How to teach your kids about money

I guess you could just be lucky and have frugal kids who know all about how to handle money and budget their allowances from the day they were born.  If so, congratulations, you have totally lucked out.  In fact, I have one of those.  He reminds me of my brother who is the same way.  My brother also always had money. The three others, though...  they are more like I was when I was a kid.  I had to learn budgeting the hard way when I went away to college.  I'd like my kids to be able to do this before they leave home one day.

We set up allowances a while back.  It wasn't much, only a Euro or so per week.  However, Doug never paid out their money for fear they'd just spend it on candy. (Which is true for, well, at least two of them.)  That's not quite the way to go, I objected.  That's not how they learn to handle their own money, that's how they learn to be mad at Daddy.  If you are a natural spender, you have to hit rock bottom at least once to see how spending all your money will get you in trouble.

Back when we homeschooled, I thought it was a good idea to incorporate that into the curriculum.  I bought a book or two but nothing much ever came of it.  Partly that was because we stopped homeschooling shortly after, and partly because we didn't have a good system in place for their allowances and spending (see above).

Then, a few weeks ago, I read about FamZoo somewhere on the Internet.  It sounded interesting enough to check it out.  What is it, you ask?

FamZoo is a family friendly web site that helps parents teach children the practical skills they’ll need to thrive in the real world. Our learn-by-doing online tools include:

• A virtual family bank for teaching money basics, managing allowances & chores, setting budgets, tracking savings goals, encouraging charitable giving, and much more.
• Family checklists for making and sharing lists of all kinds: weekly chores, ToDos, homework assignments, groceries ... you name it!

Using FamZoo together, families build strong financial, social, and organizational habits in a safe, friendly environment.

Basically, what it does is it tracks all the allowances virtually and you as the parent hold the actual money.  You dole it out, you control it. 

The strength of the program is its flexibility.  You can choose three basic types of accounts for your child.  There is a simple one for very young children where you just pay money in on behalf of the child.  This can be used to keep track of money gifts, like baptism gifts, or birthday gift cards.  The next stage is for school-age children and is divided into Spending and Saving, and the stage after that is Spending/Saving/Charitable Giving.  Another nice feature is that you can set up what is called Saving Goals.  Alan is saving money for a Nintendo 3DS - so half of his weekly allowance is going into his savings account - the program will tell you how long it will take for him to reach this goal (in November) which is a great visual help. 

In the meantime, we keep track of all the money he is spending by writing it all down.  If he needs some money, he comes to me and asks for it.  I give him the actual physical money and he tells me what he plans to spend it on.  This way, he can keep track of his spending.  The kids can also sign into their accounts (and only their accounts) to check balances.  Only the parents can view all accounts.

One can set up payable chores (I'm firmly in the "we are family and we all contribute" camp and refuse to pay for things like making the bed or setting the table), or debits for misbehavior like fibbing or not doing homework.  If they lose 10 cents each day for not making their beds, those beds are soon as tidy as you could wish for!

I love how the program makes their in- and outgoing money streams visible for them. We have a rule that you own any money you find on the floor, so every day I have a child coming to me giving me a cent or two to add to their accounts.  It adds up quickly and shows them that every penny counts.  (I'm still waiting for the day when there are no more coins on the floor - where do they come from?) 

FamZoo also has a (very basic) phone app which is very practical when you are on the go and the kids want to purchase a souvenir in Paris, or buy cotton candy at the fair.   

The result of all this is that David has been able to buy a much coveted Nintendo 3DS after his birthday instead of getting it from us - this makes him extra proud, especially since he has quite a bit of money left in his account (he is my little miser). 

The allowances get automatically credited to their accounts every week so there is no more forgetting and the kids can't lose their money since they only own it virtually.  For easy of use we are equating Dollars and Euros which is a great deal for our kids but if I start to convert those currencies back and fro, I'll never see the end of it. 

For us, this is a great solution.  It's true that the service costs a fee  (starting at $2.50 a month for the prepaid service) and you could probably set up an Excel file to emulate the program but I'm willing to shell out that money for all the visuals and ease-of-use. We already see great results and I'm hoping that once they go off to college, they know exactly how to budget their money and how to make the most of it.

The verdict:  Recommended.