2019-2020 was an exercise in teaching our elementary school-aged children personal finance, driving independence and encouraging them to make constrained resource decisions.
Spending With Purpose
It has been regularly observed that cash burns holes in everyone's pockets. Once our kids have some, all they want to do is spend it. This usually entails wandering aimlessly around Target or the Dollar Store searching for something to blow it on. Meanwhile, I am hating every minute of it.
One of the requirements in my household growing up was that any spending had to be planned and announced with at least a two week lead time. The Lennon household tried this for a while, but it didn’t work out as hoped (so far anyway). No systems were created to track who had declared what, and it was difficult to keep track of. A different solution was desperately needed.
The ideal purchasing pattern is to decide what you plan to buy in advance, make sure you have sufficient funds to cover the purchase without sacrificing other life essentials, then make the purchase without adding other unplanned items to your shopping cart. Marketers everywhere will try to overcome your resolve. The goal is to stay focused on the prize and make it back home with any excess funds still in our bank account or pocket.
Part of this also is the ability to delay gratification. If you truly want something, you’ll still want it a few weeks later. Impulse buying is often the root cause of much of the clutter we all live in. The item that we wanted so badly once upon a time … hasn’t been picked up since the day it was bought. It collects dust and takes up space. It’s sobering to look around the house and realize that all the clutter and trash once was cash. Worse yet, cash used to be time.
All trash starts as cash
It’s even more sobering to look around the house and tally up how much of the clutter was bought on credit. Credit cards can be wildly convenient and can be a powerful financial tool when used wisely.
At the ages of 5, 7, and 9 however - the Bank of Lennon extends no credit. The clientele is too young to internalize debt and repayment, while they are still working on their earning, saving, and spending fundamentals. For them - they must have funds in their accounts in order to spend it. Our cunning plan is to embed this habit in them before they realize what is happening. This creates a solid foundation for financial discipline.
The children will get to practice developing executive function, specifically around the concept of delayed gratification. Spend less now on cheap crap, let their money grow on its own, spend more on cooler things later - if they choose.
They will see that when they continually empty their accounts buying little things, they will never build up balances to buy big-ticket items. We expect that one of the older two will figure it out first, and the others will learn by watching their peer. An indirect peer pressure, it will be one of the more powerful lessons they internalize. They will experiment with how to earn more, and how to spend less as they figure out a path to wealth and abundance.
We knew one challenge would be tackling spending money at actual stores for toys. Before rushing off to Target or the Dollar Store with fists of cash, we encourage them to consider alternative ways for their spending money to create joy for themselves and hopefully others. For example, Little Man (7) is a big sports kid. He always begs to go to the driving range, glow-golf, bowling, Sky Zone, Chuck E Cheese, etc. This presented the opportunity to expand his thinking on what he can save and spend his money on.
Our plan is for the children to experience the joy and power of spending money that they have earned. We want them to feel the gratification of saving up for something they care about, and being able to afford it.
We expect one or all of them to go hog wild with their spending accounts and go broke once if not more along the journey. It's ideal for it to happen in elementary school, with hopes that they learn how to course-correct and spend wisely as early as possible. If this never happens before college, it is a lost opportunity for safe learning.
Structured failure is one of the best gifts loving parents can orchestrate. How have you set your kids up for constructive failure?
Stephanie Brooke Lennon is the author of Family Bank Blueprint, GoldQuest, and What Would Water Do? Simple Strategies for Navigating Life's Obstacles. Her titles are available in Paperback and Kindle on Amazon.com. Follow Stephanie Brooke on Facebook, Instagram, TikTok, YouTube, Twitter, Amazon, and at ​BrookeLennon.com.