I always hear about teaching kids about money at a young age, letting them learn from mistakes, etc.  I have been giving my pre-teen daughter an allowance for several years now.  She gives some of it to charity regularly, but she never has any desire to spend the rest of it.  We always remind her in stores if she sees something she wants, that she can get it with her money, but she never does.  Is this typical behavior for a child this age?  Most kids I see seem to always want to buy something.  She keeps accumulating it. Is there any advice you can give for this situation?

CARRIE: As a mother of three, I’m constantly reminded of the ways that our children display their personalities.  In school, at home, building friendships – they each have their own way of operating in the world and building their successes.

And over the years I’ve also found that one of the most fascinating aspects of money management is that it’s so personal.  Sure, we can talk about saving and budgeting and making smart choices until we’re blue in the face – but a person’s innate money personality is always a factor.

I don’t want to oversimplify, but in general most of us either tend to be more of a saver, or more of a spender.  From the way you describe your daughter, it sounds like she falls on the saver end of the spectrum.  That’s hardly a problem (unless it goes to an extreme), and there are some good ways to help your daughter start to feel comfortable making smart spending decisions. 

For example, think about putting your daughter in charge of buying some of her necessities – like school clothes -- out of her allowance.  Of course you have to make sure that her allowance is big enough to cover the basics; otherwise, she’ll just feel deprived.  But you put her in charge of buying her own jeans, tennis shoes, and T’s, she’ll get the experience of making choices, and the chance to feel good (or sometimes not so good) about her purchases.
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Then, when she’s comfortable with buying her clothes, add on.  Maybe have her pay for her hair cuts or after-school activities.  The idea is to gradually increase her scope of responsibility, easing her into making more choices.  Of course you and she will hope that every decision is a good one, but as you point out, a lot of learning how to handle money comes from making mistakes. 

Another thought is to increase her allowance and have it cover a longer period of time (say a month).  That way she’ll start to learn about slightly longer-term planning.  If she runs out before the first of the month, that will be a lesson, too.  Then you can help her set even longer-term goals: perhaps summer camp, a musical instrument, or even a car.  With concrete goals, she’ll see even more clearly the connection between saving and wise spending.

Two more thoughts.  First, once your daughter is just a little older you can encourage her to look for an after-school or summer job.  I believe that even working a few hours a week can teach so much – and could give your daughter even more exposure to money.

And finally, you can open a custodial brokerage account for her, and use it start to teaching her the basics of investing and the importance of long-term growth.  Today’s volatile markets are the perfect backdrop for talking about risk – and important lesson for all investors.

From the information you provided, it sounds like you have a great and grounded daughter.  It’s the rare child who voluntarily gives to charity, so clearly she’s a special person.  With just a little guidance and experience under her belt, I’m sure she’ll also become a confident and knowledgeable money manager and investor.

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