When Eliana turned 7, Keri and I decided this would be a good age to start to teach her about money. So, I went about devising a plan to teach basic money principles and to try my best to not make it too complex! Being a financial advisor for as long as I have, I figured starting with telling her about Sharpe Ratios and Standard Deviations might be a bit much!
So, I began to think about how to teach basic money stewardship to a 7-year-old. While admittedly far from perfect, I settled on giving her a dollar for each year of her age…$7. Once she turned 8, I’d give her a raise…$8. My idea was that I’d increase it each year until she turned 16, at which point she’d get a job and not rely on this weekly allotment.
I also thought about the best way to break down the $7 that would make sense to her, while at the same time teach important basic budgeting. So, I created 4 envelopes:
- Tithe – I come from a faith background where I believe that tithing to the local church is an important stewardship principle. In the Bible, a tithe is literally 10%. I put this first for a reason…it’s not about us. Giving back to God a portion of what He’s entrusted for us to steward is an important reminder of the blessing He’s given. So, the first envelope was for the Tithe.
- Give – Again, Keri and I feel its important to put others above self. This is our charitable dollars that can help those in need. Ideas for this envelope include, but are not limited to: Christmas gifts for others, birthday gifts for friends parties they’re invited to, paying for a meal for someone, a ministry or cause you believe in, etc.
- Save – Now we turn our attention to ourselves. This principle teaches that we cannot rely on others to support our needs. We need to have the discipline to save for emergencies and/or large purchases. Good stewardship demands that we not live paycheck to paycheck (or in this case, a $7 allowance each week). Stewardship teaches us to store up a portion of our income for future use. So, we literally set up a savings account at our bank in Eliana’s name for her to learn not only how to save money, but how a bank works!
- Spend – The fun envelope! Spend it on whatever you want! But I had one rule: Don’t spend it on dumb things! Now, to be clear, a 7-year old’s idea of something cool to buy is vastly different than mine. I had to really force myself not to judge her purchases. Gum, cheap dolls, candy, gum, candy, did I mention gum, were quite ‘dumb’ in my opinion. But I had to set that aside to give her the reward of working hard and spending her money wisely.
This went well…for a while. Eliana began to learn the concepts, the stewardship principles I was beginning to teach, and that the order was important: God, Others, Self. But within about 6 months of doing this, I couldn’t help but wonder if I was instilling in her an entitlement mentality. Every Sunday, I’d give her an allowance, but something was missing. I didn’t want her to think she gets money for nothing. What was missing?
I hadn’t been tying this money to the work she was doing. She was 7 and getting her to do chores was like pulling teeth! I quickly wanted to stop the idea of doling out money to her for free. I wanted to tie the money to the work she did. So, with that, the “Allowance” stopped and her “Commission” began.
Stay tuned for next week as I reveal how that transition went! Thanks for reading!