The Financial Apprenticeship - Stage One - Excerpt from Raising Financially Fit Kids

By Joline Godfrey

I once spoke to a group of financial advisors and asked them to describe some of the things they did to pass on good financial habits to their youngest children. There were a lot of good ideas but most memorable was the dad who was teaching his 6 year old to calculate the time/value of money. I am of course all in favor of starting the financial apprenticeship early, but this may be overdoing it just a bit! Whatever money messages and skills you want to pass along to your kids must be done in the context of young attention spans and egocentrism.

Most 5-8 year olds are curious, literal, high energy, and take information in rapidly, shifting from subject to object to idea to experience rapidly and in a short time span. How then to get them started on a journey of economic literacy to last a lifetime?

First Stage Tasks

For this earliest stage of the financial apprenticeship there are four big tasks you can expect to accomplish:

1. Introduce each of the 10 Basic Money Skills (simply).
2. Start the first allowance.
3. Observe your kids' money styles starting to emerge (and respond to them).
4. Get clear with your spouse (and money team) about four or five BIG values you want hammer home over the coming years.

If you accomplish these four tasks you will give your kids a reasonable introduction to the first stage of their apprenticeship.

The Allowance: Trumping the Troublemaker

"But MaaaAAAAaaaa, it's MY money, you can't tell me how to spend it."
"You can't make me clear the table for my allowance, I already made my bed, that's all I have to do."
"Come on?I need more money, my allowance isn't enough?"
"Everyone gets more money then I do -- and they aren't expected to pay for their own school lunch either!"

The allowance may be the most used and abused child training tool in America -- and the biggest family troublemaker. It begins when kids are very young and parents dole out a few dollars a week in an earnest attempt to begin teaching financial responsibility. Unfortunately too often it happens instead that the kids end up training their parents in how that allowance will be used. After all, those little ones are so precocious!

We smile and chuckle over the child's attempts to be grown up with their money. A wink here, a dollar there, and soon the child's ability to hoodwink Mom, or Dad, or Grandpa and Aunt Susie out of more money (because no one remembers what the allowance is really meant to cover) becomes apparent. And that cute little tycoon can morph into a money monster in the blink of an eye if frustrated by one of the allowance rules that pop up -- give the kid another dollar to shut her up! Or let him skip out without making his bed or putting away her toys so you don't have to hear that whine any longer! Anything!!!!

Now pay attention. This is an important mantra and best learned when your child is at his or her youngest and cutest stage (and when you are most susceptible to clever manipulation by the little sweetie!):

An allowance is not an entitlement or a salary. It is a tool for teaching children how to manage money.

Say it again, with conviction:

An allowance is not an entitlement or a salary. It is a tool for teaching children how to manage money.

If you decide to institute an allowance (and yes, it's a good idea), this is the message you must internalize and communicate to your children. Just like Tonka Toys are great tools for helping kids develop large motor skills, an early allowance can be used to help develop large money skills (saving, sharing, earning, counting, etc.). If it helps you remember, print this out in large type and stick on your refrigerator:

Your allowance is not an entitlement or a salary. It 's a tool to help you learn how to manage money. Love, Mom and Dad

The first allowance can begin with short simple rules (this should not be high finance; these are little kids you are dealing with!) that are communicated often and clearly:

- A weekly allowance is a way of helping you become an independent girl/boy.
- The more you learn and the better you handle it, the more quickly you get additional responsibilities and privileges.
- There are four things to do with your money: Count it, earn it, save it, share it.
- Every three months (think quarterly) we'll take a look at how you are doing with these skills-and see what changes are in order.

At the first hint that you are negotiating with an emerging labor leader, or that an attitude of entitlement is creeping in, rescind the allowance and start over with the mantra: An allowance is not an entitlement or a salary. It is a tool for teaching children how to manage money.

Joline Godfrey is an internationally recognized author, speaker, and mentor, leading the movement to increase financial literacy and empowerment in young people. Her most recent book is Raising Financially Fit Kids. Ms. Godfrey has been featured on Oprah, NBC's Today Show, the CBS Early Show, Lifetime Television, the New York Times, the Los Angeles Times, the Wall Street Journal, BusinessWeek, Fortune, etc. Independent Means Inc. is the nation's leading provider of financial education programs, summer camps, products, and online subscription services.