One of the best things my wife and I ever did was put our kids on salary. When our sons were 8 and 10 we put them on a monthly salary. I had taught finance and investment seminars for a long time when I realized that there didn't seem to be anything out there for kids. Then I found an amazing book. The book was called "Debt Proof Your Kids," by Mary Hunt, and it spurred a lot of great ideas. What if kids grew up understanding the value and use of money? Go figure. What a concept.
We modified Mary's ideas for our family, and it worked wonderfully. I highly recommend the book. Here's what we did. From January 1 - June 30 we recorded every penny spent on the boys. That included boy scout dues, clothes, shoes, stops by McDonalds, books, haircuts, theme parks, everything. We averaged each boy's expenses, and on July 1st they went on salary. Salaries ranged from $55-$70 a month at that time. The mom and dad spigot was off.
The deal was that we wouldn't buy them any clothes, shoes, books, pay dues, no sodas at the convenience store, no haircut money, no cash for theme parks, etc. They would be responsible for every life expense. If I chose to take the family out to dinner, I paid. If they wanted to stop for a meal or soda, they paid. If they needed a haircut, they paid. If they wanted the new cool sneakers, they paid. New video games, skate boards, trips to the movies or anything not initiated by me or my wife was at their expense. We only paid for things my wife and I chose to do, and they paid for everything else.
They were also required to save 10% and give 10% away. So, they had to
learn to live on 80% of their total salary. In the first month, the youngest son was broke in about 2 days. The first test of our plan came when my oldest son wanted to stop by a convenience store for a soda. We did. I bought one for my wife and one for myself. My oldest son bought one, but the youngest son was busted. No one offered the younger son a soda, and no one offered to share. It was part of the deal. That was probably one of the hardest things I've ever done.
The second month, the youngest son made it to about week 2. He did better, but he was still busted within 14 days. Month three was much better. He made it to the end of the month with cash to spare. Today, at 19 and 21, the boys are the bank. Both boys are well on their way to financial independence. The recession has had an unintended consequence for them. They've watched a lot of people lose everything they worked for because they carried excessive debt. The boy's system has been to avoid unnecessary debt and save, and they're great at both.
Both boys have their own jobs now. Mom and dad aren't supplying their salaries anymore, and they still save 10% and they still give 10% of their income away. The oldest son has developed into quite an entrepreneur and
currently has his own business. He's also in college and the younger son is heading that way.
We home-schooled the boys so scholarships are nearly non-existent. This presents a new chapter in their financial lives. Knowing that they will have some of their own money involved in schooling makes them a little more focused on what they will study. Ironically, when their money is on the table they look at college with a whole different attitude. They look at the value of what they receive in the classroom and not on college as one big party.
Yes, we did get back involved in their financial lives once they were well established teens. By then they were well on their way to a heathly financial life.
If you have young children I would recommend that you pick up Mary's book and find out how to use it in your own life. It has set my sons on the path to debt free living, and I love watching them use their minds to make things work rather than using Visa and MasterCard. It's very exciting! It's the one gift we gave to our kids that will last their entire lives.
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