth $700.
I will admit that I am amazed at how many parents seem to think I am asking too much of my children when it comes to finance. I haven't even scratched the surface yet. We still have investing to get to. :)
Our children will run the future either with wisdom or ignorance. It just might be their generation that will have to supply all their retirement on their own.
Thanks again for your column,
I really need that book because my 3-year-old does not have a complete grasp on the concept that small amounts add up.
We give my oldest son, Cale, a weekly allowance of $3 so he can save up money and buy some toys. If he is not helpful during the week and does not do what he is supposed to, he does not get the money. He has a jar where he keeps his money, and he is a good saver so it usually has a good amount of money in it.
Anyway, my wife was trying to get him to try some new food, and she resorted to bribing him because he is not a big eater. He hardly eats anything and rarely will give new food a shot. She offered him a dollar just to try sweet potatoes.
He just looked straight at her and said matter-of-factly: "I got lots of dollars", and refused to try the sweet potatoes.
He needs to learn that every little bit helps. He loves books and we read to both boys all the time. This would be a great book to work into the rotation, and another one with animal sounds.
I am a 40-year old nurse case manager for an insurance company, my husband is a 46-year old VA nurse. We have one child: an 8-year old son.
My husband and I are generally pretty frugal, saving $1300 a month for retirement, $200 a month for our son's college, and making double principal payments on our house each month.
As we get older, however, we have begun to feel, at times, like treating ourselves to something "top of the line". We had our family room couch set since before we got married until just earlier this year — about 16 years.
We've always wanted leather, so bought the Broyhill set we loved — for $3800.
One month later, we bought the matching coffee table, and a month after that we bought the matching end table.
At apparently this point, my son had had enough of his parents' self-indulgent spending, and blurted out, "We've got to stop this!"
I said, "Stop what, honey?"
He answered, "All this spending, spending, spending!"
Why, my son has turned into a little me!!!!!!!!
My three and a half year old twin daughters always question me about why I work an occasional Saturday, when they know it is a "stay-at-home day." My response is always the same: "Daddy is working for your college." Their usually response is: "I'm going to college when I'm a big girl!"
Even at this age, they understand that I work in exchange for money, which will eventually pay for their higher education.
I have always talked to my daughter, Michelle, about money and money-related issues, even if I thought she was too young to completely understand the concepts.
In the car one day when she was around age 3 or 4, I decided to give her a lesson in Capitalism - you know, the basic concepts of how businesses work.
I told her about how a retailer will buy products, pay expenses, salaries, and that the difference between the selling price of the product, and the amount that the product cost, plus expenses, was the business owners profit. I was so excited because she was agreeing and seemed to really understand what I was saying.
When I finished I asked her — 'Do you understand Capitalism?'
Her response: 'Yes, it's when you put a big letter at the beginning of certain words, like names'.
She was probably a little young for my lecture on Capitalism. But in the years since then, we have had many discussions about money, borrowing, saving, compound interest etc. And at age 14, she baby-sits regularly. She also has her own savings/checking account and her own indexed fund.
I loved your article about Lucky the Golden Goose.
I am a tax accountant and a financial planner. It's so important to teach your children about money early in their lives A great way to do this is by playing games with them.
I started playing Monopoly with my son who is eight years old. By the time we had played three games, he understood the strategy of acquiring properties and expanding the value of those properties to the detriment of the other players. He often beats me!
My point is this: we completely underestimate the abilities of our children to understand financial concepts because we think they are too difficult for them to grasp. Please tell Mr. Wrenn to keep up the good work — educating kids about financial matters is easier than educating their parents. Ha, Ha, Ha.
My husband and I insist on spending a reasonable amount (<$25) on our four young children's birthday gifts, mostly because of the precedent it sets to spend ever-increasing amounts and because we want them to have to earn the big things. It is really hard to do especially when many of their friends get expensive gifts all the time.
When my 7 year old wanted a $70 Nintendo Gameboy, we told him to save his birthday money and we would contribute the amount budgeted for his gift. He did this and was thrilled to plunk down his baggie full of dollars and change on the cashier counter at Toys R Us.
