Teaching children about money: wages, taxes, debt and repayment.

Except for a very privileged few, household chores are part and parcel of growing up; it’s how mums and dads lighten the workload around the home and for some kids, provide that first taste of things to come many years hence in the adult workforce. So much is it a “rite of passage” that most of us can even name that first chore: mine was folding clean laundry and helping either of my sisters to wipe the dishes as they were placed on the wiring rack to dry – I started this shortly after I turned 8. HRH’s was to rub his uncle’s sore back now and again, which he never saw as a chore. He’s still rather good at giving back rubs, by the way.  At any rate, neither of us were paid for our labour and had we asked for payment, our caregivers would have most definitely have pointed to all the food we consume, as Chinese are apt to do.

Nevertheless, since we’re now living in 2013, and in the west at that – where children are all remunerated for their labour, however modestly – it seemed only right to offer Amanda money for the work she asked to do around the house in order to afford a second batch of books from the Scholastic Book Club, a programme through which schools raise funds. While HRH and I encourage reading, neither of us were particularly keen on spending another $125 on books she’d read just the once. Furthermore, there is such a thing a public library; we’ve been meaning to bring Amanda to the one in our neighbourhood but something always crops up on our weekend agenda. Be that as it may, the one in her school allows kids to return and borrow new books outside of “library day.” So as far as we parents were concerned, there was no need to buy anything, much less stuff we’d have to get rid off when we move again.

I settled on what I thought was fair pay given her age and lack of experience, a means by which to afford the Scholastic Book Club order, but not so much that it’d make her consider a long-term career in cleaning. You can laugh but I once heard of this university-aged boy who got so caught up in the money he was earning from a Western restaurant ($16 per hour excluding tips, 8 years ago) that he failed his studies 2 years in a row, necessitating his mother, who works at a fish market in Hong Kong, to go around begging for soft loans to fund yet another year’s international student school fees.

HRH, who is more “China” of the two of us, would not even entertain the idea of paying Amanda. He said, “She should help to clean for free!”

But I said, “We want her to learn about earning money. So how is she going to do that if we don’t pay her for her efforts?” Moreover, she’d treasure more the things she’s bought through her own sweat – or at least I’d hope so.

So he said to her, “Fine. For every $5 you earn, you must give me $1.”

I raised an eyebrow. So early paying “father maintenance” already? 

“Why must I give you my money?” protested Amanda, quite loudly I must add.

It’s called paying tax. Papa has to pay the Australian government tax for money earned, so you also have to pay tax to me, the Australian government in the house, for money you earn. Because you aren’t earning very much, I will only collect $1 out of every $5 from you or 20%.”

“But that’s not fair! How will I be able to afford my book club order if I have to pay tax? I have to work for that money!” she shrieked.

“You can be lazy and not work and not earn anything. Or you can work and pay some tax. Your choice. The tax you pay will go towards other things you need.”

Things like the sticks of glue she has me buy (she’s now on to her 4th stick for the year), or coloured paper for her school projects (costing $1 per piece) or the workbooks we practise Maths and English with ($8 per book). HRH and I are not calculative, especially not with Amanda, but we want her to learn about money – how hard it is to earn and why she has to manage hers. She went away harrumphing like a camel and I thought that would be the end of that, but she returned minutes later asking when she can start work.

Because I’d let go my regular cleaner a month ago, who wanted a raise after I was already paying her DOUBLE the award rate (and a good $7 more than what people pay per hour for a dwelling like mine) allowing her to come late and leave early (trust me, there’s a story in there yet to be told), there was more than enough work for Amanda to earn what she needed for the  Scholastic Book Club. She needed a couple of pointers to get the downstairs vacuumed and the bathroom and toilet cleaned, but did both jobs in under two hours, for which I paid her $10 in total. At the end of it, she was less-than-happy to give her father the $2, but she did anyway. After which she asked me for more work.

“But why?” I asked her. “Isn’t that enough for your order?”

She grabbed her dog-earred catalogue and started totalling up her order.

“How much more do you need?” I asked.

“My order comes to $65. I have a $5 voucher from the last time and $25 before I started. Now I have $33. I’m short of $32 but 2 books are what you agreed to buy for me (those are Maths and English grammar books. I refuse to pay for story books)…”

I grabbed the catalogue from her. “My order is only $19. I will use the $5 voucher towards it (because I paid the last time) so I will throw in another $14. So how much more do you need to complete your order?”

She came up with the right answer and so I said, “I’ll give you a loan for the balance. But a loan means you have to repay me.”

It’s not big money but I wanted to teach Amanda that she has to be responsible for money she borrows. Otherwise she’ll turn into one of those adults who run around scratching their heads, wondering how they can be declared bankrupt over a couple of paltry thousands.

The next day we went to submit her order. A red “NO CASH” sign greeted us on the collection box; this meant I had to place her order over the internet with a credit card and fill in the receipt number on the form instead. Since I carry a card few vendors accept (thank you hubby!), I had to borrow HRH’s Mastercard to put the order through. Understandably, when Amanda returned from school to see the money still on the table, there was some confusion on her part.

“Can I take the money back since Papa has already paid?” she asked.

“Not so fast,” I said. “Mama paid for your books using Papa’s card so that money has to be given to Papa.”

“But then now I owe 2 people!”

“No, you only owe me for the money you borrowed.”

“But I have to work for you to repay the money and I have to give this money to Papa.”

“You have to give this money to Papa because he paid for the order with his credit card so now he owes the credit card company. If not, how is he going to pay for the order?”

It’d have been so easy for me to just say, “You can have the money back as Papa has already paid for your order.” It’s after all, peanut-money to us. But I wanted her to understand the flow of debt, to not get into debt unnecessarily. 

“So I earn the money to give to you to give to Papa to give to the credit card company? But I still owe you?”

“That’s right. Because you didn’t have enough for the order in the first place. So you don’t owe Papa or the credit company, but you still owe me for the balance on that order.”

While it’s going to take plenty of concerted effort on our part for Amanda to be “financially literate”, we cannot afford for her to be blind to the consequences of rampant consumerism, which is the accumulation of debt for non-income producing assets. Put simply, if we don’t teach children to think twice about their purchases or how it is to be funded, then we run the risks of allowing them to be slaves to debt accumulated for goods long since passed their usefulness. That’s like paying for a bag of Twisties you ate a decade ago. Nonsensical, isn’t it? But that’s exactly what’s going to happen unless children are taught how to manage money.