PARENTING

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Beyond The ATM

Teaching your children about spending and saving money

By Debra Roth Kane

What is one of the first lessons kids learn about money? That there’s a machine at the bank that spits it out whenever you want it. Once they “know” that, it’s hard to explain why they cannot have a new toy every time they walk into a store, or why we don’t all have skyboxes at M&T Bank Stadium, for that matter.

As for pocket change? If you can’t get to the bank, you can always hope to lose a tooth. Because then, of course, the tooth fairy is always there to provide a little currency.

This money that grows on trees (or comes out of bountiful ATMs, or mysteriously appears overnight under pillows) is not likely to inspire fiscal responsibility in the younger set. Jessica Silverman recalls trying to explain to her 7-year-old son Aidan that the ATM machine wasn’t all it seemed to be. “I had to explain that I put the money in my account,” she says.

Experts say a first step towards teaching children about saving and spending is to give them an allowance. But even this simple effort can be confusing and frustrating.

One of the first debates is whether to tie an allowance to chores. Some people will argue that doing chores is part of being a family member, not something for which a child should be paid. However, Silverman believes allowances should be tied to household contributions, “because otherwise you are just giving your child money.”

Even if a parent requires that his children do some chores without monetary enticement, extra chores (raking leaves, washing the car) can be deemed “payment-worthy.” Several children’s experts have suggested that paying children for such jobs has two benefits. It teaches them the connection between work and money and it keeps the money in the family.

Then there is the issue of how much allowance a parent should give a child. Paul Richard, executive vice president, director of education at the Institute of Consumer Financial Education, has suggested giving your children money in several denominations to encourage saving. For example, if you give five dollars, give it to your child in the form of five ones, to emphasize that each dollar need not be spent at once or even at all.

Not everyone is a fan of giving an allowance. “We used to give allowances. Our kids were asked to earn their allowances by helping make their beds, respecting each other, that sort of thing. We wanted them to learn how to save for what they wanted. But we got concerned that the money was becoming an expectation, instead of being something that was earned and appreciated,” says Daina Garonzik, mother of four children ranging in age from three to ten.

Now the Garonziks take a different approach, focusing on money that their children often get from relatives for birthdays or Chanukah. They took their 10-year-old son Ben to open his own bank account with his own bank card that his mother holds for him.

“Ben is allowed to use some of his money and he keeps that in his wallet. Some of his money stays in the bank,” she says.

“We wanted our kids to understand that the bank doesn’t just hand out money. Now Ben explains how a bank works to his sisters,” she adds.

The Garonziks also have seen another result as well. “Since we stopped giving him an allowance, Ben has become more generous. He is proud of the money he has. He’ll even offer to buy his sisters things like a pack of gum at Target. It makes him feel proud.”

Beth Rosenwald has more professional expertise with money than most. She is the senior vice president and branch manager at RBC Wealth Management, specializing in holistic wealth management for families and small businesses.

Rosenwald believes that you can and should teach your children basic lessons about money, like not outspending what you earn. She also emphasizes the multiple uses of money: spending, saving and giving.

When her two boys were small, Rosenwald came up with a system. “When the kids were tiny, they got three baskets: one to contain money that they could spend right away, one for money that would be saved for the future — even though for a 5-year-old, the future may mean tomorrow — and a third for sharing. My husband and I told our kids, ‘We have been blessed with this dollar. We have to share the dollar.’ We started when the kids were in kindergarten, using a Cheerios tub as one of our baskets,” she says.

What helps all but the youngest ages, according to many parents, is open discussion. Silverman talks to her children about why they cannot have everything they want.

“I ask them if they really need something. And often they can’t have it because they don’t really need it. I’m trying to make them aware that just because you can buy something, doesn’t mean that you do,” she says.

“We talk about family finances. We don’t tell our children what our house costs, just that Mom and Dad worked hard for it. We tell them it cost a lot of money, but you don’t need to know the number,” Garonzik says.

For families who want to explain to their children why their family is on a tighter budget, without scaring them, Joan Cohen, senior manager of Jewish Community Services’ Access Services suggests relating it to the economy and the world.

In addition, she adds that chores might be a great conduit to accomplish this.

“Chores can make a kid feel part of a family; kids can feel strengthened by being part of the solution, for example if they help rake leaves because the family cannot afford to hire someone to do it. This approach draws attention away from the scary to a positive component: you can help,” she says.

Meanwhile, the bottom line for Garonzik is that her children understand the value of money. “We make sure that we say no a lot, even when the kids ask for something inexpensive that we can easily afford. We want them to understand that every dollar adds up,” she says, noting, “I don’t know that my children get it, but we’re trying!”

Games To Help Them “Get It”

• Hunt for a seasonal item in supermarket circulars: turkeys in November; boxes of chocolates for Mother’s Day. Figure out which store offers the best bargain, being sure to take differing sizes into account.

• Is it better to buy a large box of cereal or a small box? Teach your children the meaning of the different prices shown on the shelf markers, including the all-important price per ounce/pound/liter.

• When you plan an evening out, offer a budget and an option: one trip to Ruth’s Chris Steak House or three trips to T.G.I. Friday’s.

• Scavenger hunt! Give your older child half the grocery list and a budget. Set the budget low, so that he or she has to make choices — generic brands versus favorites — in order to be able to purchase everything, while staying under budget.