Family Bank

This summer we are starting some new financial policies with our children. Previously we did not give out allowances, but gave our children opportunities to earn money doing jobs outside of their normal responsibilities. For example: mowing the lawn, weeding, washing my car, washing windows, babysitting, etc. We then had our children pay 10% as tithes to our church and 50% into their long-term savings (Mission/college). They are free to use the remaining 40% of what they earn on toys, games, presents for family members, or to replace something that Mom and Dad had previously bought for them (like a DS or MP3 Player or missing library books). This year we started having the boys pay half of the cost of their camps and EFY, but other than that we have always paid for every other activity, school supplies, birthday party present,clothes, etc.

This system has been great for us!
#1 Our children really try to earn money; the girls do jobs around the house and the boys referee soccer and mow our neighbors lawn in addition to earning money from jobs at home.

#2 They have gotten into the habit of saving their $$ for the future. 50% may seem steep to some but the way we see it is that when they are adults they will never get their paycheck and be able to spend 90% of it on their "wants". Aside from having to pay taxes they will also have to pay for their household whether if that is sharing a room at college or buying a home. We don't want it to be a shock to them.  Ken and I work extremely hard to keep our monthly bills (including insurance and taxes) to 50% of his salary. With 10% to Tithes, 10% going to Retirement, 10% to Long Term Savings (car, home, or education), 10% to Short Term Savings (car repairs/home maintenance/all those infrequent expenses that happen each year), that only leaves us with 10% for fun (vacations and children's activities).

#3 The kids have gotten pretty wise in how they choose to spend on their wants. They save up for items they really want and have learned a couple of things about budgeting to account for family presents or their activities.

Why change it up then if it is going so well then??? 
#1 They may be frugal when it comes to their money but when it comes to Mom and Dad's (or in other words anything that we would pay for) they are much more free to spend, spend, spend:) Dad can totally afford it-- right! Wrong!

#2 We feel very strongly that when our children turn 16 then they should begin using a debit card so that they have two years to use it with our guidance before leaving our home.  I think it is important for them to practice within our family so they learn the concepts before they are 16 and get the real deal.

#3  I feel like our children don't really grasp how much things really cost.  They understand how much their toys, games, or books cost.  But all the clothes, school supplies, and activities that Ken and I have been paying for really hasn't sunk in.  Darin ran into HEB with me a  month ago and was floored by how much I spent on groceries.  What really hit me though was that it was just one of my in-between trips picking up a handful of things.  After that I knew we needed to switch up our financial system.

#4 We felt like we needed to switch things up for Rose and Ginger so that they could earn money more frequently.  Really we needed to switch things so that they could be paid on a regular basis.  We sometimes go months before sitting down and paying the kids.  They just keep a running tally but the girls need it to be a regular habit.

#5  We feel like our kids are generally happy go-lucky and open to trying out different activities.  However, we also feel like sometimes they lack focus and we get sucked into supporting them in things they really do not cherish and it just ends up taking time away from things that we truly value.  This goes back to our simplified scheduling we have been trying to implement the past few years of Good, Better, Best.

I've been reading a book called The Entitlement Trap and was introduced to the concept of a family bank.  I was immediately excited by it because it solved so many of the issues that Ken and I had been discussing.  Basically, it will be switching our family to a weekly allowance system while requiring them to pay for pretty much everything.  They will still be able to earn extra money by doing jobs too.  It is important to note that in doing this whole financial system the purpose is not to just transfer the burden of earning and spending to our children.  It is to help our children align their spending with what they value, which very well could be quite different than what we, as parents, feel like they should value.  If we teach them to be cheap, misers I would totally feel like this experiment failed.  However if we teach them to be discerning and wise in how they use money to their benefit I would consider that a success!

Here are some key points that our whole family agreed upon:

• Food, gas, and all household expenses are not included in this program and will be paid for by the parents.  Including extra food needed for activities or school and gas expenses to take them everywhere.  That's all on the parents.
• Ken and I will continue to pay for their music lessons and regular sporting activities (not camps) because we feel like that is part of providing for their education.  However they will be responsible for all books, uniforms, supplies, and equipment associated with it.  We want them to have some skin in the game when choosing activities.
• Mom will continue to pay for children's clothing until they are 8 years old.  I will also pay for everyones underwear and pajamas, but not socks.  The way our kids abuse their socks drives us batty!
• Darin and Nathan will pay for all clothing and shoes (except as stated above).  Additionally they will pay for dry cleaning (what, you have to pay for that???).
• Birthday presents, personal school supplies like backpacks, lunch boxes, binders, pens, etc. will be purchased by the children (class supplies Mom will pay for).  They will also have to pay for activities they do with their friends.  Family activities will continue to be paid for by us.  For example: Going to the movie with friends- Kids pay!  Going to the movie with the whole family- Dad pays!

