Teaching Kids About Money

Hi R. -

This is a touchy subject, as we are a bit weird about talking about finances in our society, but I'll tell you what I have done.

I started giving my son an allowance at age 7. He got the number of years he was each month -- so, he got $7 a month. This was not tied to chores, to doing anything around the house -- nothing. It was his to spend.

The trick was this -- he did not get to bug me about buying stuff. No whining for toys, Pokemon cards, candy, etc., and so on. If he wanted something, he had to save money and buy it. I gave him NO restrictions on what he bought.

Yes, initially he blew his monthly allowance on silly things. And immediately had buyer's remorse and regretted his purchases. Yes, he 'borrowed' against future allowances, and then got into debt with the Bank of Mom, and had to go for several months without any cash.

Are you getting the picture? <grin>

As he got older, he got more money -- at 15, he now gets $10 for each year, so $150/month and he has an Orange account from ing direct (www.ingdirect.com). He gets half in cash, and half goes into his savings account. Yes, that's a lot of money. But NOW he has to pay for his lunch every day, buy ALL of his own clothes, pay for all school dances, movies with friends, birthday gifts for friends, video games, iPods, music and consoles, etc. He NEVER asks me for money, nor does he whine about stuff he doesn't have and wishes he did, and let me tell you, that is worth $150 a month! :) And, if most parents figured out how much they actually spend on these things for their kids, it would be more than $150 a month.

Finally (and most importantly of course), he has learned to spend wisely, save as much as he could for large purchases that he really wanted. Over the years, he has bought two computers and a flat screen TV with his savings, as well as managed his own budget on daily living expenses.

So, my advice is this -- at age 7, let him blow the money and learn the lessons with pocket change. It will pay off when he is older, and you will be teaching him some critical lessons!

All the best,

J.

6 moms found this helpful

I reconmend the books "Money Doesn't grow on Trees", "A Penny Saved", and Dave Ramsey has Financial Peace Junior. My children have become very wise on making spending decisions. They have learned that sometimes cheaper is better and sometimes you get what you pay for. They are 9 (twins) and they split the money that they earn 4 ways: God, Gifts for others, College savings, and Blow $. They are allowed to blow that $ on anything and I have learned to bite my tongue unless they ask for my reconmendation. They have learned at an early age delayed gratification. In fact, they are both saving for Nintendo DS's. ($135 with tax!) Good luck and don't forget to find what works for you. ~S.

3 moms found this helpful

Hi,
We are working on teaching our children about money as well. We have just finished reading Secrets of the Millionaire Mind. I strongly suggest this book. We have read it to our children (now 10 & 8). We also purchased Grooming Children for Success http://www.danijohnson.com/nextgen/homestudyprogram.php
Dani is a success coach for peopple and multimillionaire. She is also a committed Chritian so she uses the Bible in her program.
If you just want a little coin bank, this is a good one: http://www.christianbook.com/Christian/Books/product?item...
We have learned one very important tip. Don't ever say we can't afford that to a child. Say we choose not to buy that so they understand that money spending is a choice and to not just spend on every whim. They will understand people can control the spending/giving of money. Lastly we have set up home businesses for our children. Their goal is to graduate from high school with 10K per month. We use Mannatech for this: www.mannapages.com/helath4u (my 10 yr old's site) They understand a lot from reading them adult books. I would also suggest the Go Giver by Bob Burg, The Richest Man in Babylon by George Clason, & Rich Dad Poor Dad by Robert Kiyosaki. Hope that all helps some.
Blessings ~ S. ###-###-####

2 moms found this helpful

Hi R.,

I saw this book on Amazon and it got good reviews. It's called, "Raising Financially Fit Kids" by Joline Godfrey. Here's the link...(you'll have to copy and paste into your web browser)

http://www.amazon.com/Raising-Financially-Kids-Joline-God...

Best wishes...

2 moms found this helpful

I have 2 suggestions I have used. www.moonjar.com has a little "bank" to use divided into 3 sections for spending, saving, and sharing. www.richkidssmartkid.com has a financial literacy program, including online games for kids (better for older kids).

2 moms found this helpful

One thing I'm teaching my children (5 and 6) about money is to divide what they receive into three parts--giving, saving, and spending. They get money from a small allowance, recycling, gifts, etc. The division we use is: 10% to their giving bank, 50% to their savings bank, and 40% to their spending wallet. (I figure out the portions for them, of course.) And I've set a minimum limit that they can only spend their savings bank when it reaches $10 (which could take at least 2 months at our rate--they only get half their age in allowance each week and rarely get money gifts).

