Wednesday, January 7, 2015

Raising Money Wise Kids

Couple of weeks ago I read Mama Sue's post on embarking her journey to teach Dumpling about money management and I thought it will also be a great thing to start with DinoBoy too. 

As with most parents, we have been buying most of the things that DinoBoy asked for since he was a toddler, many a times we bought things on impulse just because "oh they look cute on DinoBoy!" or "I think he will like this toy a lot."  So to DinoBoy, he thinks that if he likes it, he can simply just ask for it, even though we have a "Not Buying Just Browsing rule before we enters a shop, he will still try his luck.  We may not buy it on the spot but we will surely buy for him in the next couple of weeks.  Sometimes we tell him "If you behave yourself in school I'll buy it for you." this usually makes him forget about that toy a few days later (lucky for us!)

Since early last year I have been turning down DinoBoy's requests to buy a few new toys and books or even a visit to his favourite restaurant because we are on tight budget.  Even though he fully understands our current situation he can't help but show his disappointment, he is afterall a 8 year old boy.  

Mama Sue's post is a great reminder that it's time that I take a step further to teach him more about money matters.  I got the book Mama Sue mentioned in her post; Smart Money Smart Kids but haven't got the time to start reading it.  I didn't want to wait till I finished reading the book, which most like will be a few months down the road, to start DinoBoy on this journey so I searched for a kids version in our local library and found How to Make a Budget by Ryan Randolph which explains the whole budgeting, finances and money thing in a term where young children can understand easily.

In this book Ryan explained the following major points in simple clear words that are easy for the young minds to understand;

Budget - "keeping track of the money coming in and the money going out.  A budget helps us decide how and when income is spent."  
Income - "can come from gifts, jobs or an allowance"
Expenses - " things you buy.  These can be things you need or things you want, like candy or clothes."

He also explains about "long term goal" (such as retirement fund), "short term goal" (such as that bicycle you want) and "rainy days" savings.

After reading the book together and discussing or clarifying some points that DinoBoy has, we sat down to do some serious work to analyzed the amount he spent during recess and lunch break.  He gets a daily allowance of $5, the school stall sells food in 3 different portion @ $1 (S), $1.50 (M) and $2 (L), some days he takes M portion, some days when he is really famish he takes x2 L portion, these are excluding the drinks he will be buying.  Since the amount he spent on food cannot be reduced I suggested that he avoid buying drinks, instead he could drink the water in his water bottle.  His current favourite drinks are packet of milo @ 80 cents and banana juice @ $1.50 (not sure if its fresh juice or those packet kind), by not buying them he would have save $2.30.  After being scolded by me a zillion times for buying useless things from the bookshop he dare not do it now so such "extra" expenses are rare now.

 On certain days where he uses tokens from student care centre to buy lunch he saves about $2. *Updated on 08 Jan 2015 I found out that the student care centre gives them token daily to exchange it for lunch. Initially I thought it was only Mondays and Tuesdays as I only see the tokens on these 2 days. Silly me I know!  Anyway DinoBoy told me that he will sometimes buy extra portion during lunch too.  Therefore, taking into consideration the above, we reckon his daily savings could be around a dollar.

We proceed to think how much should go into each of the "funds".  Since Ryan suggests "Think of your savings as "paying yourself first", so we decided that half of the amount should go into Savings, 2/3 of the remaining should go into "Spending" and 1/3 into "Giving".  This portioning thingy also trains him in division, subtraction and fraction too. 

I explained to DinoBoy that money in "Saving" cannot be touched, it is sort of a "long term goal" funds and will be deposited into his bank account at the end of the year for his future education funds.  And if he has something he wants to buy; that toy or book or even a trip to his favourite restaurant he could use the money from "Spending" and he has to save up more if the amount is not enough.  As for "Giving", we will decide at the end of the year which charitable organisation we will want to donate the amount to.  He was all hyped up about the new savings plans and with an excited heart he took 3 piggybanks and labelled them accordingly.  These piggybanks are currently sitting on a shelf in clear view and he could deposit his coins when he packs his bag nightly.

Perhaps tonight I should suggest to him that he brings bento to school to eat during his recess, this not only means more savings for him but most importantly he will eat healthier food prepared by me. Let's see if he accepts this idea or not *smile*

For now, this is my plan to make him more aware of the meaning and value of money, I may fine tune it after I finished reading Smart Money Smart Kids. So, will you join me & Mama Sue in this journey to raise money wise kids?


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