Father Sez

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Archive for the ‘Moulding the younger children's Money Habits’ Category

So my younger children now save money, what next?

Monday, April 20th, 2009

I have written about our system of giving allowances to our three younger children (15,14 and 10). This has been going on for more than a year now. We started with weekly allowances in late 2007 and this year changed to monthly allowances for the elder 2.

Our youngest girl still gets a weekly allowance. In addition, they are supposed to keep accounts of their spending.  Here our youngest girl is the most disciplined. Daily she updates her accounts book with the amount she spent and the amount she put into her savings box. Our boy, the 15 year old seems to have absolutely no concern about his accounts. I have changed back his routine to a weekly allowance. I think I have to monitor and bug him a little more weekly. Nana, our 14 year old girl, writes the neatest accounts. However I suspect that some of her accounts are, well, a little fudged.  

There have been some adjustments made along the way. At the end of last year, it was found that the physical money in hand was much less than what was supposed to be as per their books! So now, I periodically sweep their accounts out and give them a signed IOU.  

However, one thing is clear. All the three save part of their allowances. I insist that they should save at least 10%, a sort of a paying themselves first, guideline. The children save more, something that I am pleased with. Now what should be the next issue that I should try to impart to them? 

I am not completely done with what I had planned to do, i.e. to discuss with them on what are salaries and wages, how do people spend their salaries, what happens when expenses are more than income and the concept of budgeting, living below our means and paying ourselves first.

Then there is the concept of charity, the giving of gifts and what Lynnae calls ‘Blow money”.

Their next school holidays start on the end of May for 2 weeks. I have made a note in my calendar and Insya’Allah will have the discussion with them then. I’ll keep you posted on their responses.  

My view of what is Halal and Haram income for an employee

Friday, February 13th, 2009

I am now “jobless”, having worked for more than 3 decades. My career encompassed jobs that might be classified by many Malaysians as a ticket to the easy life. Somehow I missed the many ticketing offices that lined the roads of my career. 

I have my parents to thank for this. Somewhere along the line, my parents have drummed in the message (I am sure I did not learn this in school) that the only income that is allowed (halal) for me as an employee was that paid to me by my employer as salary, bonuses or share options and the like. (Yes, the pay that I got should have put me on easy street had I practiced sound personal finance management, but this is not the point of this story.) 

As a Muslim, I devoutly and absolutely believe that my rezeki (livelihood) is in the hands of the All Mighty. This doesn’t mean that I should sit at home and just pray for my livelihood. I have to work and strive my best for my living. I have tried to explain this philosophy in one of my earlier posts about the Arab and the camel. 

Much is being written in the Malaysian papers and other media that we could be forgiven for accepting “presents” given to us by our customers, suppliers and others we deal with in our line of work. I don’t agree and disagree strongly at that.  These presents are a form of income due directly to our position or office that we hold. And these are income not from our employer. I deem these to be tainted income. In the clear cases where these “presents” are given by a beneficiary because we did our work or because we did not do it, then it is clearly haram.  Examples may be buying something like, office supplies at a price which is below our office’s budget, but still at a higher price that what we could have obtained from another supplier. In return we get some sort of a gift from the supplier we bought the supplies from. This is clearly haram. Our job is to ensure that our office gets the best price we can get and all the savings should go to our employer. 

Benefits that accrue because of the network built up from the workplace are a different story. So long as we can in all honesty say that the transaction in question has nothing to do with the post or position that we hold, then it is halal. An example may be buying a piece of land together with friends met through work and then selling it for a profit.  

I am sure my daughters, who have just started working, would be facing many temptations along the way. Some easy to turn down and others not so easy. Still the test as mentioned above should be applied and a decision can be made relatively easily. 

There may be some borderline cases. What if someone gives a gift during a festival? This happens a lot in Malaysia where you can see lorries of hampers being delivered to many of the offices around town during festivals. The best would be to open the hamper there and then and distribute the stuff to the office staff.  

