How can you teach your child to manage money?
 

My son works full time and goes to school full time but it seems like whenever he gets some extra money it burns a hole in his pocket. He gets paid every 2 weeks and I make him give me money to help out around the house. Almost 1/2 of the money he gives me goes toward his auto insurance. He eats almost whats leftover. He pays his own cellphone bill and he has a small loan that he pays for. He is very responsible with the exception of saving. I can't save money because I am forever giving him money for gas, lunch, he needs an auto part, etc. He call's me "First Bank of Mom." I would just like some ideas as to how to get him to save and manage money wisely. I know I spoil him rotten but he earns every bit of it. He will probably get mad at me for posting this but he just might learn a thing or two.

I thank you from the bottom of my wallet!!!

Ok...first out, figure out what the monthly income is after deductions. Net income. Following that, list every expense in a regular month

Insurance
Credit Cards (if applies)
Cell Phone
Gas
Rent? (doubtful)

Note the difference from income in and expenditures out. Then divide it by 4.5 to see what kind of free cash is avaiable per week.

Open a direct withdrawal savings account, right from your sons bank (savings or chequing acct). I am not 100% sure of the savings options in the US, but that forced withdrawl every month, invested in some kind of GIC, or RSP, or education fund or even invested in the markets will turn results

Remember constant contribution is key to success.

So

Net Income minus- Expenses minus Forced Savings = Pocket Change for whatever...

Your son will be impressed at the monthly standings in his Forced Savings account and make it all worthwhile, next thing you know he will be buying real estate :wink:

Thanks Jim- you are so smart. What is it you do that you have all this vast wisdom? You are so knowledeable on so many subjects. I am being sincere. You always amaze me.

Yes that is a good recipe for saving. All of his money should go into an account, then he only takes out what he needs and that should be limited.

One more very important point. Stop giving him money. You have become his financial crutch. Why should he save when you will give him money when he wants some?

Thanks for the compliment ;)

Bullet is right, you can't keep giving him money. If anything, throw a few hundred bucks in his forced savings account, that will motivate him and see that you are serious.

And I learned from the best...daddio was the financial man and taught me very well, I am looking to buy my first condo in 1 years time 8)

I think ever since his dad died I feel like I have to over compensate for his loss. I just hate to see him struggle. I guess I will have to try to just go cold turkey and tell him that he is 20 now and needs to learn this stuff. I'm 38 and need to bring my savings up. I have retirement funds/plans in place but you might never have enough.

Maybe you should consider the same here...a forced saving account. But honestly, start him off with $200 dollars in his new account, even if he contributes $50 a month, thats $600 a year with interest and dividends if invested.

SSE14U24ME
Tough topic but I know it starts when the child is young. Saving is a discipline that needs to be address on at least three levels.

1. Retirement Savings. Place 25% of any raise or increase in pay into some type of retirement plan and let it stay there until retirement. There is only one thing worse than being old in America and that is old and poor in America.

2. Savings to fall back on in hard times. This depends on the person and their goals but I try to keep at least enough in cash to take me through 6 months with no income. My vehicle of choice is a bank money market fund.

3. Saving for a specific goal. Any type of large expense will fall into this area. Each item needs to be evaluated on its own merit of the person saving and adjust your life style accordingly. An example here is, I like toy trains and believe me they cost money. A diesel engine runs $350 to $500 and it will take me a lot of savings to get there. I pay my self a $40 a week allowance and I usually save $20 a week for this type of expense.

Sorry about the ramble on but I firmly believe in teaching your children about saving and buying what you want.