By Mark Heeter

While listening to a podcast recently, I heard one of the guests talking about his philosophy on giving children allowance. Being something of a personal finance expert, he cited the two questions that most parents face when considering allowance: how much and at what age? But then he also described the way some parents split the kids’ allowance into three categories: spending, giving and saving.

This is not the first time that I heard that triad as a good starting point for teaching youth how to value and use their money, and some might consider these three goals to be useful for us adults to plan their financial endeavors. The one we learn first is usually spending.   

My teenage son took on his first job last summer and is looking forward this year not only to picking up where he left off when school started, but also to perhaps getting a second job as well. He is as hard a worker as his older brother and has the chance to spend much of the summer vacation working.

As soon as he received his first paycheck – and the supplemental tips that come with this service-industry job – he was excited to talk about the money he had earned. And it grew with each passing week. More work, more money. He quickly earned a raise, roughly six percent.

Once he hit a four-figure balance in his bank account, the way he described his new wealth made it sound more and more like a game: see how high he could let the mountain of money grow, and maybe quickly, too. He is careful and purposeful about keeping his balance at a certain level, but I am watching to see how his desire to save and accumulate will be counterbalanced by his ability to spend his hard-earned wages on himself once in a while.

With an active social life and great friends, he enjoys going out with them on weekends, grabbing some dinner or drinks after a game, spending his wages on whatever teenage boys spend their money on. He buys his clothes and shoes and enjoyed paying for gifts at Christmas. Learning how to spend is just as important as learning how to give.

When my boys were small and we went to church together, each week I would purposely hand one of them the envelope to put into the offering basket. I have no idea if they gave this small act a second thought, but my point in having them deliver the gift was to give them even the smallest feeling that they were giving their – our – money to something meaningful, to someone who needed it more than we did.  Learning how to give us just as important as learning how to save (or invest).

About a year ago, out of what seemed like the middle of nowhere, my son asked me about trying to invest his money in something that would grow, like stocks. One of his friends had apparently used the word “brokerage account” with him and told him that he had one, and it was working for him. Explaining to my son how investing generally works – and looking to manage his expectations – I told him we could certainly do that. He was aware that his bank account was earning next to absolutely nothing.

Making sure he understood that, while over the long arc of history, the stock market has had positive returns – an average of around 10 percent – there have also been periods where the market has plummeted 20, 30, 40 percent. So, yes, the upward trend line has been very long, but there have been spurts of losses in there. Right now, his money is up. But I’ve tried to help him see that it can also disappear for short periods of time.

                We want our children to grow to have satisfying and rewarding financial stability. If we do our best to teach them habits of spending, giving and saving, we will be helping them as they set out on that journey. All the lessons they learn along the way will not look the same, but these basic uses of using money are all very rewarding in their own way.