She has recently been motivated to start making money because she’s set on buying an Elsa dress and shoes from the Disney Store. We calculated that she would need to earn $80 in order to make her purchase. As a result, she is looking for ways to earn an income. As we brainstorm the ways people make money, she’s settled on completing jobs and selling some of her items. I’m really happy about her selling some of her toys…it supports my goal in teaching her about the values of minimalism.
Since I’ve been meaning to find ways to teach Ella about money, I’ve embraced this opportunity. I’m growing as I learn strategies to teach her and she’s beginning to see the cause and effect of spending money and how to plan for her future.
So far, this is what I’ve decided:
– She will complete a few chores that are just part of being in the family. I haven’t totally decided what these are yet. Probably cleaning her room, putting dirty clothes in her laundry basket and removing dishes from the table. I’m trying to keep it manageable to what I can handle and stay consistent with.
– In order to earn money, she can complete specific tasks outside of her family responsibilities. I will come up with a list of jobs that need to be complete and determine a dollar value for each.
– It’s important for her to handle cash so she can feel the attachment and understand its finite quality. I can see how me using credit cards all the time is kind of a disservice to teaching her about money. I’m considering what it would look like to start using cash so I can teach her more about money. However, electronic money is part of the future and I really like the credit card rewards I get. Furthermore, there’s value in teacher her about healthy ways to use credit cards. Regardless, she needs to understand that money is tangible and isn’t an endless resource.
– When she makes money, it will be divided 3 ways:
- 10% goes to savings. This money will go into a bank account and start compounding for her adult years.
- 10% goes to giving. She can decide where this money will be donated. It will most likely go to our church.
- 80% goes to spending. This is what she gets to spend on whatever she wants. Currently she wants a Disney Frozen dress and shoes.
Eventually, we will add another jar when she starts getting bills, such as a cell phone. But for now, I want to work within these 3 jars because they mimic the disciplines that I use as an adult.
I’m really excited to watch her savings grow. The sooner she can start taking advantage of compound interest, the better. I can extend the teaching even further by introducing her to a savings account. She can join me at the bank whenever we make a deposit and she can view online her money grow.
The power of compound interest is the most powerful when we start young.
Image credit: www.moneyunder30.com
Check out this short video by Dave Ramsey on the power of compound interest:
I haven’t yet decided when she is age appropriate for having an allowance. At some point, I want to stop buying her clothes or treats and give her an allowance instead. Then she will need to budget her money in order to buy these extra things. I can foresee giving her a small allowance now that she can use for buying treats since she likes to always ask when we go out. However, I can imagine if she had the money to spend, she’d buy way more treats than what I want her to actually eat. So we’ll see about this one.
I’ve been meaning to start introducing Ella to money in some shape or form but I’ve found it all overwhelming. I’m glad there has been a natural flow and something that we can work towards. I’m curious to see how this will all unfold and I’m excited to set her up well for her future.
Here’s some other Dave Ramsey resources about teaching kids about money that I’m interested in myself:
Book: “Smart Money Smart Kids: Raising the Next Generation to Win with Money” by Dave Ramsey and Rachel Cruze