Life's Money Lessons
My three-year-old niece has just started mimicking and playing monkey-see, monkey-do. Often, our early relationships with parents and other role models impact and shape our behavior as adults. One of the areas where this is most obvious is our relationship with moneyâ€”how we think of it, use it, and misuse it. So now, looking back, what money lessons do we as adults wish out parents taught us about?
Stay Within your Budget
I started getting an allowance of $15 per month when I was 8. On the first of the month, my brother and I patiently waited for my dad to come home from collecting rent at his rental properties. From his stack of cash, he would give each of us a $10 bill and a $5 bill. What we did with the money was our own business, but if you ran out of money, that was your problem.
It sure seemed great to be able to buy all the candy I wanted on the 2nd of the month, but if I wanted to go to a movie with friends on the 25th, and I already spent all my money, it really made me wish I hadn't gorged earlier. My only option was to borrow from my older brother, but that taught me that borrowing wasn't really worth it either, so the best solution was to create a budget to help make my money last.
Save, Save, Save
The first thing I remember wanting was a Sony Walkman when I was 10. It was just an FM stereo, but it was white with a new age design. How cool! It cost $19.95 back then, so my $15/month allowance wasn't going to cut it. My solution was to save each month until I could finally afford it. When I saved enough money, including tax, I asked my mom early in the week if we could go get my Walkman that Saturday. I was so happy when I got it, and clearly I still remember how much effort it took for me to buy this Walkman.
We are constantly being bombarded with new products and all the things we "need" that make saving difficult and counterintuitive. While we, as adults may find it difficult to determine the difference between a need and a want, imagine what a dilemma children face. The important lesson that kids of any age need to learn is that saving should be gratifying, not a deprivation. So help your child set a goal, then create a reward for saving.
The Value of Hard Work
After a couple of years, $15/month just wasn't cutting it. And no, we didn't get inflation adjustments. We go an allowance bump when we reached milestones, like Junior High, or High School. The interesting thing about our allowance was that we just received it. So I negotiated with my parents to give me extra money if I did more chores around the house. Maybe it was 25Â¢ per load of laundry, or $3 to wash the car. In a month, I could earn about 33% more just by doing extra chores. My brother, on the other hand, did not choose to do extra chores. However, more on how he made due with his allowance â€¦.
Earn Money on Your Money
A month after I bought my Walkman, my brother asked to borrow $20 from me so he could buy his. He didn't want my lame Walkman. He had his eyes on the newest, latest, greatest machine in portable personal audio. He was getting a different brand, but it had an AM and FM radio, and most of all, it had a tape player. A tape player! It cost $50, but in his mind, having a tape deck was totally worth it. However, he was also getting $15/month, so he'd have to wait at least 4 months if he saved every penny.
His solution? Borrow money from his little sister. I have always been a saver, and have always enjoyed saving, so he knew I had extra money to borrow. So I lent him money at 0%, when I could've just put the money in the bank and earned interest (probably 5% at the time). I can't even remember if I actually got my money back! Clearly he won with this transaction, but I definitely learned that I should get something in return for someone's use of my money today.
As a grown up looking back, I can see how my money experiences really added up to how I use my money today. Additionally, my parents have always been open about their money habits with us, and never argued about money in front of me or my brother. With a solid foundation, I've been extremely successful reaching my financial goals, and now see it as my mission to help teach kids to learn great habits too.
endy W. Turk
Gerber Kawasaki Wealth & Investment Management
2716 Ocean Park Blvd., Ste. 2022
Santa Monica, CA 90405
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This material contains forward looking statements and projections. There are no guarantees that these results will be achieved. Investing involves risk including potential loss of principal.