Next, our 5-year old decided he needed his own Gameboy so bad he just couldn't wait for his birthday. Of course we told him the same thing, that he would have to save his own money. Well, not only did he save every last penny, but he went out into the neighborhood and earned better than two-thirds of the $70 by doing odd jobs like shoveling snow and taking out garbage cans on garbage day.
We did have to rein him in when we heard him pounding on the next door neighbor's door and explaining that he owed him $2 for shoveling the sidewalk. He hadn't asked first!!
To be sure, the satisfaction on his face when he plunked down $70 in mostly change on the cashier's counter was so apparent. It was a joy to see them achieve! The lessons learned are invaluable and now our almost 5 year old daughter doesn't even ask for a Gameboy, she already is saving to buy her own.
Now when the Gameboys are left on the floor, I just say something like "Wow, is that $70 laying on the floor to get broken or lost?!?" It reminds them how hard they worked to earn it and the value of saving for long-term goals.
Two years ago, my wife and I set up Roth IRAs for ourselves and Educational IRAs for Bailey (4 years old), Timmy (3 years old) and Alex (2 years old). We contribute $25 a month into mutual funds. Or, as the boys call them, "mooshoo" funds.
Each quarter we get a packet from the mutual fund company with charts and graphs that explain the fund's performance. We sit at the table and look at each other's charts, and make fun of Mommy because she went ultra conservative.
To determine which "mooshoo" funds the boys invested in, we asked each one what they wanted to be when they grow up. Bailey wants to drive school buses on the moon (don't ask me — that's really what he wants to do). Since there were no interstellar transportation funds, we talked him into international funds.
Timmy wants to be a doggie doctor. We went with biomedical for him. Two years ago, Alex couldn't talk, but both Bailey and Timmy decided that he will be a trash man helper. We went with utilities for him.
Up until late last year, the two older boys were making much more than Alex, and rubbing it in. However, recently Bailey's and Timmy's portfolios have had big losses and Alex is now the leader. Middle brother Timmy has now decided that he, too, wants to be a trash man helper. But older brother Bailey got really upset at the idea that he can lose money in "mooshoo" funds.
All by himself, Bailey decided that everyone can be everything when they grow up. He asked if he could get some of Alex's mooshoo funds and some of Timmy's mooshoo funds, so he can always make money. Timmy and Alex followed suit, just because that's what big brother is doing. My four-year-old came up with the concept of diversifying your investments before I could teach it to him!
So, I bumped the monthly investment up to $30/child, and they each divide it among three "mooshoo" funds.
Next quarter, we'll keep making fun of Mommy.
My step-son Darryl, who could not understand fractions in school. Knowing that he loved money more than life, I asked he what 0.5 was. He had no clue. I then asked him what .50 was. He looked at me like, 'Is this going to take long?'
Then I made the 'cents' logo after the numbers and you should have seen the light bulb come on! I didn't have to help any longer, Darryl understood fractions after all. They just needed to be applied in a "dollars and cents" fashion.
Thanks for listening
Mr. Wrenn's book sounds absolutely wonderful. I'm partial to the farm references as I was raised on a farm and have a degree in Animal Science. I was recently helping out at an equine supply business. There are always children looking over items that interest them and figuring out if they have enough money to purchase what they want.
One Saturday, a young girl inquired about whether there was something she could buy with $2.00. I don't know how familiar you are with equine supplies, but there isn't much $2.00 will buy. This young girl looked at each of the items and after quite some time, decided to purchase rubber bands the color of her horse's mane to band it for training and shows. They cost $1.25 for a bag of 600. We added the tax, gave her the total and counted out her change.
A half hour later, this young girl came back and reached her hand out to give me something. When I extended my hand she gave me the change from her $2.00. I asked her why and she looked me right in the eyes, and told me she wanted to give me her change for taking the time to help her.
I explained to the young girl that I was happy to help her and that I do it because I love children and horses. I explained to her that I have a 6-year-old daughter and would do the same for her. She didn't want to take her change back, but eventually she did. We talked about how she could save it until another time when she might need something for her horse.
It's hard to explain the impact this young girl had on me. With all that is going on in the world today, to see such kindness, thoughtfulness and sincerity in a young person, really sends a message. I was truly touched my this young girl.
