Encouraging my nine-year-old to save money

When Jase was 5 years old, we started giving him a small allowance as a method of teaching him how to handle money. We stopped buying him candy or toys when we were at the store and insisted he uses his own money for these extras.

He wanted a Star Wars AT-AT and with the help of a graph to show how much savings he had verses the cost, he ended up saving up enough money for the toy. (We did match his savings so technically he only had to save up half the amount but it was an expensive toy so it still took him a long time.)

Now, Jase is willing to do extra chores to earn money and is good about savings. Even now, he has $100 in savings and is often reluctant to spend his money.

Lexie too has been receiving an allowance. But she has the exact opposite reaction as Jase. If she has money, she thinks she needs to spend it. If she gets $5, she wants to buy something right then. She made $9 at her Nana’s garage sale and immediately handed it to me to buy an app for her iPad.

These past few weeks, she has been saving her money but her plan is once she reaches her goal, she will spend it and be out of money again.

I hate that she spends everything she receives. I also don’t like that she is purchasing virtual things – often “gems” or “coins” for some i-Pad game. She has nothing physical to show for her purchases. But I am not sure it is my place to qualify her purchases as foolish as they might not be to her. All I can do is explain the opportunity costs of her decisions. (If you buy gems for Animal Jam today, you won’t have money when we go to Sea World this weekend.)

Now when we first started the allowance, it was meant to be a learning tool – one I researched a lot before we implemented it. Many sites suggest you have your child divide their money into three categories – savings, spending and charity.

But I didn’t want to tell them how to spend or that they had to give their money away. I didn’t want to tell them what they could and couldn’t buy. I wanted it to be their money and their decision. Which means if they want to spend all their money on candy or virtual “money” than they can

The kids and I have talked about budgets and wants vs needs as part of our summer life skills/lessons. We have talked about making sure you take care of purchasing the things you need such as a place to live and food over things that you just want to do like go to the movies or buying a new video game. And I plan to repeat these points to them as they grow up.

Recently, I sat down with Lexie to talk about her spend-everything attitude. I reminded her of times we were somewhere and Jase was able to purchase a larger toy than she could because he had saved more. And there have been times where she couldn’t buy anything at all while Jase spent his money. (The bad thing is Jase is too sweet. He will buy her something so she isn’t upset.)

But more importantly, I mentioned to her the importance saving will have when she is older.  When she is an adult and on her own, she will not want to spend everything she makes. She will need money for emergencies. Being an animal lover, I pointed out that something unexpected could happen to her dog and she will not have the funds to pay for medical expenses.

That example made an impact on her but I don’t expect her to all of a sudden to start saving. In her mode of instant gratification, I don’t know if she will have the dedication to become a saver without some help.

So as much as I would love to allow her to do whatever she wants – and I do think she can learn some powerful lessons by making her own mistakes with money – I also want to instill in her the importance of savings.

In order to get her use to savings, I think we are going to have a minimum she must have in the “bank” rather than a certain amount to save from each allowance.

Part of me fears that making her save without her understanding the reasons can backfire later. When she no longer has anyone “making” her save, she could go the opposite way and go back to spending like crazy. Or maybe she will have learned to save some of her money. But really, only time will tell.