Financial Literacy – A Year Later

It has been a year since we have more formally engaged in financial literacy for Little Girl C. The story of how I took her around King’s Road looking for something she would want to buy with her newly earned 2£ was one of the mostly read ones last year. So I felt it right to share how this has evolved.

Financial literacy for a 6 going on 7-year-old

After we decided to give Little Girl C an allowance, it was unclear what the next steps would be. How would we develop her financial literacy? So we kept the status quo, though I must say I was not too good at actually giving her “the” pound for her piggy bank every week. However, we agreed to draw a ledger for her. After some useless googling I ended up doing my own and filling it in on paper. But it was lengthy and her patience is short. I questioned whether to approach it. And I stalled.

However, I did not give up. And with baby steps I tried to apply some financial messaging that would plant some needed seeds:

• She asks for new stuff when we go to shops, especially given I don’t go to shops a lot. (I live on Amazon Smile). When we go and she asks for new items, I give her the option to put it on her Christmas or birthday list or pay for it herself. It inevitably has been ending on her list (until recently, as you will soon find out);
• I explained more often the value of things in ‘allowance weeks’. Destroying tights at an inconceivable rate now has a price tag on it (yes I know children are meant to play and get dirty). It costs 5 weeks of allowance (bear with my cost for the sake of argument);
• When we went to the School Christmas Fair together, I asked her to decide in advance how much she would be willing to spend from her allowance, so she could decide between stands. When choosing whether to have a cupcake she asked if I wanted to share (a first) and if I would pay for food. I confirmed food was on me, as she was paying for the rest anyway. She was relieved.
• We also offered up different explanations on why people work (besides purpose), so they can afford life and stuff. Taking her to my office has made a huge difference. In fact, I have not heard since “I don’t want Mummy to work, Mums are to stay home with their children”.

My financial literacy as a child

Myself and Hubby B talk about this. Not only because of our children but also because of some of the loved ones around us that may come from the same background but by no means share the same financial discipline. None of us knows quite well what the secret sauce is. As I discuss with friends in different situations from me, I try to identify which factors may have helped me gain some financial wisdom, despite being from a relatively privileged background:

An allowance: I have had an allowance for as long as I can remember. It started with meager coins, which I remember were often requested on loan for coffee or bread runs. Story says I was the only one with money in the house;

A limited allowance: whilst the allowance was not what I paid my living expenses from, in my teenage years, my choices were fairly determined by it. Amazingly, I did not feel it that much, perhaps I was never that big of a spender. At least not in extras. My dad was proud to say he paid us below what he could or thought we would need. Whatever the reason was, it created the concept of scarcity without me ever feeling poor or unlucky;

Extras with limits:  I was lucky to have free spend on gas and mobile phone (mostly for safety reasons). That did not stop my dad from giving me a beating (not literal) about my spend in the months where I went overboard on my mobile phone bill. I may have gone a month without mobile phone (or close) as a close reminder of the privilege. Kids would not survive this these days, but back then mobiles were ramping up and had nothing smart in them;

School was my job: I was never told I did not have to work. I was only told studying was my full time job. In my teenage years, my dad was not particularly fond of us finding paid employments (though we did). I will stay away from judgement there – was it financial education or need for control? But from early on, I knew work was part of life. It just so happened that I was not in formal employment yet. But it was always a consequence.

Family business and strain: my parents ran a business together since I was born. As such, we were very close to it. I spent loads of time in their office, ate in their cafeteria, understood who the different people were and their functions. I also heard a lot about choices to be made, and lived through when they decided to downsize. From my early teens (if not earlier), I spent a few summer days or weeks there. First I covered for the receptionist’s holidays, later I covered for the accountant. When my mum later got into business on her own post-divorce, I was closely involved with the day to day running, monies in and monies out. Divorce itself was a good financial education too, though I am not by any means recommending that as a tool at all. There are easier ways to make teens aware of money.

Savings Account: I have had a small savings account since I was very little. I remember that for some Christmas we would get cash gifts from family and we would put a large part of it away. Knowing it would be away until age 18. It made sense and though it was not life changing in size, the concept stuck and it built us some routine of putting money aside.

