5
Giving your kid more financial control
The Marketplace Money Piggy Awards.
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
Tess Vigeland: And finally this hour, the other day something arrived in our inbox from a listener that made us so proud, we decided to call up to hear the story.
Mohammed Noor and his 11-year-old daughter Megan are in Durham, N.C., and they join us now from their home. Welcome!
Mohammed Noor: Thank you for having us.
Megan Noor: Yeah, thanks.
Vigeland: Mohammed, let me start with you. You wrote us an e-mail and told us you wanted to share a recent success story. Tell us what that story was.
Mohammed: Well, Megan's always been pretty good about how much money she asks us to spend on things for her. But starting when she was about six, she got tired of the standard kids' meals when we'd go out to eat, and she'd always prefer what we were ordering over the standard corn dogs and chicken nuggets and things like that. So listening to your show, we actually heard a mother and daughter talking about something similar in terms of clothes. So Megan and I made kind of a similar deal: What I agreed to do was to raise her allowance to cover moderate meals for our weekly outings. And we have that amount automatically transferred to her pre-paid MasterCard every week. And the deal is, any money that she doesn't spend is hers to keep.
So we started the experiment a little bit over a month ago, and personally, I think it's gone great so far. Megan's definitely moderating what she orders and has more money to do things that she wants to do. And I'm spending less, and there's definitely less stress, because I'm not telling her what to order, or more importantly, what not to order. But it's a good life experience for her when she's still fairly young. She's 11 at this point.
Vigeland: Megan, what do you think of all this?
Megan: I really like it. I like having more money to spend on jewelry and stuff like that.
Vigeland: Now, how do you end up having more money to spend when you are ordering higher-priced items off the menu these days?
Megan: I order cheaper items now, like if I was at a Mexican restaurant, before I would've ordered fajitas or something like that. But now I'm more likely to order a quesadilla or something cheaper like that.
Vigeland: What are you hoping she gets out of this Mohammed?
Mohammed: Probably, I was hoping for a good life experience, because she's going to be going to college before we know it. And being able to moderate thinking, "Will I have this budget? This is how much money I can use for it." Secondarily, it would be saving money for us in the short term.
Vigeland: Well, I have some very exciting news for both of you.
Mohammed: Oh yeah?
Vigeland: Because of this e-mail and because of how you have managed to come up with this great way of teaching your daughter money, you are the inaugural winners of the Marketplace Money piggy bank contest!
Mohammed: Oh my goodness!
Megan: It's mine.
Vigeland: You will be getting a beautiful, bright blue plastic piggy bank. Let me see, I put just a few quarters in this one.
Sound of coins rattling in a piggy bank
Vigeland: And each week, we are deciding if a listener or someone on the show or perhaps a Facebook fan is pig-worthy or perhaps pig-needy. You are in the pig-worthy camp!
Mohammed: Excellent! Thank you! We're honored.
Megan: Thanks!
Vigeland: So, how do you get a prized Marketplace Money piggy bank? Well, you may be a caller or a listener, a Facebook or Twitter friend or maybe somebody we interview for a story. And we decide you've done something really cool and/or smart with your money or perhaps, you're in need of a helping hand to get to your savings goals.
Here's one way to win: A couple of months ago I picked a random number between 1,000 and 2,000 and wrote it on my office wall. When we hit that number on Facebook, that fan gets a piggy.
Some clarifications are in order here, I think. Mohamed is a good friend of mine, and Megan is my goddaughter. (I'm not Muslim.) Whenever Megan gets money for birthdays and other events, she divides it into three portions. One third goes to savings and one third goes to charity. It is the remaining third -- discretionary spending -- we're talking about in this story.
I don't think it ever occurred to Mohamed or Megan to take offense at the shape of the piggy bank; I know Megan was quite delighted to receive it.
Jennifer, I think you missed the point: If I understood well, this approach applies only to a weekly family outing not to all uses fo the weekly allowance. First, I asume that Mohamed takes her daughter to a nice restaurant where they can eat well - a quesadilla is still good. Second, the rest of the week they eat at home, so food education has many other spaces where to grow and be taught. All in all, it seems that this system advocated by Mohamed is about how to spend wisely extra money on things that are not necessarily that important. In fact, I think Mohamed is teaching Megan the opposite! Food is more important, even if you are having fun. At the end, the choices will be hers, and a combination of freedom and education might just do the trick.
I listened to Tess's conversation with Mohammed Noor in astonishment. I can't believe he received praise for giving his daughter a choice between spending money and food! The choices we make about what we eat are just as important to our well being as our financial choices are. Our food choices have lifelong effects on our health and development. An eleven year old child can not be expected to have an accurate comprehension of the importance of diet. Given the choice I think most kids would chose cheap food over a more expensive healthier alternative if they got to pocket the difference. That's why most people don't let their kids do the grocery shopping. Megan stated in the interview that she now has more money to spend on "jewelry and stuff". Seriously, is that more important than her health? If her father wants to teach her long term financial responsibility he should teach her about investing or saving, not scrimping on a necessities to pay for junk.
I found a great way to keep myself on track with my checkbook. I used to overdraw my account occasionally, and the overdraft fees are ridiculous! So I found a way to keep that from happening ever again. Every time I subtract a check or debit card transaction, I round it up to the next dollar amount (even if it's only .01 over the whole-dollar amount!) and subtract THAT amount. It may only be a few cents for each transaction, but at the end of the month, it can add up to quite a bit of cushion. If you only make 30 transactions a month--once every day--you can 'earn' as much as $30. I also ROUND DOWN all deposits to the dollar amount--ignoring the cents. I must caution you to always write the correct amounts down in the register, but don't transact the addition or subtraction with those amounts--use the rounded amounts. It's also easier to subtract on the fly with a whole-dollar amount--so there are no more little errors and I always have a little extra in that account! I haven't had an overdraft since--and I'm seeing the amount add up a lot faster than I thought!
