Whose problem is it?
For me, this problem came to a head one year when we were shopping for school clothes a few days before the start of the school year during the middle school years. My son wanted the latest sneakers which cost over a hundred dollars. I knew these were important for him to "fit in" but I also knew there would not be enough money for everything else he needed if we made this purchase. Right there in the middle of the mall, while I was calculating all of the things we couldn't afford, he was having a melt down thinking about going to school in sub par shoes. And then it hit me. This was not MY problem. It was my son's problem. He was the one who needed to solve it. So I gave him the money that I knew I could afford for all of the clothes and we made a list of all he would need. It was up to him to solve his financial problem. From that point forward I vowed never to argue with my kids about money. Here is how we did it at our house.
Give them the money.
Give them the money. All of it. Determine how much you spend each month now on each child beyond food and shelter. Consider toiletries (included all hair products), clothing, lunch money, entertainment and anything else that you typically negotiate, including big ticket events like concerts and proms. It will be a much larger sum than you would probably guess. On the first day of each month, hand over the cash to your kids. You may want to set up a bank account with an ATM card, allowing you to make an electronic transfer. But if your child responds better to green, use that. When kids first get acclimated to this amount coming in on a regular basis, they get giddy, thinking they are rich. But once you have a brutal conversation about reality, the giddiness disappears.
Sit down with each child and have a conversation about what this money must provide. If your child prefers to buy lunch at school instead of preparing something from the kitchen, the money must be used for that. Likewise, if the standard issue lunch is not enough, the monthly budget must be used for any vending machine purchases or snacks at the convenience store. The money must be used for all clothing purchases. Hair care products. Movie or concert tickets. School supplies. Gas for the car (if your child drives). You name it, the kid must buy it with the dollars you provide.
Food you buy for the family for the home kitchen is not included. But, since you control that money, you make the decisions. If your kids want junk food or luxury items that you don't think are necessary, they will have to foot the bill. You should be sure to include some things they could pack for lunch in your fridge and pantry so they can make daily decisions about brown bagging or dining out (at the school cafeteria). Provide them with the food that will allow them to save money by preparing their own lunches. This training will pay off in adulthood when your kids are in college or the workplace.
Health care costs and money to operate your home are not included. You still pay for all of that. However, if your child is wasteful with electricity, water, or does things to increase your heat and AC costs, you could require some contribution. For example, if you think a 5-10 minute shower is adequate, but your teen prefers 20 minutes, figure out how much that costs. You can get information online about the cost of hot water in your community. Every time your water hog goes over the limit, deduct the amount (be true to the real cost) from the following month's pay.
ALL clothing must be purchased by your kids with this money. This includes those trendy sneakers, accessories, and even socks and underwear. So, before you determine the monthly amount, figure out how much you are spending on each child in a year and divide by 12. It is okay to have a little variation from child to child depending upon specific needs. For example, a girl must buy bras at a certain age. A boy will never have this expense. A child with disabilities may have needs that other children simply don't have. You can account for these differences when determining the monthly figure for each child.
Show them unconditional cash.
Like your love, this cash must be unconditional. You hand it over no matter what. The only time the amount should change is if your child's needs (as opposed to wants) change, or if your financial situation changes. If a parent loses income, everyone will have to cut back. Do not link this money to grades or behavior. However, DO make it clear that you retain full veto power on some clothing choices (how revealing it is) and on certain food purchases that could be harmful (energy drinks). These types of purchases require ongoing monitoring and conversations. Any time a purchase is made against a particular veto, the amount spent will be deducted from the next month's total. The child can avoid this deduction if it is possible to return the item and get the money back.
Never bail them out.
This is the toughest part of the plan. You cannot bail your kids out when they make bad decisions. If there is a great concert coming and they have spent all of their money, do NOT advance them any cash. If they need supplies for a school project and don't have money, they will have to figure out another way to solve the problem. If they run out of lunch money, don't do the lunch prep. You will have to watch your kids struggle and fail and learn from their mistakes. It will take some kids much longer than others. You will help them learn to manage money by respecting them enough to manage their own money.
There is never enough money.
At some point your kids will likely come to you and whine they don't have enough money. This is a tremendous opportunity. If you did it right, your calculation of monthly expenditures should have included everything they NEED, and a fraction of what they WANT. In order to get everything they WANT, they will need to do some earning on their own. But here is where it gets tricky. Do not fall into the trap of giving them more money for doing the things they should be doing already. Do not pay for grades or chores. If they want more money they will have to earn it outside of your home. Encourage them to babysit, weed gardens or cut grass for the neighbors, get a job bagging groceries, or anything else tweens and teens can do. They can also sell things on Ebay, Etsy, or in an old fashioned yard sale. If your kids want money badly enough they will figure it out. By setting up conditions where your kids want things and are willing to work to get them, you develop a strong work ethic that will carry them through life.
Make monthly money chats part of your family culture.
At the beginning of each month, sit down with your kids and review how they have used their money for the previous month. Help them evaluate their decisions and encourage them to make even better decisions. Talk about big ticket purchases that may be coming up. They will need to plan ahead and save for these. You are there to guide and support, but not to make the decisions. These monthly chats will help your kids become expert money managers long before they leave you. Kudos to you for helping your kids develop these skills so necessary for an independent life.
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