The First Large Ticket Item

Last week, after some Netflix series on our flight back, Little Girl C says “Mummy, can we sell some lemonade”. I ask her why and she claims she wants to raise money as the girl in the series did so. We are about the leave the plane, it is 10 pm on Sunday evening. I am not paying attention.

As we wait for our luggage, the magic begins.

Little Girl C: “Mummy, can I buy it myself? I could sell some lemonade so I could pay for it.”

From there, it was an upward spiral. Yes, upward. I don’t know what she wanted more. To buy the bag or make some money. So as we waited for our bags for the next full hour, we brainstormed ideas. Lemonade. I questioned it might be too cold for lemonade at the moment. Bracelets: Daddy questioned if she had a market – I shushed him. Postcards: I offered to buy them from her for people’s birthdays instead of buying them in the shop. Drawings – I suggested she did them in time to take them to Portugal and “sell” them to the family next weekend. At some point, she tried Daddy to invite people for a BBQ and charge them. I drew a line and said she could sell lemonade in the BBQ but we were not having people pay to come to our house.

As she drifted into sleep in the car she asked “Mummy, when you have ideas tomorrow will you message Daddy? You are quite brainy, I know you will have more ideas”.

Supportive Challenge

I must say I was quite excited. But I was curious on whether she would follow through. Unfortunately, I also knew she had enough money in her piggy bank to buy the bag and some small change. So when she started talking about it again, we went in steps: i) check the cost, ii) check the money and iii) work out what we needed to do. Turns out all we needed to do for step 3 was to hit click on Amazon. But this was not without entertainment.

This Sunday, we finally got the ledger I had started for her. So I explained how every week she has a starting balance, she gets 1£, she may or not spend something, she may or not get extra money (life for her birthday or selling stuff) and she may choose to put money on her savings. Unhappy that she had to do 52 weeks of maths she started with resistance. As she got to 50£ she beamed with excitement and wondered – “will I get to 100£”?

As she finished her maths we compared with what she really had in the piggy bank (mummy’s fault) and I paid all my debts right away. I then had her check how much she would have left after spending the money on the bag. With the money on one side and Amazon open on my screen, I went back to my question: “Are you sure you want to spend all this money and be left with only this bit?”. She was confident and said yes.

Giving The Money Away

Saying is easier than doing. The next step was the one I knew would hurt. I asked her to hand me the money so I could pay. She got angry.

“Why do I have to give YOU my money”.

I mean, she gets angry when she has to pay to buy houses playing monopoly. In Kidzania a few months back she was unwilling to go to places where she had to spend money. So I threaded carefully. I explained again that I would pay from my card, as Amazon was not a physical store and did not take cash, but cash was still being spent, so I needed hers. At the 3rd time, she gave me the money and with excitement pressed the button “buy now”. Daddy was glowing with pride, and I did not know whether to hug her, take pictures or do a video. I may have done all 3.

Passing the wisdom

Let’s get it clear, as much as I have spent time diagnosing, I have not yet spent an enormous amount of time executing. Partially because I know we live in different times. Partially because I wish there was more I wish I had learnt (rich dad poor dad style). And mostly because there are so many things I want to pass along to my children – kindness, honesty, love of learning, value of friendship. It is hard to know where to start with Financial Literacy. Or when to start.

I think we have done version 1.0 about earnings and the ability to spend in something you really want rather than spending right away in small not so useful stuff. Even though I was saddened we could not get into the making money bit, I know we will get there soon. In fact, I bought her some postcard making raw materials anyway and offered her to buy it from me for 8£ as all raw materials have a cost (I may charge her for the lemons as well if we get to do lemonade).  Perhaps she is willing to do that in order to make MORE money. Financials 2.0: Investments.

Writing this, I know what Financials 3.0 needs to be. The savings account. I need to show her the bank account in some way so she knows there is money there that is growing for her. And that she can chose to add more to it when she gets more money. We will start with last Christmas’ money and see how we do.