Economic Stimulus

bob — Thu, 24 Jan 2008 23:20:35 -0500

We gave Zoe her first allowance this week. She’d been bugging us for it since her sixth birthday, which was three months ago.

I took $1-worth of nickels, dimes and quarters and put them into her Hello Kitty purse and handed it over to her. She’s been carrying it around the house since. I can tell because I can hear the change jingling from a few rooms away.

This is not part of the plan. The plan was for her to take the money and divide it between her three banks: one is for savings and will go to the big, institutional bank when it gets full enough and will be used for some big purchase in the distance future (such as that college education she’s always asking for); the second is for sharing, and will be directed to the non-profit agency of her choice, provided the agency meets our approval and it is made clear that her friend Ella, who admittedly doesn’t seem to bring her family much profit monetarily speaking, is not considered a non-profit agency; and the third is money that she can spend at her will, provided she withstand a minor lecture from one or both of her parents on the value of a buck.

The 1/3 save, 1/3 share, 1/3 spend philosophy is one I discuss with parenting groups with fair regularity when I’m facilitating. A lot of people seem confused about how to handle the allowance issue. This should be no surprise to anyone who has followed the current crisis in the home market, wherein a huge slice of the houses under foreclosure belonged not to victims of predatory lending, but by people who stretched to buy second homes and who seem unable to grasp the gist of adjustable-rate mortgages. Nobody should have been surprised by rising rates; everyone should have been highly suspicious of lenders who did not require such factors as a regular income when qualifying people for a mortgage.

Sadly, our efforts to show Zoe the nature of interest (as the word applies to the financial world) have been stymied. The local bank where we took her to set up her first passbook bank account – the same place that 10 years ago fished us in with a combined savings/checking account that offered greater than 4-percent apr – gave her a plush animal and a coloring book with her pass book, but the literature that we received at the inception of the account did not mention anything about how much they would pay her to keep $33.43 there. We assume there is some interest involved in the deal, but perhaps the rate is too miniscule even to be included in the fine print. If this were the case, it would not be unlike the interest on our combined checking/savings account, which has dwindled to Why Bother? proportions.

On the plus side, the kids get a lollipop every time I go in to deposit checks and the like, which gives them a good feeling about the bank as an institution. And it makes it a lot easier for me to convince them to walk downtown to run errands. They squeal with joy whenever I come across a check that needs cashing. They might be the only 4- and 6-year-old kids in the country desperately urging their parents to file their income tax early. However are we going to break it to them that there will be no rebate this year?

Well, that’s our problem. The problem expressed by a lot of parents I run into is when they should start giving their kids an allowance. In a video called Winning at Parenting Without Beating Your Children, author and lecturer Barbara Colorusso suggests starting an allowance as soon as you can be certain that the kid won’t eat the money. This is actually what she says, and it should ring true to the wave of relatively-recently-graduated young adults and soon-to-be-graduated college students who are submerged in a titanic struggle with credit card bills, in many cases because they were late to learn the effect of compound interest on debt. Maybe starting kids early with money is not so silly.

In light of this, and with apologies to Mrs. Colorusso, we started Zoe’s allowance a few years after she stopped looking hungrily at nickels. Now that we’ve gotten our act together – or at least now that she’s bugged us enough to pull together a financial package for our oldest child, we’re ready to let the learning begin. So far, we’ve merely learned that she likes walking around with a heavy pocketbook.

Our system is slightly different from the tradition spend/save/share model in that Zoe’s allowance isn’t necessarily going to be shared between the three banks. She gets four coins (all quarters), and the rule is that each bank gets at least one, while she decides which bank will get the fourth. You might think you know. Which one of us wouldn’t put that extra quarter into the “spend” bank – the one where the funds are liquid and the receipts are not accounted for? We’ll see. This is one of the areas where learning will take place: We’ll have a good, early idea what kind of spender Zoe is.

My parents and Jen’s parents had us each pegged as conservative spenders, I guess based on our bank accounts when we were kids and teens. In fact, they’ve grumbled from time to time to the tune of us being insufferable tight-wads. This is not exactly the case. Jen and I consider ourselves cautious, but we’ll spend when the time is right. We happen to be stuck between our friends who just went out and bought a new, big hang-on-the-wall TV and our other friends who just got a new, big hang-on-the-wall TV and spent 45 minutes explaining that it was a gift from her parents and they would never even ask for such a thing, let alone buy one for themselves, they were happy enough with their slightly fuzzy 19-inch Zenith, thank you very much.

