I don’t remember having much money as a kid. Aside from the tooth fairy and a few $5 bills I got for birthdays, income was pretty low. As a teenager, I got a part time job as soon as I could. I spent MY money on clothes, cassette tapes (yeah, I’m old), and all sorts of crap I’m sure I “needed” (a $30 Hypercolor t-shirt and some cool Ray Bans come to mind). My parents never gave me rules on what I could and could not buy (except for the obvious illegal things). If I earned it, I could spend it. It seemed like a good deal at the time, but now that I’m a Mom, I wonder if parents should control their kids’ money.
How Much Money Should Kids Have?
My parents or in-laws never did allowances, so Jim and I aren’t really into that. We think it’s not unreasonable for a kid to keep their stuff neat and be able to do some basic chores appropriate for their age without getting paid for it. If our daughter does something extra helpful or wants to sell her toys at a yard sale or consignment, she gets money for that. She also does pretty well on birthdays and holidays. Apparently the going rate for the tooth fairy and monetary gifts has gone up since I was a child, because recently we counted her money. She had over $200!
When she was a baby and had no clue, I took any money she got and put it in her college fund. Hopefully she will thank me someday. Now, she is old enough to know when someone gives her a gift and wants to have a say in where it goes, which is usually in the piggy bank. I don’t think it’s good to let a 7 year old keep that much in a piece of plastic that could easily be stolen by Barbie or a Princess doll at any given time.
We took her to the bank and opened a savings account. It doesn’t earn much interest, but I think it’s a good lesson to see the balance and how it’s affected if she wants to take money out. Then I started wondering if maybe we should have invested this in stocks. Is that overkill?
Should Kids Have Investment Accounts?
Our daughter does actually have a Roth IRA. My brilliant accountant suggested we set one up as a way to save on taxes when I owned my practice. Normally, a kid has to be 7 years old before you can hire them for things like filing and copying, but he said we could give her job as a model for advertising purposes, so we did. She now has over $11,000 in retirement savings at the ripe old age of 7.
Now, if we absolutely needed the money, we could take out the contributions without penalty. That’s why Roths are so appealing. I won’t say this money is absolutely hers until she is an adult. She has no idea about it, and we won’t ever let her think it’s there for anything other than retirement. If she runs off to join the circus at age 16, we will keep that money or use it to pay for my psychiatrist bills!
As far as money that my kid earns when she is old enough to get a real job, I believe I will make her put half into her Roth. I think we will also have a portion set aside for charity. The rest she can keep or save as she wants. Hopefully, this will create good habits that last to adulthood. I don’t blame my parents for not making me save, but if I’d learned the value of a dollar early, it might have saved us from all this catch up work that we’re doing right now.
What do you think? Should parents have a say in how their kids spend money? What’s the dumbest thing you bought as a kid?