My 13-year-old daughter was thumbing through a mail-order clothing catalog, pointing at items and saying over and over, "Mom, I want this!". So, I asked her to take a pen and circle all the items she wanted. Then I had her take a calculator and add up the cost of all the items she had circled plus the tax. The total came to well over $1,000 dollars.
I didn't have to say anything more and she has never looked at a catalog the same way again. In fact she's a very frugal shopper now.
My daughter is six years old and in kindergarten. In the beginning of December, her school opened a little store with inexpensive items so the kids could buy Christmas presents for their family members. My daughter's birthday is the fourth of December.
She saved her birthday money and her allowance for the whole month just to buy her two brothers and her mom and me a present. It wasn't until she had bought for all of us that she went and bought something for herself. Neither my wife or I ever discussed this with her. We wanted her to make the decision on her own.
It was very touching to open my screwdriver bought for me by my daughter who could have taken her money and bought candy or anything else she wanted for herself.
Thought you would like the story. Thank you.
I am a mother of 6 children, ranging in ages from 10 year to 16 months.
With a family this size it is impossible for my husband and I to keep up with chores ourselves, so our children help. We struggled to come up with an allowance system but finally devised one that works for us. We started the kids on this process by taking them to the bank and opening up savings accounts. We established Thursday evenings as paydays (we explained to them that we also get paid on a regular schedule).
The four older children each have a daily job as well as a weekly job. The children receive points for their job (ranging from 1-5 depending on attitude and how well the job was done). Weekly chores are worth double points, as they are normally larger and more time-consuming. When Thursdays come, we add up their points for chores completed. Points are paid at 10 cents each.
Our family believes in tithing to our church, so when the total is determined, we deduct the first 10% and set it aside for the child to take to church for offering. The rest of the money is divided in two equal parts. Half is kept at home for at-will spending money. The second half is put in the bank for long-term savings (we talk a lot about what types of things they can do with that money in the future... buy a first car, help pay for college, buy a stereo, etc).
The kids have loved feeling "grown up" with their own bank books; and they can't believe their bank statements each month ... we hear regularly, "I can't believe the bank PAYS me to borrow my money!"
I recently had an experience with my 8 year-old daughter who had money burning a hole in her pocket. Like all children her age, the first stop had to be Toys-R-Us because she had recently played "The Game of Life" at a friend's house and wanted her own copy of the game.
The price tag on that game was going to wipe out all the money she had and my wife and I were disappointed (but not surprised) to see that she had apparently absorbed the old "spend-it-if-you-got-it" mentality.
On our way to the toy store, we decided we would stop in at the thrift shop just to see what they had. She grudgingly agreed. Suddenly Isabel came running up the isle all excited. We followed her to the toy section where she showed us a perfectly good copy of The Game of Life for just $2.50!
She purchased the game as well as a Blue's Clues Microphone game for her 2 year old brother. Total cost: $7.00. (We later saw the same toy for $20.00 at Target).
Isabel had a fair amount of cash left over and was able to save it for another day. She is now a thrift store convert and has since displayed — if not a desire to not save all her money — at least a desire to weight her purchasing decisions wisely.
I hope this helps.
When my daughter Hannah was 3 years old, we began an allowance, dividing it among three piggy banks. One is for store purchases that she wants to make, another is for church offerings and the third bank is for saving.
After a year or so of saving, we talked about putting the money in a 'big bank'. We had been to the 'big bank' before and mostly she had seen me cash a check and get money back. But, I explained that we gave our money to the bank to keep for us and that the bank would pay us a little bit for letting them use our money.
Hannah thought this sounded like a good deal. Well, we took all of the change in a bag, the bank teller counted it, recorded it and handed Hannah a passbook in a plastic case.
Hannah shook the passbook and said, "It doesn't sound like my money is in here."
Thanks for the opportunity and the link to the lucky book.
If you have a question for Gail Buckner and the Your $ Matters column, send them to email@example.com along with your name and phone number.
The views expressed in this article are those of Ms. Buckner or the individual commentator, and do not necessarily reflect the views of Putnam Investments Inc. or any of its affiliates. You should consult your own financial adviser for advice regarding your particular financial circumstances. This article is for information only and is not an offer of the sale of any mutual fund or other investment.