Money money money
Posted under Witterings
Do you remember, when you were a child, the aching boredom and anticipation of ‘saving up for something’? And the adrenalin rush when the day finally came that you had ‘enough’ and off you skipped to the shops to induce a retail therapy induced high? I won’t ever forget buying my first Walkman (which was the size of a brick) after a very, long hard summer of saving the whole TWENTY SIX POUNDS that it cost. My Mum used to pay me 50p to tidy the airing cupboard and other sundry chores, my Dad 50p for washing the car. I think a couple of WHOLE POUNDS changed hands for creosoting the garden fence. Bit by bit I saved it up and squirreled it away in my plastic ‘Fred’ Homepride moneybox until the joyous day arrived and off I trotted to Argos. I kind of miss those days of ‘saving up’; I suppose credit cards and a little bit of financial security has knocked that on the head. We save, but for those ‘roof falling off’ type scenarios and for that Great Unknown…’the future’. We don’t have savings accounts for the Megaboys specifically, but perhaps we should?
When Bertie turned 5 a few weeks ago we decided to give him a little bit of pocket money each week. When he’s a little older he will be given jobs to do in return for the pocket money but, for now, he gets the money in return for good behaviour and doing as he is asked. It’s not a lot of money, £2.00 a week, but it’s enough to blow on plastic tat in the toyshop. We use the coins to talk about value, and for simple sums. He seems pretty chuffed with having his own money and likes to keep track of his ‘purse’ and how much he has in it. He’s also developing a good sense of what he can afford and, just in the last week, the sense of ‘saving up’ for something that you really would like. You can see the internal dilemma on his face as he talks about it. He really, really would like a Hello Kitty café (yes, really) but they are £8.00 and that means not spending any of his money for four weeks. Is it worth the sacrifice? I’m trying to encourage him to go down this route, not because I am looking forward to extracting 45 pieces of tiny pink plastic tat from under every cupboard in the house, but because I think it’s good to learn fiscal good sense early in life.
So, I’m expecting my 5 year old to learn about saving but I don’t actually save for him and his future. It’s a kind of double standard unless you take the hard nosed view that children need to learn to stand on their own feet and financial handouts don’t necessarily help them longer term. Where is the incentive to work hard and ‘make something of yourself’ if your parents hand the generous allowance/university fees/car/deposit on a house/wedding of your dreams to you on a plate?
It’s a topic I’ve talked about with various people recently and it makes for fascinating discussion. As parents, we want the best for our children but at what point does ‘the best’ mean foisting them out of their middle class, duckdown anti-allergenic nest and letting them get on with it? What’s the best way to encourage independence, forcing them to pay for themselves once they leave secondary education? Is that fair because, being so ancient, MrSpud and I didn’t pay to go to university and we even got a bit of a government grant to help cover living expenses. So would it be fair not to contribute to our boys’ tertiary education (if they go down that route) in the knowledge that it will saddle them with huge debt at the start of their working lives. Would such an arrangement put them off thinking about university, or would it focus their ambitions on what is financial prudent long term (in terms studying a vocational subject, or whether to undertake any further study at all)?
I have such mixed feelings about it. I want my children to be happy and fulfilled. I don’t want to bring them up expecting to live their lives in the manner to which they are accustomed without a lot of hard work on their part. But, then, I want to let them experience things that MrSpud and I didn’t growing up due to financial pressures. Equally, we didn’t exactly suffer from not going skiing/having a pony etc etc etc.
I know of one couple that decided they didn’t want their son to have debts when he graduated so they paid for all his tuition and living expenses for three years. Unbeknown to them he took out the loans AS WELL and lived the high life on a combination of their generosity and debt.
Others have paid for their children’s living expenses, on the basis that if they were living at home the parents would incur those expenses anyway (er, if they were living at home surely they should be paying board & keep?).
And then I heard of a very wealthy couple that couldn’t decide where the ‘line’ is, the point at which you say ‘that’s enough’ to your children. So they gave a lump sum to each child on their 18th birthday and told them to use it as they wished but there would be no more handouts. The children could use it to party with, or for university fees, or for a car, a deposit on a flat or a wedding. That seems like a sensible idea but I’d be afraid they would blow the lot and I’d be furious.