The children are responsible for tracking and filling out a timecard.  They can earn up to 4 points a day, Mon-Fri. for a total of 20 points.  They will be paid a certain amount for each point.  Because the boys have a larger financial burden they will earn more per point then the girls.  We have set a certain amount for each point but it may change in the future.  Especially if they are being wise but unable to provide the necessities, or if they are being unwise and feel little pressure to be responsible.  Our kids know this, but it will be very rare for us to make adjustments.  We still totally feel like it is our responsibility to provide a minimum for necessities and basic life style for our children.  I highly doubt this program will save us any money.  In fact, we hope that it will cost us more money because they are being so diligent in earning.  However it is the process of learning how to successfully manage their money that will be priceless!

They will earn points for these 4 areas:
PM Responsibilities: Reading Scriptures, Washing Face/Showers, going to bed on time.
AM Responsibilities: Waking up on Time, eating breakfast (for the summer we set a certain time).
Education Responsibilities: During the school year this will cover homework and musical instrument practice, and playing outside.  This summer it will also include whatever they have set-up with Ken for Summer Reading Program and other type of enrichment. The boys will be building computer, Rose has a writing journal she is doing, since Ginger is just starting Kinder in the fall she will only be doing her summer reading program.
Chores: We are doing a zone based chore system that we started in January except this summer the kids want to switch it up daily.

The major key to this whole financial system working is that the children are solely responsible for  running it.  They have their chart to track what they did each day with their four magnets.  At the end of each day they need to fill out a timecard and bring it to me to initial.  I found this cute little  coin bank that has a lock on it.  They will have to deposit their timecards into it each day.  There will not be any reminders from me.  It might take awhile for them to learn but hopefully when they stumble and have weeks with very low pay it will motivate them on their own to be diligent.  They will also deposit slips for their extra jobs.

Friday night before Ken and I go on our date will be payday.  We will open up the timecard bank add up the points and pay out.  I found this awesome cash box with a code lock on it as well.  I have a stash of cash that I will keep on hand in there.  The girls will be paid in cash so that they can pay their tithes and savings and any excess they can deposit back into their checking account.  The boys are able to see the correlation easier between their calculations though so they will probably only be paid on paper.  It's still important to keep a reserve of cash though so that when they want/need cash for an activity or whatever they can right me a check and I can immediately fill it.

I gave each child a set of personal checks that I made (more details below on how to make them).  I also picked up a checkbook register for each one at a local bank.  I love that they gave them to me for free without even asking if I was a member.  I really wanted them but had no idea how to get them.

The register will be final record of what they have available to spend.  We started each child out with an opening balance since they have immediate needs to purchase.  (I have been telling them the past 3 weeks  things would be changing and would giving them all little hints about how things would be different so they were super excited to get the whole plan.)

When they deposit money into their account they write down the amount in their register and I will initial that it has been received into the bank.  When they want to buy something then they will fill out their check just as a normal person would and give it to me and then subtract the amount from their register. I will then pay for whatever it is using my debit card or write a real check.  I will not pay for anything until they give me a check which means it is super important they bring their checkbook along to stores or wherever.

We also bank through ING and the kids have a college/mission saving account that they cannot touch until they graduate from high school.  But since we are adding this system I also set-up a short term savings for any monies they want to set aside for major purchases instead of keeping it in their checking account.  It is accessible on our phones and they can now look at all of their online accounts anytime they wish to.

Darin was super excited to write his first check.  He needed to register and pay to attend a Freshman Orientation Camp.  I can already see what a big difference this is making for him knowing that he is paying for it.  There was a deadline for the last day of school for the cheapest registration, then it goes up by $5 if you do it in July, or $10 if you do it in August.  He was so on top of it yesterday and kept wanting to make sure that I was taking him to the High School to drop it off, I swear he reminded us 10 times.  Whereas in the past my sons have forgotten to turn in forms like this and even with me making them pay the difference between the cheaper and more expensive price they really did not care.

I made up a template and then changed all the kids names on it.  The funny thing was that I was feeling sentimental when making them so the routing numbers at the bottom are totally special for Darin, I completely forgot to change those for all the others though:)

After cutting them out I used my sewing machine to create a perforated edge.

Then we stapled them together.

We cut up a manilla envelope to serve as the backing.  The back side is the full length of the check and can slip into the checkbook covers plastic edge.  This is important because if you slip just the last couple of checks in then they will tear where you punched them with the sewing machine.  It would have turned out better if we could find my glue gun but instead we had to fold it over in the front and staple it.  The next time I make these, which will probably this week so I have spares ready and waiting in our bank, I will set the sewing stitch smaller so the checks are easier to tear.  It took a little bit and these ones are fine, you just have to bend the check first to get it out nice and easy.

I bought the plastic checkbook covers on Amazon for $2 a piece.  There were 10+ colors to choose from so each kid has a different color.