Should Parents Control Their Kids’ Money?

"Me, join the circus? No way, I want to be a princess when I grow up!"
“Me, join the circus? No way, I want to be a princess when I grow up!”

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?





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  1. When I saw the headline, I thought “uh-oh, financial helicopter alert!” But, when I read your post to see that your really just giving your daughter sensible guidelines like splitting earnings between spending, saving, investing, and giving, the alarm bells went away. You’re still allowing your child to make decisions about money (and mistakes) with the spending component while coaching her on sound personal finance principles. I let my kids choose/adjust the percentages in each bucket for a little more control – as long as no bucket gets zero or a negligible percentage. Once explained, none of the 5 made bad choices in that regard and some even saved/donated more than I suggested. Brilliant move on the Roth IRA! When she starts adding to the Roth, you might consider a matching plan – aka a “Family 401k” program.

    1. That’s a great idea about the family matching plan. I don’t want to be a helicopter, but from experience, I wish I’d had a little more guidance on money from a young age.

  2. Your daughter and Taylor would get along very well – both plan to be princesses when they grow up. I’ve heard it pays well. 🙂 I think it’s a bit of both. Parents need to provide structure and guidance, then allow their kids to spend their money. Let them make some poor choices, dry their tears and help them see how to do things differently next time. We let the girls choose their own goals, although if they want something that is unreasonable (like a pony), we tell them. Sometimes when they get a bug about something we know is more impulse than a true desire, we try to help them think through the purchase but if they are adamant that they need it, we let them spend their money. And I try to hide my smile when they later confess it was a mistake. Doing is how we learn but we also need to set parameters and teach them how to make good choices with their money.

    1. She’s a little older, but I think she’d be a great catch for George in about 20 years or so! If not, at least she can learn how to manage her money in the right way. That’s my hope anyway.

  3. My mom also opened up a savings account for me when I was younger but she did determine how much was put into it whenever I would get monetary gifts because she knew I liked to spend on candy and other useless stuff…my former penchant for spending started pretty early!

  4. My son is 8 and he has saved around $700, we allow he to spend money when he wants to; however, he has also been focused on savings. We have decided that we are going to open an UGMA account for him and move $500 into it. He is going to pick the stocks that he likes and we will watch what happens over the years. He has decided he likes Nike and Dunkin Donuts. I think the sooner kids can understand saving, spending and investing, the better. And there is no teacher better than real life.

    1. Letting them pick things they like and are familiar with is a great idea. That’s how I’ve picked some of my stocks! I actually own a few shares of Walt Disney because I feel like we’ve been funding them for the last few years.

  5. When our son was small, the only requirement we made was that at least half of the money he received go into savings. We didn’t force charitable giving because we think that is a personal decision. We also opened an IRA for him which I think he still has today.

  6. That’s awesome you’ve been able to put that much in a Roth for your daughter. We plan to hopefully start doing something very similar when our daughter turns 7 in a few weeks as well as our other kids when they get to that age. I don’t know that we’ll control money, per se, as they get older, but definitely help give guidance in order to help make educated decisions.

  7. I think it’s great that you’ve opened up a savings account and a Roth for your daughter. Both seem like wonderful ways to teach her about personal finance in a hands-on, approachable manner. My parents helped me open up checking and savings accounts when I was younger and I appreciated their guidance. They didn’t dictate how I should spend my money, but they did provide a lot of helpful advice.

    1. I hope we are setting a good example as well. That’s a huge reason we wanted to get out of credit card debt. It’s hard to explain money to your kid when you suck at it.

      1. Honestly it sounds like a living hell. Money is such a big idea in life. Your little girl only knows that hard work doesn’t pay off. Instead it goes to the big guy. She doesn’t get to have the joy of money of spending and saving and budgeting. My parents did the same thing, but they would instead give me 2/3 of the large sums of money(birthdays or Christmas) and put the rest away. Let her have some wiggle room. I know that after a while if having it I said dad put it in the bank. He didn’t know why and I didn’t either but there was obviously a reason. You need to let your child venture a little. The only good thing your teaching her is how shitty our government is. Make money and gets swept up. They say “we will give it back to you in about 70 or so years” and don’t. My opinion is let them “earn” some money and they can do whatever they want with it.

  8. We didn’t get allowances, but my mom had a system where she’d give my brother and I cash for clothes-buying and we got to keep any excess. It taught us a number of things including the value of a dollar, how to budget, how to weight different purchase options, and the savings in buying things used.

    I think once you give a kid cash, it really is their money to spend (though of course parents will always nudge them in a certain direction). I never really spent a lot of money as a kid, but I do remember bringing a $100 bill to school for some save the rainforest charity thing, only to lose it when I put it in my desk overnight. Quickly learned never to leave large sums of cash unattended.

    1. I think I’ll do that when our daughter gets a little older. She can decide to buy some expensive outfit or get several less expensive things and keep the rest. I don’t think I had a $100 bill until I was at least 16.

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