The good thing about this is that they are always aware of giving. I also don't have to hear whining in the store any more about all the things they want. I only need to ask, "Oh, is that what you are saving for? How much is it?" I don't have to feel pressured to buy them toys because they know they are the ones doing the buying now.

I did a lot of searching online about teaching money management, and the article I liked best is this one:
Children and Finances, Part 1 http://www.crown.org/LIBRARY/ViewArticle.aspx?ArticleId=342
and Part 2 http://www.crown.org/LIBRARY/ViewArticle.aspx?ArticleId=343
If you don't do a regular allowance, you can still use the ideas for teaching them with their gifts or other money. Best Wishes!

2 moms found this helpful

Hi, R..
My daughter is 10yrs old and we started something similar to what other mom's have said, several years ago. First though, we made it very important that our daughter (our only child) knows that she is doesn't get "paid" to do chores but that she earns money by being part of the family and helping the family. We didn't want to get into the battle that "if you don't clean your room you won't get .50 cents". It's more that we ask her to do certain things around the house, some on a regular basis and some occasionally, as part of our family and then at the end of the week she'll get her allowance. If she doesn't help with the family "stuff" she'll nothing.

We pay her $3 a week. Ond dollar goes into her "fun money" bank, one dollar goes into her "gift" bank, and one dollar goes into her "savings" bank. The fun money is for her to do what ever she wants with. She has learned that if she saves some that she get more for her money than if she spends it as she gets it. The gift money is mainly used to buy her dad and I presents, either for Mother/Father's Day, birthdays, and Christmas. We usually match was she has but it makes her feel important buying a gift with "her own" money. The savings money is collected and a few times a year we take it to the bank. She actually gets excited now to see the statements. Also, any money she is given as a present usually goes into her savings, with part of it going into her fun money. The savings money can't be touched until we say so, like for a purchase of a car or for college...something major.

You might even contact some banks/credit unions. They sometimes have programs for kids to learn more about money. I think KeyPoint Credit Union does. I know they used to have a summer program. Good luck!

M.

2 moms found this helpful

R.,
One of the things that you could teach them is the value of giving to others. That is a big goal of mine in teaching my kids not only the value of money, but even more importantly how to be generous and giving to those less fortunate.
Some ideas might be to come up with a % breakdown of what is for spending, saving in an education fund and for giving back. I know there are a lot of organizations that are doing drives for new clothes for foster kids etc. It probably would be really exciting for your kids to actually buy a pair of shoes or something and then go and drop it off at the donation spot.
Just a few thoughts . . .
Regards,
D.

1 mom found this helpful

R..

Now this is a subject that I am passionate about. You may have heard of the Book Rich Dad Poor Dad. It is an amazing book that addresses this subject. They have a board game for adults and a board game for kids. We have been playing them for years and have learned a TON!! I recommend them to all of our friends and family and they have all fallen in love with these tools. You can vist his website at http://www.richdadpoordad.com/Store/Catalog.aspx?ProdType....

I hope that you have as much fun as we have.

God Bless,
C.

1 mom found this helpful

My kids are a little bit too young to really "get it" yet (they still think quarters are better than dollars because quarters are shiny), but when I was a kid, I received an allowance that was not tied at all to chores. My parents' idea being that chores are something that kids have to do to help run their household, not some optional thing that they're going to get rewarded for doing. Second, that kids should be able to spend their allowance in whatever way they want. Even if mom and dad disagree. I remember spending my money on some really dumb stuff, but eventually learned all about saving up and budgeting. My parents would buy me school clothes, books and that kind of thing, but the "nice to have" items had to come from my allowance. My mom's famous line whenever I asked her to buy me something: "Do you have any money to pay for it?... No? Well, either do I!"

1 mom found this helpful

My 8 year old and I love to go yard sale shopping. It is a great way for her to learn about value, estimation, making change, and talking to people. She usually brings about $3.00 if she has it saved up (or sometimes I give her a few if she has none), she carries it in her purse. She checks out the prices of items and decides if she wants to spend that much, she pays the person and gets the change. You would be amazed at how much a cute kid can get for a dollar. Keeping that in mind don't let them bring to much money (less than $4 is good) or you will probably end up with a lot of "junk". This way you can teach a lesson without spending $20 on a new toy at the store.
Good luck, have fun.