We stopped making payments in to the boys’ Child Trust Funds recently for just this reason. MrSpud was never comfortable about handing over a large sum of money to the boys without any kind of control from us and, as time has gone on, I tend to agree. But are we being mean? When I was 17 my Dad gave me money from a savings plan he’d taken out when I was born. He’d intended to buy me a car with the money but, um, £300 didn’t buy a car in 1988. So he gave me the money and said I could do as I pleased with it. I’d never had anything like this kind of money before, it was a fortune to me. But I was a sensible soul and spent it on trainfares and accommodation for my university interviews and auditions and I bought a camera. Hardly raving was I?
But what if my boys aren’t so square as me? What if we handed them a substantial pot of savings and they spent it all on beer or worse? Wouldn’t we feel cheated of our hard earned cash?
But, if we save FOR them but only allow the money to spent as we desire are we controlling them? Would I be saving for a ‘mummy approved’ future rather than the ones they hope and aspire to themselves?
I don’t know the answer to any of the questions that I’m posing. I know I need to teach my boys about the value of money and the satisfaction that comes from earning a crust. But how much of a ‘leg up’ do we give them to help them on their way?
In the meantime all I can do is encourage Bertie to savour the joy of delayed gratification that ‘saving up’ for something special gives. And hope that his taste in Objects of Desire improves.
This is a cool article. It is time we parents faced up to the fact that our children need to learn key financial skills. I would suggest that children be taught at a very young age about money, as early as kindergarten perhaps.
One can read children’s stories with financial lessons in them. One such series are my children’s books “Finance for Kidz.” You can check them out at http://www.finance4kidz.com
Thanks
Prakash Dheeriya, PhD
Father, Author & Professor of Finance
Finance for Kidz Series
finance4kidz dot com
I suppose teaching them early on, as you are doing, about saving and making money go far etc is a big step towards helping them to make good choices in the future. I come from a less well off background, I had a paper round and if I wanted something, I had to buy it for myself. By the time my son is old enough, I will be able to afford to give him lump sums of money, and I think the best idea is the “lump sum at 18″. If they waste it, its gone and hopefully they will have learned a lesson. I know of someone who is 40 and his mother still gives him money when he needs it, possibly because he knows she always will, and she feels she always has to, because she always has and he expects her to. I think if youre going to give them money, they should chose what to spend it on themselves, but they should also know that theres no more, from then on they have to earn their own. I suppose the lessons we as parents teach them along the way about being wise with the money we may offer them, will be of much more use to them than the actual money itself. Oh, you’ve really got me going on this one Spud! I dont think there is a correct answer, is there?
We too stopped paying money into child trust funds, it just seemed so ridiculous to hand over all that money to a relatively young person with no control! We have started pocket money in exchange for jobs and they are learning well about saving up for things they really want – as for the future saving scheme I’ve not a clue!
I think a lot of habits are passed down from parent to child, including spending habits. My mother is TERRIBLE with money. She spends it as soon as she gets it and her bank account is constantly in the negative. Growing up my sister and I never learned to be patient and save for the things we wanted. If we wanted something, we had to have it immediately, which when we got older usually meant borrowing money from somewhere (i.e. loans, credit cards, parents). My parents never instilled any notion of discipline or budgeting in us.
The consequence of this is that I’m now $80k in debt with student loans. This of course has a lot to do with the exorbitant cost of university in the US and being an international student in the UK. But if I had known then what I know now I wouldn’t have been so carefree with borrowing money (and spending student loans on things that had nothing to do with uni!). My parents only helped me pay for my first year at uni. I funded 4 years of schooling (a BA and MA) on my own. I don’t mind at all that my parents didn’t pay for me, but I wish more than anything that they had taught me to be disciplined with money, to save up for what I want, and to look for alternative sources of funding such as grants and scholarships instead of taking the easy way out with loans.
My advice to you would be to make sure your children know they need to work hard for what they want. Don’t just give them everything they want whenever they want it (not saying you do by the way!). If I were you I’d put aside the money you would have been saving for your children into a savings account anyway, but don’t tell them that you have set aside savings for them. Keep it just to have it. Wait until they’re older and then decide what to do with it. In the mean time teach them the value of money and hard work, have them save for the things they want, and help them figure out how to fund their endeavors for themselves.
Sorry for the essay, but I hope that advice is helpful!
Hear hear!
We don’t pay into a child trust fund, but we do pay into a bank account for Moo (as it’s tax free), and I mentally allocate some of my savings to her future. But big sums only for things I approve of (like university, first car…).
