Teaching your kids about money

The first big test of Alison McIrvin's financial game plan for her kids came in the form of a collectible doll with soft hair, cute accessories and an $80 price tag.

Her two oldest girls were just 5 and 6 when they started pleading with their mom for American Girl dolls.

McIrvin spotted the potential for a lesson that has stayed with the girls ever since: For every dollar they saved toward the dolls, McIrvin told them she would match it.

"It took them a good nine months to get the money," McIrvin recalled, "but those dolls were well taken care of. ... I wanted them to have hope, but I also wanted them to sweat a little bit."

There's never been a more important time for children to learn about managing money. If Americans' crushing debt loads and rising bankruptcy rates among young adults aren't convincing, consider this: Many college administrators believe credit-card debt leads to more dropouts than academic failure.

Financial literacy isn't something most kids learn in school. Parents are mostly on their own to tackle a subject many find at least as hard to talk about as sex or drugs. Because that discussion isn't just about dollars and cents. It's about teaching kids values and personal responsibility.

We found three Seattle-area families with different strategies for teaching their children money smarts — and a shared belief that financial literacy is critical to their children's future.

Do their methods work?

McIrvin's two girls are now 17 and 19 and still have their American Girl dolls. Both independently shared the doll story to illustrate how lessons learned in childhood resonate still as they prepare to leave home.

Teaching thrifty tricks

Claudia Nuñez, of Bellevue, is a stay-at-home mom and volunteer; dad Carlos works for a food-processing company; sons Carlos, 11, and Emmanuel, 5.

Saving money when you have money is one thing. But how do you instill smart financial habits in your kids when money is tight?

The Nuñezes start by teaching their boys how to spend smart.

On weekends, Claudia Nuñez takes sons Carlos and Emmanuel to garage sales and thrift stores, her purse loaded with spare change she divides between them.

They tag along when their mom shops for groceries, where she shows them how to compare prices and shop sales on cereal and yogurt.

Big purchases and new gifts are rare — birthdays or Christmas only, and not always then.

"They learn to wait. ... I make sure they know we have to save, that it won't be new, that they can't have it all," she said.

These thrifty tricks don't come naturally to Nuñez. She grew up in a wealthy family in Guadalajara, Mexico, attending a private university to study agricultural engineering.

As a young woman, she used to make annual shopping pilgrimages to the United States to buy clothes.

"I'm a spending person. I've had to work hard on myself," said Nuñez, a high-energy woman with hands that slice the air as she talks.

Nuñez has tweaked her money techniques as the boys have grown.

When Carlos was younger, she used a magnetic chart to track daily chores, and he would earn 10 cents for each, including brushing his teeth and taking medicine.

But that grew complicated for her and boring for him. Now she gives the boys an allowance, though she admits to not being consistent about it. This summer, she's trying a new system: giving them computer or video-game time rather than money in exchange for doing their chores.

"If you save up, you can buy almost anything you want," said 11-year-old Carlos, with a gap-toothed grin and the whisper of a mustache. "I've learned from my mom to ask myself if I really need it." Even if they someday have the means to shop anywhere, Nuñez said, she hopes these early lessons stick with them.

"I don't want them to think money is at the center and be chasing money for happiness," she said. "It will save them money, and it will save them pain later. It took me all my marriage to learn this."

What works: Claudia found a toy cash register at a garage sale. Emmanuel and Carlos created a game out of buying and selling each other Pokémon cards, using Monopoly money as currency.

Pouches full of money

Mom Alison McIrvin, of Sammamish, works part time and home-schools her children; dad Neil is vice president of sales for a software company; daughters Norelle, 19; Natasha, 17; and Narissa, 9; sons Andon, 14, and Addison, 11.

A week before a big dance at her high school, 17-year-old Natasha McIrvin plucked up the courage to ask a boy at school to go with her. When he said yes, she had to pluck up the courage to ask her parents for money to pay for it.

And when they said no, McIrvin had to scramble to raise $120 in a week to pay for a costume, dance tickets and dinner.

"I asked them quite a few times" for an advance, she said ruefully. "They just said, 'You should have planned ahead.' "

Since they were old enough to push a vacuum, the five McIrvin children have been expected to pull their weight around the family's butter-yellow colonial set on an acre in rural Sammamish.

A daily-chore chart on the refrigerator lists everyone's jobs. An unfinished chore means a $5 fine or 30 minutes of yardwork as penance.

In addition, the whole family has "Friday chores," plus an occasional all-family yardwork day.

