Dear Dave,
I’m trying to wrap my head around your commission method of giving money to kids. We have an 11-year-old and a 16-year-old. Should they have individual lists of tasks, or should there be one big list they both work from on a firstcome, first-served basis? Also, should giving, spending and saving be a mandatory part of the commission structure? Is there a time when children should age out of the commission structure?
Camilla Dear Camilla,
I really like the “age out” part of your question. So, let’s look at the entire scenario as an evolution. For starters, you should teach kids to work and manage money early, but at an age-appropriate level. We don’t send 3-year-olds to the salt mines. We might send a 16-year-old there ... I’m kidding, of course. But it’s not unfair to expect more of a 16-year-old and teach them with more sophistication and detail than you would a preschooler.
If you tell a 3-year-old to clean up their room, those of us who have had kids that age know the child will put away two or three toys — and you’ll do 90% of the actual work. Then, the kid gets lots of high-fives and praise for being the best room-cleaner on the planet. Oh, and here’s a dollar for doing one of your chores.
The point at that age is to teach them to make an emotional connection between workandmoney.Workcreates money. It’s a simple concept, but I still talk to folks in their 40s and 50s every day who can’t seem to grasp the idea. After that, you can move on to things that are a little more complicated.Youhavetoclean the room yourself. It’s your turn to feed the dog. And tasks get a little bigger, and little more complicated. This is a great time to introduce them to the uses for money — I’m talking about giving, saving and spending — and how to do all three.
By the time they’re 16 or so, they should know enough about money and how to handle it properly that you can help them open their own checking and savings accounts. Cosignontheaccounts for them, and as they begin making more money through things like after-school and summerjobs,theycanpractice managing their finances on a different level with parental oversight.
But the real point behind the commission structure is this: If you do the work, you get paid. If you don’t do the work, you don’t get paid. When they’re younger, and maybe don’t want to do a job here and there, that’s okay. They’re kids. What you’re doing is new to them, and it’s a learning process. But if it goes on for a couple of weeks, or they decide they’re just not going to do anything — that’s not an option. They’re going to learn to work.
Camilla, my goal as a parent wasn’t to raise great kids. It was to raise kids who became great adults. In my mind, parents do their kids an awful disservice iftheydon’tteachthem how to be mature, functioning adults in the real world. And handlingtheirfinanceswisely, along with learning the value of work, is a huge part of that .
— Dave
Dave Ramsey is a seventime #1 national best-selling author, personal finance expert, and host of The Dave Ramsey Show, heard by more than 16 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, buildwealthandenhancetheir lives. He also serves as CEO for Ramsey Solutions.
Dear Dave,
I’m 29, and I’m about to buy my first home. My plan is to buy a duplex, and rent out the other side to help pay down the mortgage quickly. A good friend, who is like a brothertome,wantstobemy renter. But I’m worried this might jeopardize our friendship at some point in the future. What do you think?
Justin Dear Justin,
Congratulations!Believeit or not, I can still remember how exciting it is when you’re finally able to buy your very first home. I hope the process moves quickly and smoothly for you.
Now, let’s get to the real question, and how your friend plays into things. The kind of arrangement you’re talking about can work. But to be honest, I’m afraid the odds aren’t in your favor. No matter how long you’ve known each other, or how well you get along, you always face the risk of running into a situation that can damage the relationship when you do business with friends.
Listen to this next part very carefully. Does what I just said mean you can never do business with friends? Nope. I do lots of business with friends. But before anything happens, I always make sure the specific requirements and expectations of our relationship are laid out very clearly. In writing. And in your case, I’d start making sure the ground rules are completely understood now. Ensure that he understands heabsolutelymustcometalk to you ahead of time if there’s even a chance he might be late with the rent. Most problems between a renter and landlord can be worked outif both partiesare mature and reasonable. But you’re not running a charity here. This needs to be emphasized in a very firm, but very kind, manner.
The truth is friends sometimes have unrealistic expectations of each other. The friend who is renting may think he’ll get some slack on the payments. The friend who’s the landlord may assume the renter will be a perfect tenant. These are bothdangerousassumptions that need to be addressed before anything is signed.
You can make this work, Justin. Just be straightforward and fair. Make sure the rules are completely understood by everyone involved. Then, if you ever have to enforce the rules, do it gently—but firmly.
— Dave