“The road to success is dotted with many tempting parking spaces.”
― Will Rogers
[ Day 28 of 2000 ]
I happened to read this article from CNBC, and following a link there, I got to this original article. According to that, over 57% of Americans have less than 1000 dollars saved up. They also have the distribution with age, which was quite eye opening. I tabulated the results for you, and here it is:
I will include the original plots at the end of this post just in case you do not want to go to the original article.
He is a typical 9 year old – He loves soccer, reading and video games, and not necessarily in that order. If he were a typical American, the odds are stacked against him. He has 46 more years to go before more than half of his peers would have saved up a thousand bucks.
When he was 5 or 6 years old, we started a pay-for-chores system. That didn’t go very well. He was too lazy – He decided that he didn’t need the money if that meant no chores. Part of that could be our fault too – We were typical the overworked, time-strapped, guilty parents. He did get whatever he wanted even though he had no money.
We had to revise our tactics. We decided that GBoy wouldn’t get paid for chores since neither BusyDad nor I was getting paid for it. The chores had to be done, that was just part of the daily routine. And non negotiable. There were no consequences, no incentives. That was just part of life. It took a bit of nagging initially, but it went smoother than I expected.
Once that was in place, we introduced allowances. We told him that we were going to stop buying all toys, and would pay him instead. That way, he could decide what he wanted to spend the money on. He was over the moon – Prior to that, we vetoes many of the things he wanted to buy. We thought they were not worth the cost. Now there was nothing to stop him from buying anything he wanted. We told him that every week, he would be paid an amount equal to his age. He was really excited – the amount was going to go up every year, with no negotiations. And there were no strings attached.
Save Some of That!
We had been talking to him about college. And how he will have to pay for that. He was planning to start saving once he started working.
We told him that he could start saving now and be ahead of the game even before he started working. We all agreed that since the amount he was getting was a lot, he could save at least 50% of that.
I set up automatic transfers to a savings account (in my name, but designated for him) for half of his allowance. I increase the amount transferred by 50 cents, on the weekend following his birthday. The rest of the money goes into a “savings book” that he has – I add to it every weekend.
For instance, he is 9 now. Every Sunday, I add $4.50 to the savings account and $4.50 to his savings book. He is only allowed to spend what is in his savings book. Whatever the expense is – tokens at an arcade, buying candy or toys etc, they all have to fit into that. He cannot spend any money that is already in the bank account.
He Has Supportive Parents 😉
Once in a while, I let him be overdrawn (from the book, not the bank account). That usually happens when he decides to move extra money into the bank account, and very soon sees something he really wants. Since I want to encourage moving money to the savings account, I let him “borrow” from future allowances if that is the case. That is generally very rare.
The way we get him to move excess money to his bank account is by making that more attractive. I match every extra dollar he decides to save. I am still surprised by how happy this makes him.
The $5 the tooth fairy normally leaves him? He sees that as $10 because it goes directly into that account. Matched by me. The tooth fairy once gave him $20 for taking care of that tooth (I didn’t have any other bill!), and that became $40!
- Money Saved: This has helped us save money too. We don’t buy him toys any more. He buys them when he wants to. We buy him toys for his birthday, for Christmas and when he has done something so extraordinary that we think we should encourage it.
- Less Clutter: The clutter in our house has come down a lot because he doesn’t buy himself too many toys any more. He says he would rather save it for college. He started finding odd things to play with. His favorites are things like strings, balls, sticks, rubber bands, paper,… This is the same boy who never even looked at a Lego set once he made it. He is more careful with his toys now that he knows that he has to pay for it. It is cute -he has even made “time capsules” from shoe boxes with a date marked on them so that he won’t open them earlier. When he once got a bunch of toys for his birthday, he put them in the basement, and took them out one at a time over the next year.
- More Responsible Child: His favorite way to pass time is to play video games. Since we don’t let him do it on week days, he spends most of his time reading. Since he would lose money if we have to pay the library fines, he is careful to return them before the due date. I take him to the library once every weekend, and he stays occupied throughout the week.
So How Much Did He Save Up?
GBoy now has $1134.74 in the bank, and slightly less than $10 in his “savings book”.
I don’t really remember exactly when we started the allowance and saving for college. But it hasn’t been that long. Let’s say that it has been 3 years or so, and he got $8 on average. That would mean that his bank account should have $624 (3 * 52 * $4). The rest of it ($510) came from the money he saved up (and then doubled) by not buying the things he wanted, but didn’t need.
Will I regret this later?
I don’t know. He seems to understand the value of money. I do not know whether he is going to look back on this time of his life and be glad that we taught him that, or whether he is going to spend more to compensate for it. Only time can tell. Right now, it looks like he is on the right track. And I am one proud mama!
Do you have any strategies that worked for you? Anything that didn’t work, so I can stay away from them? Let me know in the comments below!
Like I promised before, eye opening savings details from GoBankingRates: