“(My children) know the price of everything and the value of nothing.” - Rod Stewart
There was a lively discussion at work the other day between a mother who doesn’t give her kids any pocket money because she believes they should do chores as part of a household. Another believed they should receive money to learn about its management.
Around the same time a neighbour told me how when she was 18 her parents bought her first car, which she crashed within months. They quickly replaced it with a second new car, which she also crashed within months. To replace that second gift she was told by her parents to buy it with money she would have to save on her apprentice wage. She didn’t crash that one!
My neighbour was one of those people I envied, a lot, at school and uni. I was pushed to do a weekend job when I was 15 to help pay for an overseas exchange trip I wanted to do. And I never had anything like a car bought for me.
The experience didn’t make me a financial guru but it did, as my mother assured me it would, teach me ‘the value of money’ (and years later I still almost do an eye roll as I hear that term).
It scared me how easy it is for my kids to spend without any concern about ‘the value of money’ when my youngest son asked to ‘pay’ by quickly waving my card over the EFTPOS machine at a shop the other day. Long gone are the days of counting and handing over hard-earned cash.
So, in addition to my kids doing (unpaid) ‘family’ jobs - keeping their bedrooms and things relatively tidy, helping with the dishwasher and laundry - they are paid for extra chores, some regular and others more occasional for top-up money.
We started with a money box but when my teenage son became old enough to take what he’d raided from it to buy lollies I started direct debiting money into a bank account.
The account is great because the regular statements teach him about the value of savings and interest, which he loves to see accruing.
But he still likes disposable cash to spend. For now I have control of the account (and therefore his spending to a large degree) so if he asks for some cash to spend on something we talk about how worthwhile the purchase will be. Fortunately he still has simple tastes and only occasional requests, but I still get “Aww mum, don’t say that again, I have thought about it!”
This system has also proven to be an effective way of getting him to do extra chores.
After a recent round of negotiations about how much he would get paid for folding some laundry I made what was for me a big compromise, thinking it might do him some good to consider how long it took him to earn a packet of Skittles, books or going out for a burger with friends.
I was reassured that Australia’s favourite financial guru Scott Pape, aka The Barefoot Investor, feels the same way about kids wasting money as they learn about managing their own money. “They will make mistakes and that’s good. You want them to make mistakes when they are 15, not 35,” Pape says. (Even junk food is better than a suped-up car).
He’s also a firm believer in making kids get weekends jobs and saving for their own cars.
“It’s a really wonderful way for young people, still in the safe confines of the family home, to get a dose of the real world,” Pape says.
As a dad of young boys himself, Pape understands parents want their children to be safe on the road.
But he argues that when a child is gifted a new car they’re possibly also getting an attitude of entitlement and missing out on a huge opportunity to learn life-long skills.
“You’ve got three years or so between the age they can get a job and when they can get a car to actually work on that plan. And it can be really powerful,” he says.
Even multi-millionaire rock star Rod Stewart, quoted above, has made his kids work as shop assistants for the minimum wage.
My 14-year-old spent some of the last holidays looking for a job. He doesn’t have one yet but in the meantime I have open discussions with him about how much I earn and how much things cost, something else recommended by Pape.
In line with that he has pre-paid mobile phone plan - and a library card to borrow books instead of buying everything he wants to read from a bookshop or Kindle Store.
That’s something I also did with my elder daughter who couldn’t have a part-time job because of her high-level sport commitments.
Her comparisons of our house, clothes and car also sparked important conversations about debt: That people who can appear to have a lot of money may actually just owe a lot to the bank - and not just the low interest Bank of Mum and Dad.