My parents would think it was AWESOME if we bought one of those TVs, but it’s not really where our priorities lie. (First of all, they might extend their visits if we made the place more passively entertaining for them.) We look forward to seeing where our kids’ priorities lie and we’ve already gotten a hint with Zoe. Right before the allowance program began, she emptied her coffers (which were filled with spare change that I had lying around, which trickled down to her and Nadia based on my benevolence, or lack thereof) to chip in for a book that could be signed by a visiting author at her school. She picked out the most expensive book in the author’s bibliography, but it had the word “Pink” in the title, and so she would not be deterred. And she put her money where her mouth was.

This effectively emptied her banks and allowed us to start her allowance with a zero balance. All the better for us all to chart her earnings.

That leads me into one more question that we frequently get at Families First when we talk about money and kids. That is whether the allowance should be tied to labor that we make the kids do. Do we bring them right into the real world by giving them a paycheck and making them clock in?

The answer provided by most of the videos I’ve seen is no. Kids are supposed to get money just for being part of the family. Should they be expected to help out around the house? Yes. Should they get paid every time they clean their room? No. Parents of older kids who have heard the words, “What will you give me if I do?” might be able to trace the roots of their budding arch-capitalist in that strategy. Unfortunately we have to come up with other ways to get them to clean their rooms – if they’re unwilling to do so, some kids like clean rooms. One way is to tell them they can’t have friends up to play in their room if the place looks like a wreck. Another is to make room cleaning a cooperative activity where everyone pitches in cleaning up every room. Still another is to withhold privileges like playing outside until their chores are done. Or you can let them have a messy room, I don’t care. Just maybe tell them to keep food out of there if they’re likely to leave leftovers under their beds for weeks on end.

Thomas Phelan, the man behind the 1-2-3 Magic videos – and oh, have I spend a lot of time in front of those videos – advocates giving an allowance simply so that you can have something to take away from them when they refuse to do what you ask them to do. You basically charge your kids if you end up doing jobs that you have assigned to them. I can repeat that whole segment of the video to you, verbatim, right off the top of my head, but I will not because of copyright issues.

A main thread of both of the parenting programs I’ve mentioned today, and most of the ones that I have experienced, is that we need to work toward our children’s self sufficiency. Thus, we might have to make most of the decisions for our kids when they’re four, but gradually they take the reins of their lives so that when they’re 18 or 19 years old they’re ready to make all the major decisions that life demands, financially and otherwise.

By the time they’re in their late teens, you’re not charging your son out of his allowance for when you make his bed. You’re not giving him an allowance; he’s working for his spending money. As for the bed, you’re telling him things like if he lives like a slob he’ll never find a mate and be miserable for the rest of his squalid life.

I actually don’t have much experience with raising teenagers. I just remember what was said to me when I was that age.

Anyway, there’s a sink-or-swim moment where we let go and our kids are supposed to thrive financially because they’ve had healthy experiences with money and making choices.

Imagine my concern, then, last week when I found my own wife Jen was already serving as an enabler for one of our kids’ free-spending ways. Nadia has not proven very reliable with her Kinz Cash. Some of you with Webkinz in your family might be familiar with the electronic economy whereby you can buy stuff for digitized versions of your kids’ stuffed animals. Well, at the “W-shop” on the Webkinz web site, Nadia has blown a substantial amount of dough on clothes for her yellow puppy Ducky. Her list of purchases includes the same pair of shoes twice. (To Nadia’s defense, she thought she had to buy a pair for Ducky’s front paws as well as one for the back paws, but in Webkinz Land, while pets walk around on all-fours, you can only put shoes on their back feet. Now you know, too.)

Anyway, Ducky was very nearly on puppy skid row when I found Jen the other night logged on as Nadia, playing the solitaire game in the Webkinz arcade. As you all know, you can earn Kinz Cash just by playing fun games in the arcade. Jen’s prowess at solitaire had earned Nadia about $100 of plush-world-adjusted currency – currency which I knew Nadia would dump straight into buying the ballerina-themed refrigerator she’s eyeing.

So much for sinking or swimming. Our second born was getting the trust-fund treatment – or at least her pretend dog was.

Oh well. If she crashes and burns on the footpath to financial freedom, she’ll always have her older sister to bail her out. Zoe should have quite a heavy, jingly pocketbook by the time she’s 19.