By Jon L. Ten Haagen, CFP ®
When I was a child, my folks would tell us to save money for items we wanted to have in the future. It kind of worked for me, and it worked for my younger brother, who saved just about every penny.
When I came home on leave from my service, there was a shiny gull wing Mercedes in the driveway – it wasn’t new, but pretty darn impressive. At first I thought father broke down and splurged on something fun. No. It was my younger brother who saved his money.
So, it can be done with a little discipline. (By the way, my younger brother still saves and saves – a good lesson for all of us to learn and pass on to our children.)
And how do we go about teaching our children the value of a dollar and the importance of saving? After all, it is a lesson that is taught to each and every one of us. Saving for college expenses, a first home, a new car, an IRA or an ROTH IRA – your qualified plan at work; the one that matches your investment up to 6 percent.
I recently saw a commercial about a father who just finished using up the last of the coffee in a big coffee can. He looked over at his son and then got some tape and a marker, and wrote “mitt” on it. It goes on to show the son with a new mitt. Then the sign said “bike,” and gradually changed to other desired items. Saving is a learned habit and it starts with simple lessons – lessons that, if learned early on in life, will make a lot of things easier.
Today, the practice of an allowance is perhaps a little more complicated. One kid in class gets $10, and another $50, while a third gets zero. Each family is different and these differences must be explained. Children will ask for more money to keep up with their friends, or at least for an explanation of the differences. It is a lesson about hard work and reward.
Do not just fork over money each week. Help your child to focus on goals. When they ask for a ‘raise’ in their allowance, explain that, just like grown-ups, they have to do more to get more. Perhaps they should start to clean the table after dinner, wash the dishes, empty the trash once a week and bring the garbage cans to the curb on designated days, as well as bring them back in afterwards. Graduate the chores as they get more money.
Now, once they get the money, if they do not have guidance the money will be gone before next week. And then they’ll be looking for more.
Consider sitting them down and explaining that mom and dad work to get their money and that they also have money to pay for future things, like the water and electricity bills.
Consider the three jar theory: One jar is for savings, another for spending and the third jar for sharing with charity. Mention to them that later in life they will get a pay check from a job and that the government needs money to provide desired services, like plowing or picking up the trash.
Share with your child that it is not what you have, but what you keep. At first, your child may end up blowing their allowance halfway through the week. Do not bail them out. Teach them to respect money and learn to work with it.
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Huntington’s Jon L. Ten Haagen, CFP is founder and CEO of Ten Haagen Financial Services, Inc. which is an independent full-service Investment and financial planning firm. In this bi-monthly column he will answer your questions on the markets and investing. Ten Haagen has 39 years of experience as an investment professional. You can learn more about Ten Haagen Financial Services at Tenhaagen.com
Ten Haagen is an investment advisor representative offering securities and advisory services through Royal Alliance Associates, Inc., member of FINRA/SIPC, and a registered investment advisor. Ten Haagen is a certified financial planner (CFP) since 1982. The Ten Haagen offices are located at 191 New York Ave., Huntington. Please feel comfortable to call and stop by for a cup of coffee and a chat. E-mail questions to firstname.lastname@example.org
Ten Haagen is very active in the community giving back. He is on the board of a number of nonprofits and is the liaison for the Greater Huntington Council of Yacht and Boating Clubs, Inc. The boating council represents approximately 4,500 boating families helping to keep our waters safe and upgrading the water quality.