Back in the days of Ramen noodles and free happy hour hors d’oeuvres my husband and I didn’t give much thought to the kids we’d have one day or how we’d teach them about money.  We just earned our money, saved what we could, spent what we had to, and enjoyed the rest.  But after many years of earning and budgeting for two, then three, then four, and now five of us, we figured that we’d better start teaching these kids that we don’t harvest money from our garden or pick it from trees, at least not in our backyard.  Better yet, even if our kids could pull money out of thin air, we realized that we’d want them to be fiscally responsible and to be good stewards. How, we wondered, could we get there?  How could we teach them not to waste financial resources by constantly upgrading to the shiniest new toy on the block?  How could we teach them the value of paying for things in cash and avoiding debt, when the world around them is awash in it, and the proverbial Joneses always have the latest, coolest woody wagon (or brand-new convertible)?

We started slow.  Admittedly, it wasn’t hard to teach that you can’t have everything you want when we didn’t have the resources to pay for it.  I suppose we could’ve charged it all but, thankfully, neither of us is wired that way.  But as our paychecks grew and we could afford to buy more, we had to make a conscious choice—to develop parameters, actually—about what we would buy and when.  Figuring this out for ourselves was the first step in helping our kids become financially savvy.  It’s a cliché’ because it’s true:  model, model, model.  Our kids learn by our example.  (That’s what I tell myself, anyway, as I drive around in my fine, fancy 1999 mini-van.  If they all drive shiny new cars when they’re older, I’ll have to recant.)

One of the first decisions we made was that, in our house, chores are not tied to pay.  The kids have jobs they do on a regular basis that have absolutely nothing whatsoever to do with money.  There are other jobs, however, jobs above and beyond making their beds and setting the table and clearing up after dinner, for which they can earn money.  Washing the car will net them about five bucks.  Picking up after the dog is usually $2.  If it’s been a few days, though, that is definitely negotiable, which has helped them understand that if you’re willing to do hard (or gross) work that others want to avoid, you can charge a premium.  Yep, I’ll pay extra for that.

As we were trying to figure all of this out, somehow I stumbled upon Mary Hunt’s book Debt-Proof Your Kids, and I loved it.  Almost all of what she says resonated with me, including her crazy idea of paying kids a salary when they reach a certain age, in exchange for shifting some expenses to them.  The idea isn’t that their salary adds to what comes out of your pocket—it just transfers it to them.  For example, our kids begin getting a salary when they’re in the 5^th grade.  Included in their new responsibilities is paying for birthday gifts for friends, treats if they go to the movies with a friend, and school skating parties.  (Don’t worry, we’re not Scrooge.  We still buy the popcorn when we go to the movies as a family.)  The lessons here are invaluable.  Too much spending on yourself = looking like a cheapskate when you get invited to two birthday parties in a month.  Budget, boys, budget!

Of course, this idea is much more difficult in practice than it sounds on paper.  Standing by and watching our eldest blow cash on completely useless junk—while remaining silent and waiting for the hard lesson later—is almost physically painful.  Seeing things somehow work out when he gets money in the mail from a grandparents just before he needs it is nearly equally painful—hard lesson averted, much to our chagrin.  But over time, the lessons sink in, and we’re very hopeful that our kids, like Mary Hunt’s, will grow up to understand the value of the dollar, budget well, give generously, and avoid debt like the plague.

Perhaps the most unexpected and pleasant side-affect of this plan is the trickle-down effect.  While our eldest suffers, our younger two boys watch and learn.  Although they aren’t yet receiving a salary, they get plenty of cash from gift-happy grandparents, aunts, and uncles.  Both of them prefer, thus far, to spend a little and bank a lot.  It’s a good start, and we hope it holds.

In the meantime, we still buy birthday gifts for their friends.

I wrote this post to participate in this week’s blog blast at Parent Bloggers Network.  Speaking of generous giving, Capital One is the sponsor this week and they’re giving away three iPhones.  Enter the blog blast yourself for a chance to win!