It will be tough when we try to take such a stand when so many of our colleagues do otherwise. We just have to remember and keep reminding ourselves that we should earn only halal income and only such an income should be used to feed our families. We don’t have to judge others. That is for them and for their conscience to decide. 

After a while word should and will get around. Word that so and so does not like such gifts. And can still be depended upon to do the right thing.  

This is what is meant by a reputation and this is the reputation I want my children to earn.  

Bailouts - the family versions can be even more painful

Friday, December 26th, 2008

There has been a lot of debate about some of the bailouts that are being doled out by various Governments for those businesses considered too strategic or important to fail.   

The opponents of the bailouts take the view that the companies failed because they did not produce what the market wanted, were fiscally irresponsible and / or did not practice proper and prudent financial management. And a bailout would not solve this. Rather it would only postpone the “death” of these companies. FMF puts it even better.  

The supporters of the bailouts talk about the greater good and that there would be far more pain for all should there be no bailouts.  These bailouts at least indirectly affect all the citizens of the country, since taxpayers’ money is used. Still there is a certain detachment, as the people who decide on the bailouts do not actually use their own personal funds.  

What is the bailout hits closer to home, like a family member needing one? What if the bailout is needed also because of irresponsible fiscal behaviour on the part of the family member?  And the bailout has to come from our own personal funds.

Here there are also emotional ties involved.  The affected member could be a son, a daughter, a brother, a sister or even parents. And often the bailouts take a large chunk of savings from the donating members. What should our actions be? Should we take the moral high ground and say that market forces should prevail and that the affected member should just face the consequences. Or should we cave in due to our inability to see the affected member suffer? 

A brother of a close friend of mine has on a number of times hit on his father for bailouts. The savings the father had built up as a result of his frugal ways and hard work were badly affected by these bailouts. Still he paid.  I have often wondered about what the deepest thoughts of the father about these bailouts were?

Malaysian papers often carry stories on loan sharks going after the parents or the spouse when one of the children or the other spouse runs off without meeting his or her loan obligations. There have been even cases of parents disowning their irresponsible children 

I have no idea what I would do if any member of my family needed a bailout. I suppose I would do all I could if the matter was a result of an unforeseen accident or such. But if it was a result of sheer irresponsible behaviour then I suppose my stand would have to be different.  

I am completely in agreement with Brip Blap’s well written argument that YOU are your own bailout.  Only YOU can fix YOUR problems”.

So if any of my family members ever come to me for a bailout, this would be the test that I would apply. If I cannot answer this question with thumping certainty, then it would be just more money down the drain.  

Still it is lots easier now to get way over our heads in debt, than it was when I was starting out. My two elder girls have just started out in their working lives. I hope that they have learnt enough from our talks and their own reading not to get into any financial hole too deep to climb out of. 

And I pray that I’ll never be burdened with having to apply BB’s test on any members of my family. 

Paying yourself first – my younger daughters’ views

Friday, December 12th, 2008

Way back in November 2007, I wrote that one of my goals for 2008 would be to teach my children the two most important personal finance lessons I had learnt.

These were:- 

a)    To pay ourselves first and

b)    To join or have a peer group that has pf as an agenda item. 

In February 08, I posted a review of my progress on achieving this  goal. Now that the year is drawing to a close, its time for another review. 

The easier one first - Goal (b).  

On this, I have yet to succeed. This lesson was aimed more for my two elder girls, both of whom graduated this year and have now started their careers.  

I really cannot influence the type of friends they would be making at this stage of their lives. Or the type of friends they already would have made.  So my plan was to encourage them to read the many fine PF blogs out there written by people not much older than them. Hence they should be able to relate to the lessons and guidance from these posts even though the authors may be non Malaysians. Hopefully through these blogs, they would be able to get to know some financially responsible friends   

Well, I suspect they don’t read the pf blogs as much or as often as I would want them to.  

