I created the Challenge because I found that a lot of parents want to teach their kids about money, but apart from having them drop coins into a piggy bank, they’re not sure what to do.  My goal is to guide you through the steps and move beyond the piggy bank.

I’ve been teaching kids, teachers, and parents for over 23 years.   My teaching philosophy has always been to make the lessons meaningful and relevant to their lives.  Kids learn better this way.   Besides, it’s more fun teaching this way.

I am a HUGE believer in looking out for and using teachable moments.  They usually come at the oddest times, but are probably one of the most powerful teaching tools we have.  So during the Challenge, I will be sharing some with you so that you can begin to look out for them.

I have two teenage boys, Nathan – 17, and Ryan – 15.  They are awesome kids.  Really.  The best part is that they really like each other.  I don’t think a parent could ask for anything better.

They’re also great with money.  Nathan set his first personal financial goal when he was four years old and purchased his own bike.  Pretty amazing, but that’s Nathan.

Ryan was different.  Way different.  It was because of him that, when he was seven years old, we designed and created our kids’ savings and money management software program, KidsSave.  He was a terrible saver.  But offering him some incentives made all the difference.  We’ll talk about that during the Challenge.

I’d love to know a little about you.  How many kids do you have and what are their ages?  What is it you hope to gain from this Challenge?  What have you been doing so far to teach your kids about money?  And anything else you want to share…

You know how I am about teachable money moments.  Any of those out there?

Whatever it is, we’d love to hear about it!  Click  ’leave a comment’ below.

It’s also important that our kids learn how to earn money.

But tying allowance and chores is not the best way to teach either of these.  Why?  Because when the two are tied together, you are making your child do the work; they aren’t being allowed the opportunity to discover the value of work on their own.

It also sets up a situation where kids may decide the money is simply not worth it.  This often leads to power struggles.

On the other hand, we do not want to raise entitled children.  And when money is handed over to kids with no responsibility attached, that’s what you’re creating…entitled children.

As with most things in life, there needs to be balance.  Here’s how to do that:

Set up an allowance system that puts your kids in charge of ALL their discretionary spending.  Working with your kids, decide what that spending includes:  toys, snacks, trading cards, gifts, cell phone, DVDs, etc.

Some parents also include non-discretionary spending items such as music lessons, school lunches, etc.  It’s up to you.  Just make sure the allowance amount reflects their responsibilities.

What you’re doing is shifting the spending decisions to your kids.  Chances are you are already paying for their school lunches, or cell phone, or video games.  Let them do it.  In the long run, you’ll save money.  And so will your kids because beautiful things happen when kids are in charge.

Then, and this is important, create a list of Above-and-Beyond Jobs and the amount they can get for doing each one.  These jobs can include such things as mowing the lawn, pulling weeds, washing the car, etc.  Keep in mind that there are certain things that kids must do as a part of the family.  They do not get paid for those.  But the Above-and-Beyond Jobs offers them the opportunity to learn how to earn extra money.

And they’re going to need extra money because their allowance will not cover everything.  That ipod they want, or the latest, coolest cell phone, or the 5th grade science camp.  Those they earn through choosing to do Above-and-Beyond jobs. 

Behavioral psychologists say that when we are allowed to make our own decisions, we are much more motivated.  It has to do with our innate need to be in charge of our own lives.  Setting up your allowance system the way described above allows our kids to be in charge.  As a parent, you’ll be helping them develop the life-long skills of managing money.  And that’s a job well done!

Feel free to share your thoughts, ideas, comments.

That’s because the activities are already set up.  A few minor tweaks and I’ll be set.  And that’s a good feeling because it took me a long time to get all the activities and emails organized. 

This time I really want to concentrate on sharing more teachable moments that relate directly to the activities.  And I’m hoping that more people will decide to chime in along the way.  I’d really like to make this a conversation about what’s working and what’s not. 

If you’re new to the Challenge, I’d love to have you share a little something about yourself, your kids, etc.  I’ll start:

I am a wife and a mom.  I have two great teenage boys.  Ryan is 15 and Nathan is 17…today.  Yup, today is his birthday.  He’s on the golf course right now playing for the high school team.  Ryan is on the track getting ready for a track and field meet tomorrow.  Both boys are very active (although, I often tease Nathan that golf is hardly an “active” sport.)

Both boys are also great at managing their money.  They pay for just about everything themselves.   I love that it eliminates them coming to me for money.  Of course, there are times when I do need to pull out my checkbook.  Like last week when Nathan needed to pay his golf transportation fee at school.  I take care of those things. 

So what responsibilities do the boys have to take care of with their own money?  Stay tuned.  We’ll talk about this during the Challenge.  Until then, feel free to share your thoughts…

“Hey, I’d love for you to have_____. Let’s come up with a plan to help you get it. How about I match every dollar you save with one of my dollars?”

