One of the criticisms of Generation X is our lack of a fiscal IQ, paired with an entitled attitude that leads us to credit/debt. The negative net worth Generation X has amassed limits our options, chains us to the lenders we owe, and ruins the quality of our lives. Many of us have witnessed our home values evaporate, retirement accounts are either non-existent or have fizzled, and personal debt has spiraled out of control due to the marketing of credit cards, equity lines, student loans, and 0% interest a.k.a free money (remember free is never free).
After we fill our financial IQ tank with knowledge, the next step for us is to stop this precipitous slide. We can change the next generation by installing a financial IQ in their operating system. I'm not talking about allowances, and please ignore the cries of "I want it" while washing yourselves of that parent guilt. Take a bold step to arm your kids with an understanding of how money works, and that can allow them to change the world.
In our house, the financial education for our kids is a hands-on event, no preach and listen in our house - with two energetic boys, I imagine that would prove fruitless. Nope, we use a "commission" chart that outlines the available work to be performed for a week. The salary for work is negotiable, based on the effort and quality of the work performed. Generally though, a job or commission has a base rate of 25 cents. They have over 10 bucks in commissions available to them, jobs that range from feeding pets, sweeping floors, and washing windows. Keeping rooms clean, beds made, and homework done are "have-to-do's". Neither Mom nor Dad pay on the "have-to-do's".
They also have the freedom to create new work that isn't on the sheet. The lesson here is disregard the list of jobs supplied, create new ones or innovate existing ones and enjoy more success. Pay day is on Friday. They gather their charts and we sit down and discuss compensation. They are empowered to negotiate for more, or evaluate their efforts as "not good Dad" and except less. When money is doled put, the first dollar goes in their "giving" envelope, the second in their "saving" envelope, and the third in their wallet for free spending ( if they choose they can skip this and give or save more). Saturday is our day we go to the bank, and they deposit their hard earned cash, and we take advantage of the immediate reward from watching their accounts grow.
Bottom line, they are in control. They make work decisions that lead to financial reward, and then make conscious decisions about where their money goes. We do not buy them toys; they use their "wallet money" as my four year old dubs it, to buy the things they want. Work, create, innovate, get paid, give, save, spend; that is the equation we use to create a financial IQ that may one day make a big impact on this world.