The Buck Stops There

dollarSince the theme of This Week in America is the budget (or lack thereof), I’ve been thinking a good bit about how one teaches economic responsibility. The issue is particularly relevant to our family since my older son received his first credit card application the other day and he heads off to college next fall.

Understand, I’m not claiming Dave Ramsey or Scott Burns-type knowledge about money and investments. Lord knows we’ve wasted our fair share of dollar bills, but we’ve also managed to avoid sending money to any preachers when we are watching t.v. at 2:00 am.  And we’ve never bought anything that has “But wait, there’s more” as part of its advertising slogan.

Like most parents, my wife and I have often felt like a wallet on legs. We could tell how much money our kids wanted based on the intensity of the hug. When they complimented our hair, we knew to hide the credit cards.

When my older son was 12, we decided, after yet another weekend of “all my friends have one” and “I have to have these shoes,” that we weren’t doing our job as parents. We hugged, bandaged, kissed, fed, secured, taught, piano-lessoned, and little leagued, but we hadn’t embarked on any kind of conversation about economics beyond “That’s too damn expensive!” Clearly, we noted, if our son whose foot changes sizes every three weeks doesn’t understand why $150 shoes are a bad idea, perhaps we should do something. We figured if we start before the kids became teenagers we might reduce  the steep learning curve once they get older. And, yes, part of our motivation was self-serving–economically responsible kids are less likely to move back in the house after we’ve grown accustomed to the empty nest (and turned their rooms into man caves!).

It’s no easy task to explain money to a 12 year old. Like our politicians, pre-teens are pretty oblivious to income, expenditures, and the larger financial implications of spending money. Investments, deficits, and balanced budgets are complex things. When, for instance, is it smart to buy the most expensive product and when is such a purchase a waste of money? Are there legitimate times to run a short-term deficit? How do you anticipate future costs? When is it important to raise revenue and when do you focus on cutting costs? What are fixed costs and one-time costs? How do you plan for the future without sacrificing the present?

Unfortunately, there’s not an app for that. There was, though, google. We were lucky that people like Ramsey, Burns, and a variety of other folks out there had ideas about money and teens. Naturally, we stole a little bit from each one.

Added to the difficulty, though, is that we had to aim for responsibility without creating bitterness all the while remembering teenagers are missing that all important frontal lobe. We can’t just assume they will make smart choices. The hard part of parenting is teaching them how to make choices not just letting them make choices. We wanted our kids to learn about money without abdicating our responsibility as parents.

So we wrote a contract. In essence, we added up the amount of money we spent on clothes, school supplies, and entertainment for our son and that’s the amount he got every month for a year. The catch, though, was that we didn’t buy his clothes, school supplies, or pay for movies/food/video games. Our contract was very specific about who bought what stuff. We would buy deodorant (out of olfactory self-defense), but if he wants fancy anti-stinkum he pays the difference. We would pay for school related extra curricular activities (band and sports), but if I’m buying the baseball glove, he has the right to supplement the money for a different, “better” glove or play with the I get.

It’s amazing how quickly the $1.50 notebook works just as well as the $5.00 notebook when you have a little skin in the game.

More importantly, the “Agreement” we developed included other responsibilities. My son had to do well in school, budget at the beginning of the year (showing us he was prepared for school expenses), do his fair share around the house, track his expenses, donate either 10% (or volunteer for 5 hours a month), and save 5% of all his money. His savings account had to have a minimum amount of money each month. If he bought something big, he had to have a plan to restore his savings.

That was the easy part. We had responsibilities, as well. Most notably, we had to let him be stupid with his money. Obviously, we weren’t going to let him do anything illegal or unethical (no meth labs or rated M games), but if he wanted to spend his entire month’s paycheck going to the movies and at the snack bar, then we had to let him even if we knew he needed new shoes.

Amazingly enough, when he tracked his spending in the third month and realized he was spending 50% of his income on entertainment and food, he changed his habits. When he realized a $50 pair of shoes would last just as long at the $150 pair, he learned to make that choice. When summer hit that first year and he realized he might not have any new clothes for school the next year if he didn’t watch his money, he had to make a plan.

As the years passed, we’ve increased the amount of money and changed the contract here and there. We’ve added some items (texting, gas, car insurance) and deleted some others: each year we renew the contract for another year. One of the keys has always been to give enough money that he can buy his necessary items without giving him so much he didn’t feel compelled to budget carefully. In essence, if he didn’t want to get a job, he would have clothes and supplies for school, but that’s it.

It’s not a perfect system. We still endured our share of moping and the occasional begging for either a raise or a loan, but the beauty of the contract is that it offers yearly opportunities to negotiate and review. Our boys have learned to pay attention to increases in costs and inflationary costs. These are the skills, I hope, that will serve them well when they do finally get that first credit card. Of course, we do kind of miss the compliments about our hair but I guess that’s the necessary trade-off.

Things I Read

And Things I Learned

Washington Monthly

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)

Joanne Jacobs

Thinking and Linking by Joanne Jacobs

Inside Higher Ed

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)

NYT > Politics

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)

Balloon Juice

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)

Dilbert Daily Strip

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)

The Full Feed from

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)