My eldest girl, Along, the psychologist in the family, is quite withdrawn at home. She does not talk much and pretty much keeps her thoughts to herself. With her close friends, she talks excitedly and you can be forgiven if you think that she has two different personalities. My eldest brother says, she is exactly like what I was when I was her age.  

The second one, Azah, is more like her mother. She is more outspoken and talks freely about her thoughts, wishes and wants. She has talked to her friends about my blog and some of them do follow my blog. 

It is quite a challenge to figure out how my girls are reacting to this message from me.  I am sure they know that their Papa means well.  At least the both of them do read my blog (at least occassionally), so that’s a great positive.  

Goal (a) - Paying themselves first

 This lesson was to be imparted to all the children.

I think I have talked enough to my two elder girls on this. I shall, of course, continue to do so.  

The three younger children have allowances each. The boy, Abang (14) and Nana (13) receive monthly allowances. Ain (9) receives a weekly one. They all have to maintain accounts of their allowance and I review them each time they receive the next one. The first thing they have to do when they receive the money is to save 10% of it. 

I was not sure if they understood the lesson of paying themselves first. So I asked Nana and Ain if they understood why they had to save the 10% as soon as they got their allowance. They gave answers like, “so that we would not forget” and “so that we can save before the money is lost”. 

I told them a story as I had read in the Richest Man in Babylon. About how most people receive their wages or salaries and pay the shoemaker, the landlord, the dressmaker, etc., and then try to make do with what was left. Hence paying themselves last. 

I told my daughters that they should always pay themselves first, and only after paying themselves should they worry about paying the others. They nodded wisely and then went about doing whatever it was they were doing. Hmm….I have to find more stories.

I guess I can only give myself about 45% for 2008 achievement as far as this goal is concerned. I am continuing this goal into 2009 and as long as necessary. This is a very important goal for me.

Buying my daughter a car…her first

Friday, November 7th, 2008

My brother bought me my ever first car. I had completed my studies and was then working in an audit firm. The car was a used Mazda Capella and it cost a princely RM3,800 (about USD 1,100 at current exchange rates).

I have no idea from whom my brother bought the car or what rules he applied when he bought it.  

I do remember that those days, I was not very confident of driving. The road to my office had some slight hills where cars would be lined up in the traffic jams. I had my fears about being able to balance the clutch whilst uphill or downhill so I used to get to work so early that I was about the only one on the road.  

I also remember that my brother (who did not even have a driving license then) never made a big deal about this “gift”. He just presented me with the car. 

And this yellow Mazda Capella was the first car anyone in my family ever owned. Since then I have bought 4 other used cars. Three have been sold and the fourth is now being used at our goat farm by Zai.  I have been relatively lucky in the used car purchases. I am quite a dunggu when it comes to cars and by sheer luck have escaped relatively unscathed.  

 

A 1970 Mazda Capella. The first car ever owned by anyone in my family, although ours did not look anywhere as perky and shiny as this car looks.

Picture Credit: www.dbmathews.com/mazda.shtml  

Now that my two elder girls are moving in together and the eldest girl’s place of work is too far to walk and is not served by public transport (other than taxis), my wife and I decided to buy her a car. 

We decided it would be a used one and small (to save on petrol and make it easy for parking). We also decided that it would be one with an automatic gear shift. (Malaysia still produces manual shift cars!) Then we enlisted the help of one of my wife’s cousins, Zali, who is an auto mechanic. 

Zali checked out the used car dealers he knew and found one that fit our specifications. He checked out the car and pronounced it well maintained. The mileage was about 86,000 kms for the 10 years old car. 

 kancil21.jpg

A Perodua Kancil - my daughter’s first ever car

Picture Credit: Google 

So we have signed up and paid for the car. It’ll take a couple of days for the transfer to my daughter’s name as well as the required mandatory check by the Authorities to confirm that it is road worthy. 