"We've adopted the philosophy that we're all a team, all part of this family, and that you can't just be consumers, but you must be contributors as well," said mom Alison McIrvin.

The kids also share in the family's fortunes with a monthly allowance of $40 for the elder teens, $30 for Andon and $25 for the two youngest ones.

McIrvin uses a notebook with zippered pouches for each child to keep track of the money. Right off the top, 10 percent of each child's earnings goes to the tithes pouch for their church.

The remaining money is split into thirds between spending, long-term savings and a gift budget each child learns to manage.

The savings pouch is off-limits until they graduate from college. In Natasha's case, that means $1,200 she couldn't touch to pay for the dance in February.

It's not always easy to keep from rescuing her children when they make mistakes, Alison McIrvin said, but she wants her children to take ownership of their spending choices, using money as a tool to develop a sense of responsibility.

On occasion, her 14-year-old son has shown up at a birthday party with only $2 worth of candy as a gift because that's all he had left in his gift pouch.

"I try to let them fall a little bit. If he doesn't kind of face this now and show up a little embarrassed, he's going to graduate not knowing how to budget," McIrvin said.

The older kids are keenly aware of the way many of their friends live in Sammamish, where there are Lexuses in the high-school parking lot, maid services cleaning the homes and parents handing out triple-figure allowances.

"We used to pull that card on my mom — 'None of my friends do all these chores,' " Natasha said. "She just says, 'We're not like your friends' families.' "

Natasha admits to moments of frustration with her parents' insistence on financial responsibility, but she's come to appreciate the lessons she's learned — and the $1,200 stashed in savings.

This spring, her mom handed over all four pouches to Natasha, telling her she was ready to manage her finances on her own.

What works: Alison asks for cash back in small bills when she's shopping so she always has a supply at hand for allowance.

Working toward a goal

Mom Elizabeth Hurdle, of Renton, is currently job hunting; son David, 12; daughter Anna Kate, 9.

David Hurdle's got his eye on the car of his dreams — a black BMW convertible — and about $20 stashed away in savings that should nearly cover his first half-tank of gas.

His sister, Anna Kate, has made better progress toward her savings goal — a horse — with $128.25 banked so far.

Their mom, Elizabeth, encourages them to work toward goals to make saving a more tangible concept.

They may not be realistic — Elizabeth doesn't quite conceal an eye roll when David starts in on the car — but saving "should be a goal, not a moral value."

When the talk about fancy cars starts to crescendo, though, she's apt to douse it with a sobering visit to the newspaper's classified ads.

A little comparison shopping and a conversation about the monthly payment on her Honda Pilot versus the BMW help inject some reality into David's dreaming.

Money is part of everyday conversation for David and his 9-year-old sister, Anna Kate, living with their mom, a bird and two dogs in a quiet subdivision.

By talking regularly about what things cost and her values about money, Elizabeth Hurdle is hoping to both demystify money and instill a sense of gratitude for what money makes possible. "I tell them this is what I make. This is the mortgage. And the numbers are huge to them," Elizabeth Hurdle said. "I just really want them to be grateful for what we have, to recognize it as a gift."

Hurdle made a point of telling them how much it cost recently when the three of them went to a local hotel for an overnight, a splurge to enjoy the pool and room service. David said it's probably good for them to know that, but "you feel guilty ... you kind of feel a little bit of resentment."

Gregarious and already taller than his mom, David said it's clear to him, "If I want to do this stuff, it's going to involve working. A lot."

Hurdle had financial independence early, with a checking and savings account by age 10 and a credit card as a teen. But it was her father who made the final call on whether something was in the budget.

Then came Hurdle's first postcollege job. Now on her own, she, along with her then-husband, ran up so much credit-card debt, they took out a loan from his parents to pay it off, taking the next couple of years to pay them back.

"It was a scared-straight kind of thing," said Hurdle, who has never carried a credit-card balance since. "I never learned how to make the decisions on my own."

Lately, Hurdle has tried to encourage her children to take more initiative in doing their chores around the house. She offered David $5 to mow and scoop the lawn. If she doesn't have to remind him, the rate is $7.

So far, David has earned the $2 bonus just once. But he likes the idea.

"Two dollars extra can make your wallet feel a lot thicker," he explained — and just that much closer to feeling the wind in his hair behind the wheel of his BMW.

What works: The kids are expected to help around the house, but their $4 weekly allowance isn't tied to chores because Hurdle wants them to learn responsibility for helping to keep the household running smoothly.

Jolayne Houtz: 206-464-3122 or jhoutz@seattletimes.com