Can taking out the trash provide a lesson in money management?
It can, if you offer some kind of payment and teach your child how to handle the money.
There's ample evidence that children learn money habits early in life. Hoping to raise financially savvy adults, many parents give their kids an allowance in exchange for doing simple tasks around the house.
Julie and Mark Parrish pay their three boys a weekly allowance in return for helping around the house.
"We don't use a chore chart," the West Lynn, Ore., mom said, referring to a system for assigning different tasks to children that some families set up. Instead, the boys are asked to complete age-appropriate jobs as they come up. "Anybody can feed the dog," she said, noting that because the boys don't have specific assignments, each has the opportunity to learn and try new things. Maxwell, 10, earns $10 per week; Tucker, 8, earns $5, and Gabe, 7 earns $3.
An allowance in exchange for simple tasks is a good first step, said Meridee Maynard, a financial literacy educator for Northwestern Mutual in Milwaukee. "Part of the idea with an allowance is to make sure you reinforce that in order to earn money, you have to do certain things."
Still, other parents balk at the notion of paying for chores like washing dishes or making beds, considering such tasks part of family responsibility. They teach money lessons using gifts and by finding opportunities for kids to earn outside the home.
"We're a little community and everybody has to do their share," said Jon Tancredi, a Philadelphia-area father of two. Tancredi does a lot of his own work around the house, and said ever since they were toddlers, his kids Jenna Grace, now 13, and Jack Owen, 10, have been nearby helping in some way. "A job well done is its own reward," he maintained. "I want them to be goal oriented, and not motivated by money."
Yet he doesn't dispute the importance of financial literacy. Tancredi said he's taught his kids using presents they received, or with cash they've earned for doing small tasks for neighbors — and his daughter is now baby-sitting. He expects Jenna Grace to save some of her earnings, but knows a teenager will want to spend. "I think one of the parts of earning money is to be able to enjoy spending some of it," he said.
In the end, it's the lessons about how to manage money that matter most.
"We were just not taught those things as kids, and we suffered for it," said Julie Parrish, recalling how she ran up credit card debt in college, and found herself a new mother at 25 with no savings in the bank.
"I had no clue," she said. "And I had my credit score dinged along the way for it. It takes years to recover from those things."
To avoid such problems for her boys, they play games that focus on money and investing. And she's instituted a small ritual for their allowance.
"We make a production of going to the bank," Parrish said. Once there, she withdraws cash from her account and pays the boys. They must deposit some of the money into their savings, and are allowed to keep the rest.
Maxwell, her 10-year-old, is also learning some beginning lessons about investing. In the past year, he's become fascinated with old coins and bills, and started collecting. On a recent weekend, they went to a coin shop, where he saw firsthand how an investment can appreciate, when the dealer displayed thousands of dollars of vintage bills. That realization only increased his enthusiasm, his mom said.
Using $18 — his week's allowance plus some savings — Max bought some coin collecting books and an assortment of coins, including some old pennies to fill one of his books, a few John F. Kennedy half dollars and a 1926 Standing Liberty quarter.
Even 7-year-old Tucker knows about stretching dollars by using coupons. "My kids already understand that there's a sales cycle, and they might wait until Sunday and there will be a new sale," she said. "They're very aware."