When the car is collected, Zali will be showing my daughter, Aliaa or Along as we call her, some basic car maintenance tips such as water and oil checks and keeping the tires properly inflated etc.  Along will also maintain a car log book just like we do. She’ll be logging the time, destination, start mileage and end mileage readings each time she uses the car. Whenever she refills petrol, the amount will also be entered into the log book. 

I have also emailed Aliaa the URL of a driving school that does a one day class called SmartWoman Driving Course. She’ll check it up and should sign up for it sometime in December. 

Unlike the time when my brother gave me my first car, my daughter’s car is coming with some strings attached. There are some rules, some do’s and don’ts. We have talked about these rules and my daughter has given her agreement.  

My wife and I are sure that she’ll handle this car, her first major physical asset responsibly. And Insya’Allah, the car will not turn out a lemon.

My children’s allowances – Phase 2

Sunday, June 15th, 2008

Google Images 

Since January this year I have been giving weekly allowances to my younger children.  

Abang, our only son who is 13 and his sister, Nana, 12 years old both get allowances, whilst the youngest Ain, 9 years old has been told to wait.  (I thought she was a little too young.) 

Abang and Nana also have to write up their receipts and payments in an accounts book which they have to show me each time they receive their allowance. 

And they have to save at least 10% of their allowances. 

On the 2nd June, all four of us went to the bank and banked in their savings into their accounts. (In Ain’s case, I contributed some money. I was a little surprised when she reminded me about the promise I had made on her savings.) 

Now we have changed the allowance interval to monthly for Abang and Nana. They still have to keep their accounts books updated, and save at least 10%.  

Ain has also asked for an allowance and an accounts book. She has been started off on a weekly allowance and I have showed her how to write up her accounts. She surprised me with her understanding of how the spending should be done. I think she will be a frugal spender.  

These are the money lessons we have learnt over the last 5 months. 

a)    The boy “misplaced” his accounts book. As such I could not sit with him and reconcile the amounts shown as “savings” in his accounts book and the amount banked in. This upset me a bit. A new book has been bought for him to start the monthly accounts, and he has been given a “lecture” on not to misplace the book again.  

b)    Nana, on the other hand, went out with her friends on an outing and spent almost all her savings. She now fully understands how easy it is to spend something that took so long to save up. Her record keeping is meticulous and, I must say, excellent.  

The lessons may not seem much, still, my children have learnt more in the past 5 months than in all their lives before this. I have some regrets about not starting this allowance system earlier, but better late than never, right?

At least some hard money lessons are being learnt now and the stage is being set for the “always earn more than you spend” talk with my children.                

Invest or pay down loans?

Monday, May 19th, 2008

This issue has been argued and debated to death in the pf blogs.

Nevertheless it’s an important topic and I am sure sooner or later every one of us will have to make a similar choice. 

Well, my second daughter was recently at this cross road. 

My elder two girls both have, what we call in Malaysia as investments in Amanah Saham Bumiputra (ASB). This is a type of unit trust managed by a Government owned body and the principal and annual returns are guaranteed by the Government.  

It’s hence not surprising that banks freely give out loans to people to buy these investments. After all, these unit trusts are sovereign rated. So since they turned 18, my two elder girls have loans and investments in ASB.  (The yearly returns are sufficient for the yearly repayment and I do a small top up yearly. My wife and I hope that this will help them to continue and maintain the savings habit only they start their working lives.)  

Recently my second girl received some money and the issue of using the money for investment or paying down loans came up. 

For me, it was simple.  

I showed her the great article written by Mighty Bargain Hunter under the heading of “How strong is your piggy bank?” 

Azah went through the story and decided she wanted to keep 50% of the money in a titanium-reinforced Kevlar® piggy bank inside a force field. That is to pay down the ASB loan. 

The balance will be kept in a steel piggy bank by buying additional ASB units. 

I am happy with the choices she has made. What do you think?

Reviewing my children’s allowances

Monday, April 28th, 2008

Sometime ago I wrote about our family’s goals and experiences on allowances for the younger children 

There appear to be differing views on kids’ allowances. NCN prefers to let the children earn their allowances. This would help in teaching responsibility and build self esteem. Wise Money Decisions has an interesting twist, and he also writes about another family that practices the free market system on allowances.  

