I mentioned in a previous post that we don’t plan to compensate LO for his chores. I not only plan to give money for chores, I don’t even want to give him a regular allowance.
I received allowances growing up, and I’m sure it has helped me budget money and learn the ropes of spending and saving. But with LO, I want to take it a step further and encourage him to make his own money and not simply rely on allowance from us. He’s too young for these entrepreneurial endeavors, but when he’s a little bit older and can comprehend the idea of money, I’d like to start him off with finding ways to make money.
One idea I already mentioned was the art gallery. This can extend to anything he can sell, either things he already has or things he can create or invent. He can also sell his services, such as doing chores for other people. Any start-up costs he may have will have to be used by either his current money, or borrow from his parents (which he will have to pay back from any profits he may have). This will hopefully show him to be careful with how much he spends to start up compared to his return on investments.
And being the Parental Bank, I’d like us to show him how to save half of his money for a long-term investment such as college, one-quarter of his money for short-term savings (such as saving for a bicycle or a game), and one-quarter to spend immediately. His two long- and short-term savings go in two separate jars, and the spend-immediately money goes into a wallet. And just like a 401(k), any money he puts into either of the jars gets matched by his parents, dollar-for-dollar. Even monetary gifts from other people will be divvied up the same way.
Once the jars fill up, I’ll help him open a savings account and show him how even the bank also rewards his savings with interest rates. And with his short-term savings, I can show him that while he put in $10 inside the jar, he now has $25 because his parents and the bank helped match it.
We’ll see how successful we are in applying these methods. I’m hoping that LO will not only learn good money management, but good money-making methods as well.