But I do think it’s nice for them to have occasional lump sums to decide how to spend. I remember as a kid, my gran had left me and my sisters a small sum of money. By the teenage years, my mum would let us withdraw what I saw as lump sums (maybe £50?) to buy our clothes, on our own, and to make those decisions. The thrill of taking the train into birmingham and going to the bullring to see how many t-shirts and skirts I could buy at £2 each is still with me!
You’ve scared me now! I’d always planned to financially support my kids through university for the very same reason as the parents you speak of.. the thought of them starting life saddled with mortgage sized debts and no hope of owning their own home before 30 saddens me and I’ve always expected that I will go back to work to cover that cost for them. Am I mad? Dunno…. but they’ll be the ones picking my care home so maybe it’s a good idea in the long run lol!
Very timely post.
Simon and I had a LONG conversation (again!) about the household budget and school fees and unversity loans last night. I had always assumed that we would pay for University, (you and I talked about this), but he thinks they should take out loans and pay it back when they are earning. Between our new situation, and larger changes in the UK budget, it’s all up for grabs. (Ha!) I had a “job” from the age of 12 onwards, and it looks very like my oldest will turn 18 without ever earning a pound. Your description of the “middle class, duckdown anti-allergenic nest” is spot-on and made me laugh. My generation of children can’t help the fact that they grew up in such an affluent era, but how to kick them out of the nest? You KNEW there was no nest to go back to . . . surely a big part of the reason why you were a sensible, responsible soul.
Its a very difficult question. I had a job from 15, and had to save up for things like holiday spending money (and the actual holidays from age 16 onwards!), clothes, nights out, etc.
My parents supported me through uni in that they paid my accomodation for the 4 years I was there (although we had no tuition fees). But at the same time I had a job and paid for the rest of my living expenses myself. I bought a car at age 18 for the princely sum of £200, although my parents did help with the insurance.
I think I had the best of both worlds. I had support, but I also learned the value of money and I think I am fairly sensible with it now. I don’t remember ever being given a lump sum jsut to spend on what I wanted.
Hopefully the things your boys learn now will influence their views on money in the future.
I seem to be just following what my Mum did for us which is fend for yourself! And I don’t say that in a mean way but that’s just how I was brought up, and I think it’s given me a really good grounding. I don’t expect anything from my Mum but I know she would do whatever she could to help me if I needed it, for me that’s a perfect balance.
I like that as a big 5 year old he gets pocket money, I think my daughter would be ready for that when she turns 5 in March, thanks for the idea.
We haven’t put anything into the child trust fund – fees are too high vs performance. Instead we have bank accounts in each girl’s name and put money in there on birthdays and Christmas with the aim of building them a pot of cash for when they are older. It also wipes out some of the guilt for not buying them much for birthdays…
I’m sure we’ll have to contribute significantly to university education / first houses but hope that we’ll have taught them enough about the value of money that they’ll make good decisions (and will encourage them to work for money rather than sit back and wait for someone to pay – hopefully our work ethic will rub off…)
Difficult one though
Yet another reason why I am not having kids! The desire to give what you didn’t have, and to ensure your child has every advantage, vs wanting them to know the value of money and to acheive for themsleves.
My mother in law recently was commenting how with each of her 4 children she has increasingly paid more and for longer and that sometimes she feels she gets an ever decreasing return on her investment but at other times thinks the exact oposite. My Husband, the eldest far out earns any of his siblings and always will do (Unless his youngest sister catapults to acting fame) due to his choice of career. However, he also chose to move half way around the world from his family and isn’t as fulfilled in his work as any of his siblings. Which would a parent prefer, and has the money really made any difference to the outcome?
My eldest (9) just haggled with me over the cost of cleaning the base boards for me… yes haggled… then when I stayed firm on the price she shrugged “nah.. not worth it!!”. wtf?? guess what I made her do it anyway!! sans payment!! take that ya little pre-pre-teen.
It’ always a challenge to provide for our children, the right amount not too much. Our girls all were taught to save, they had accounts for short term spending and long term saving. When they bought cars and started working they had to add accounts for insurance, registration and maintenance, still having the short and long term accounts. They all 3 have done really well, the twins travelled the world on their saving and still saved while they worked in the UK. Number 1 is married owns 4 houses and is building a huge house on 22 acres. We help them still if they get into a bind but then they pay back what we lent them. There are no free rides, but if you want to treat them then do. We recently paid for our twins to fly to the US for their 21st birthday. They put themselves up in the penthouse suite of the Bellagio, they have learnt the value of saving and of having to go without.