Of course, you decide whether or not you feel matching would help. You may decide that fifty cents for each saved dollar would work better. But adding the matching incentive can help get your child “in the spirit” of working towards this first goal.

Then have your child help you problem solve what’s needed to come up with an achievable goal: how much the item costs; how much money he already has saved towards the item, if any; how much he can save each week. Using this information figure out how long it will take before he has enough money to buy the item.

There’s nothing like the sense of pride that a child gets from working towards a goal and achieving it. Your child ends up with his coveted item and you sneak in a few life lessons. It’s a win/win.

Cooking the books:  Originally meant to convey changing of one thing into another, as conversion of food ingredients into meals.  It is now popular as a phrase that describes the deliberate distortion of a corporation’s financial accounts.

Do you have any?

We don’t require that our boys give money each month.  Rather, several times a year (usually when I start receiving the ‘renew’ envelopes in the mail) we have a family meeting to discuss our giving-back goals.   We let them decide what they want to do, if anything.  (They’ve never turned down an opportunity to give back.  Whew!)

In December, Nathan chose a local organization, River City Food Bank which he donated $20, and Invisible Children where he gave an additional $20.  John and I matched dollar for dollar each one of his donations.

Ryan decided on Heifer International.  He loved the idea of giving a gift that could help a family develop self-reliance and sustainability.  His $40 donation, which, again, we matched, bought chicks, ducks, and geese.

But giving money is just one way we want to teach the boys to give.  Buying clothes and toys for needy families is another way to give back.  Lots of families are generous this way.  It’s important to make sure we include the kids in the giving.

One year when we “adopted” a family we were asked to take the price tags off the clothing items we donated.  When I asked why I was told that sometimes family members return the clothes for cash that they then  spend on drugs.  Okay, that was an eye-opener.  Off came those tags!

Another way to give back is by giving of our time.  The boys’ high school requires that students graduate with at least 25 hours of community service work.  It’s a wonderful idea.  So far, Nathan has helped out in Special Olympics bowling and golf.  Ryan wants to get involved in Special Olympics track and field this year.  And they’ve both sorted clothes at a homeless shelter.  Both boys hope to graduate with a minimum of 125 hours.  But me, I’m thinking about how this is helping them become aware of their role in the larger community.

Then there are times when things like Haiti and Chile happen.  The silver lining in these devastating tragedies is seeing how people from around the globe come together to help.  Helping feels good.  We need to share that with our kids.

Giving her the opportunity to think about her purchase in terms of the work involved allows her to have a concrete representation of the effort behind the purchase. And she just may decide that her time and effort is a little more valuable than the item.

An added bonus: She may also develop a greater understanding and appreciation of the choices you make with the money you earn.

But let’s keep in mind that those are two ends of the continuum.  There’s a middle ground.   A middle that takes the best of both.  It can be done.  Here’s how:

When you pay for your teen’s haircut, do you have her complete chores at home before you go to the hair salon?  Probably not.  Now, give your teen the money to pay for the haircut herself in the form of an allowance.  This teaches her pretty quickly that if she wants to get a new ‘doo, she’s going to have to learn to budget.

So, you’re “giving” her an allowance, but responsibility comes with that.   There’s nothing entitled about having to pay for your own haircuts, or cell phone, or gifts for friends, out of allowance money.

And how about her learning how to earn money?  Yes, that’s very important.  The amount of allowance she is going to get is meant to cover most of her discretionary items, but not all.  She will need to earn the extra money.  And when she earns it, she’ll be learning the life skills of time management, work-for-pay, fair pay, etc.  How does she earn the extra money?  Stay tuned.

Your thoughts?

“Pokemon cards are your responsibility. You need to use your money if you want to buy the cards.”

“But I already spent all my money. Can I borrow the $5 and pay you back when I get my next allowance.  I promise I’ll pay.”

“When we set up your allowance we agreed that I would not be giving you advances.”

“I know.  But I really want the cards and if I don’t pay him the money he might let someone else get the cards.”

“Hmmmm.  What did you spend your money on?”

“I bought bubble gum and those mini water guns that didn’t even work very well.”

“How do you feel about those purchases now?”

“Well, the water guns are cheap and I didn’t really need the gum.”

“Would you do it differently next time?”

“Yeah, I’d be more careful about how I spend my money.”

“What are some ways you could be more careful with your money?”

“Maybe think about it a little longer before I buy something.”

“How about putting some of your allowance money into your savings account as soon as you receive the money?  That way, if something really important comes up, the money will be there.”

“Yeah, maybe.  So, are you going to let me borrow the money?”

“What do you think?”

“No.”

“That’s right.  Part of our agreement was that you were going to learn how to make good choices and work on saving some of your money.  I think this was a pretty good lesson.”