There are so many articles on this clearly popular (rightfully so) issue. For some examples you can go to this site. 

All my wife and I want to achieve is for the kids to understand money, learn how to live within a “budget”, save some of their “earnings” and keep reasonable records. Achieving this woould be enough of an accomplishment.  

The primary rules of our system are :- 

a)    The allowances will be paid every Sunday,  

b)    It’s currently only for our boy (14 yo) and 4th girl (13 yo). The youngest may be getting hers from next year, 

c)     The children have to keep accounts of their receipts and payments, 

d)    At least 10% must be saved and put into their piggy bank, 

e)    I have promised topping up their savings at year end. 

We have not tied the allowances to any chores and neither have we decided to make any deductions for mistakes, “felonies” etc. 

So far the system seems to be working well for the girl.

The boy on the other hand seems to be spending nothing. He also seems to have no interest in the allowance, and the whole amount is just being socked away in his piggy bank.

At first I thought it was because he had a stash hidden away, cash gifts from us and his uncles and aunts for the festivals. His mother collected the whole amount and banked it into his savings account. Still no change in his spending habits.  

When I talk to him, I get the famous teenager monosyllabic answers.  Last week he told me he wanted to change the accounting system. Which he didn’t. This Sunday, both of  went over the book keeping required. He had also spent some of his allowance during the past week. Maybe now we are getting somewhere.

I have told both of them that the allowances will be changed to a monthly one with effect from 1st June. This would allow them to budget over a longer time horizon and allow me to start talks on salaries, savings, budgeting and such. 

And I know just the way to do that, thanks to D4L’s idea of weaving an interesting story into these lessons.

Review of my younger children’s money habits

Wednesday, March 5th, 2008

boyandpiggybank.jpgIt’s been 4 months since we started giving the children a weekly allowance.  In November 07, Abang (14) and Nana (13) signed an agreement with their mother that:

a) They would keep weekly accounts of how they spend their allowances,

b) Save at least 10% of their allowances.

So far this exercise is going well. They show me their accounts book each week (the entries are neat and tidy) and I give them the next week’s allowance. The amount they note as having “transferred to piggy bank” is also noted in a separate page, so that it can be compared to their bank books later.

Bank savings accounts have been opened for all three younger children.

I have not explained to them the concept of “paying themselves first”. Though they save the money weekly, currently they are doing so just because I have told them to.

I have reviewed this process and now propose to tweak it as follows:

a) Based on advice from Lynnae in her installment of the free e-book Money Matters for all Ages, I am going to change this weekly allowance to a monthly one. Hence it becomes more like a salary. The kids will learn how to stretch this salary for a month and also learn to budget.

I am setting 1st June 08 as the target date for this.

b) They have to learn that just whining and complaining will not get them any extra money. They have to do additional chores in the house and negotiate additional payments for this. So far only Nana has earned extra money and that, too, only once.

c) They have to pay for their own special expenses like presents for their friends’ birthdays and stuff like that. I have to elaborate on the frugal ways that are available to come up with a present that is memorable and yet very light on their budget.

This Friday, their first term holidays start. It’s only for a week. Now that there is no cable TV in the house, they should have a little more time. I plan to take them out and have a chat with them on :-

- what are salaries and wages,

- how do people spend their salaries

- what happens when expenses is more than income,

- the concept of budgeting, living below our means and paying ourselves first.

d) I’ll ask the youngest girl, if she is ready for a weekly allowance. So far she has not asked for this. She still receives money daily from her mother for school.

Well, I certainly don’t expect my three musketeers to enthusiastically grasp this talk. I’ll have to take them out to a place they’ll enjoy, soften them up a bit and try. At least I get a chance to talk to them at an earlier stage in their lives than their two elder sisters.

I’ll keep you posted.

Note: The picture is from Google Images.

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