Money Management | Mom Blog | From Dates to Diapers™

Hi, readers! I’m Lucy Duni, mom to a beautiful 18-month-old son and education director for new online financial management tool zendough.com by TransUnion. From one parent to another, I know that credit can be as confusing as raising kids … so allow me to help clear up a few issues.

With a full time job, a child and a household to run, credit may not be top-of-mind with everything else going on in your world, but it is important to remember that your daily financial obstacles and decisions help determine your credit score – that little three-digit number that can make or break the rates you get on mortgages and auto loans, for example.

To help you out, I wanted to share a few of zendough’s secrets on maintaining good credit by following much the same thought process you probably use to raise your kids.

Make paying your bills a routine, just like feeding your family. Late payments on your bills are, as you might say to your toddler, a big no-no. Just as you put food on the dinner table at dinnertime, when bill payment time rolls around, be sure to pay at least the minimum amount. A history of late payments – even by a few days – may hurt your credit score.

Spending is like sugar: keep it to a minimum. You don’t give your kids an endless supply of sugary snacks, because you know it’s not good for them. Credit is similar. Things like spending outside your means and keeping high balances on credit cards can have a negative impact on a credit score, because they’re unhealthy financial habits.

Let your credit rest. After you put your kids to bed, the last thing you want is to have them wake up every five minutes, because they won’t be in good shape for the next day. In a similar fashion, your credit needs a rest from applications for new credit and loans in order to be healthy and ready the next time you really need it. Opening many credit accounts, such as store credit cards, in a short period of time can make your credit score droop like a sleepy child. A couple of notable exceptions: multiple inquiries for a mortgage or auto loan over a few week period are typically combined as just one inquiry each, enabling you to shop for good rates without worrying about hurting your score.

Parents also need to be on their best behavior – in the eyes of the lender. When your kids are on their best behavior in public, it reflects well on you as a responsible parent who is in control. When you use credit responsibly, especially over a long period of time, lenders see that you are in control of your finances, and they are more likely to offer you favorable rates on credit and loans.

Give your credit room to “play.” Just as healthy kids need space for creative play, a healthy credit score depends on keeping some space between the balances on your credit cards and the total amount of credit you are allowed to access on those cards. A rule of thumb is to keep these balances at or below 30% of the total available credit (for example, a balance of $300 or less on a credit line of $1,000).

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Allowance…it can be a difficult decision. To give it or not, how much to give, and for what purpose? Through the years I’ve read a lot of great, but conflicting, advice from financial gurus and Christian leaders alike. What I found was that there is more than one right way; we each need to adopt the system that works best for our family, one that instills the values and lessons we wish to impart. The main lessons my husband and I want to impart are responsible money management, the importance of saving, the importance of giving and the detriment of debt.

So with these goals in mind, when our son was young we sat down and worked out our allowance “rules”. They aren’t rules per se, more like guidelines. We understand that as children grow and change the rules will too. Here is what worked for us.

The Early Years:

Open each child their own savings account

25% of their allowance is to be be deposited into savings each week

The savings account is not to be touched (we will consider allowing them to use part of it when it is time to purchase a car)

One dollar for every year of age is allotted (5 year old gets $5 a week etc.)

Chores are not done for allowance, they are the teamwork required for a smoothly functioning family unit

However, allowance is not a right and if the chores are not done, poorly done or attitudes need adjusting the consequence may be the loss of one week of allowance

Gift purchasing costs (Christmas, friend’s birthdays etc) will be split 50/50 between child and parents

There will be no allowance advances, that is called being in debt. They must save for their desires

They must give regularly to whatever cause they would like to champion. It does not have to be monetary giving. They can give of their time and effort.

These were our guidelines and we were happy with the results. It could have been better of course. When our youngest, now 2 years old, reaches allowance age we will most likely make some changes. I think it will work better if we he immediately gives us back the 25% required for savings and we then deposit it for him. I’ve found that when left to the child, saving usually slips through the cracks.

We coasted pretty smoothly on the above system until our son was about 12. Then we began noticing a few hiccups. He started saying things like “You can just put it on your card, Mom” (I use a debit card instead of cash or credit) or “I’ll pay you back later”. That wasn’t going to fly. So again, Hubby and I sat down and worked out a new system for the teenage years. One that has been working beautifully I must say. I am now hearing my son say things like “I can buy that cheaper at Walmart” or “I’ll wait and see if it goes on sale”. Ahhh, music to this mother’s ears. He’s thinking, planning and acting responsibly. Here are the new rules we implemented.

The Pre-Teen/Teenage Years

Open each child a checking account, teach checkbook skills

25% of allowance is to be deposited into savings each week

The savings account is not to be touched (we will consider allowing them to use part of it when it is time to purchase a car)

The new allowance amount is calculated by the equation: cost of clothing and entertaining the child divided by 52 weeks (*for us it was $25 a week, but it could be more or less for you based on where and how you live)

The child now purchases his own clothes, entertainment and extras

Any large purchases need to be approved by Mom and Dad

Chores are still part of life

Allowance can still be lost as a consequence of poor behavior

Gift purchases will now be split 75/25 (child/parent)

Still no advances, you must save for your desires

They must give regularly to whatever cause they would like to champion. It does not have to be monetary giving. They can give of their time and effort.

Now before you flame us for being cruel, let me clarify. We don’t expect our son to purchase everything for himself. We do lots of things as a family and pay for all the activities, movies, dinners, field trips etc. Our son is only expected to purchase his clothes and extras. “Extras” include last minute trips to the movies with friends, playing 500 rounds of games at an arcade or some chintzy toy I refuse to spend my husband’s hard earned money on.

At $25 a week I feel that arrangement is more than fair. And best of all it’s working for us. The first time my son had to buy a new winter wardrobe he spent over $150-6 weeks worth of allowance-at PacSun on skinny skater jeans. He had no money left to buy the desired hoodie sweatshirts. He hasn’t made that mistake again. He’s now weighing each purchase carefully. He’s suddenly realized that $200 really isn’t the best deal on sneakers He’s budgeting and that brings me joy because this simple knowledge will serve him well later in life.

How about you? What allowance rules work for your family?
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Cheryl is a happily married, Christian, stay-at-home mom of two boys. On Adventures of a Somewhat Crunchy Mama you’ll find her opinions on travel destinations, books, movies, homeschooling, good food and wine as well as all things child-rearing and homeschooling, with the occasional product review or giveaway. She also authors The Unadorned Book, which offers book reviews and author interviews.

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