1 mom found this helpful

Hi R.,

I got this idea from a friend of mine. Open a bank account for each of the kids. Every time they get money (chores, gifts, jobs) have them put 1/2 of it in the bank. This will teach them to always put money into a savings account first. The remaining money, let them spend it on things they want like treats, toys, etc. Once her son graduated from school he started paying rent, my friend put the rent money into another savings account for her son (He doesn't know about it). Now when he needs to borrow money she has it to give to him, but he has to pay it back, when he is ready to purchase a home or get married, she will give him the balance. I thought this was a great idea!! Also, if the kids have a lot of toys they don't play with have a garage sale and let them sell their stuff. Put half the money in the bank and let them spend the other half to buy something new. Let them buy what ever they want. Now is the time for them to make mistakes and learn when the lessons are small.

I hope this helps!
L.

1 mom found this helpful

R.,
I read an article about what the Rockefeller's did and we are going to do it when my baby is older. My brother is doing it with his kids now. Get your kids 3 piggy banks. When they get money from relatives or allowance, they have to split it up between the 3 banks. 1 is savings, 1 is spending and 1 is charity or church. They have to put at least 10% in charity. They can split up the savings and spending any way they choose. They will soon find out if they put it all in spending and it runs out right when they want to buy a new toy that they will have to start saving more for those times. Include your kids in conversations about money - like paying bills or buying groceries. Show them the price tags and compare shop and get their opinion and include them.
Good Luck
D.

1 mom found this helpful

Tell your kids the "Penny" story -- I read it in People Mag. probably 20 years or so ago, but I've always remembered it:

In brief: A man had a daughter he named Penny, and after she was born he saved every single Penny he ever encountered. By the time she was a teenager he had enough money saved to buy her a car, which he did.

I've told my kids that story -- one of them picked up on it right away and has become a total tightwad, and the other two -- well, not so much. So no guarantees. But it's a cute story.

1 mom found this helpful

R.,
I beleive that it is never too early to start teaching your kiddos the value of money and the responsability that comes with it. So way to go! I have four little ones 7 and below and am in the mist of this very same issue. Since you have the stars in place, (we use marbles) you may want to have a "pay-day" once a week (say Fridays) and give them 5 cents per star or you could just give them a weekly allowance. Them teach them the 10-10-80 rule (but adjust as you see fit). Have them save 10%, give 10% away, and spend 80% on a toy. . .you may want to change this to 40% save, 10% give, 50% spend - but I always encourage my kiddos to pick an item at the store and I remind them on "pay-day" that the item cost this much, you have this much. . .lets keep saving so that we can buy it. I discourage taking $$ to the store and picking out items as it reinforces the GOT TO HAVE IT NOW and they usually don't really want the item, it was just appealing at the time. I think they build an appreciation for items they save and buy on their own. Also, if you attend church you can have them put 10% into the offering or if not, sit down and talk to you kids about the importance of giving to a charity and let them pick a charity they want to give to. Lastly, the savings. . .start a savings account for your kids and let them make the deposits into the account monthly and you can show them how interest is added monthly and such.

Good luck. hope this gives you a few ideas.

1 mom found this helpful

I just wanted to agree with everything that has been said. Especially Allison who said they have to learn from experience. Our kids (7 and 8) are only allowed to spend a portion of their money but already they have learned a lot with some wise and not so wise purchases.

Another rule we now have....if their rooms are not picked up before bed, I take whatever is on the floor and hide it. If they want it back, they have to buy it from me (nickels and dimes). It is a good way to start lessons in money and also a huge one in keeping your room clean.

1 mom found this helpful

Hi R.,
I work with lots of school aged kids and one of the ideas I got from a parent is to use a piggy bank like this one: http://www.amazon.com/gp/product/B0002HRWBQ?tag=cc-bad-20 It makes the conversation about what to do with money really concerete.

I also recommend that you check out Kiva.org as a potential place to donate/invest. It is very real to kids and teaches so much about social respondsibility and connection to the larger world.
S.

1 mom found this helpful

All the advice given is excellent. If you want a book, buy Larry Burkett's book for children. There is also a bank available through him with the 3 places for savings, spending, and charity. You can go on christianbook.com and look up Larry Burkett. Good luck!

Start with having them save a percent of everything they are given - you pick the percent. I had my kids start saving for college, a car, whatever( it needs to untouchable and long-term) AND I would have them donate a percent to a charity of their choosing.

Then and only then, they get to spend their other money on whatever they want.

Great lessons to be taught early - good for you!!

I've used the idea of 3 "jars." When my son earns money, we break it up into 3 portions. We donate 10% to a charity (for us, it's church), save 40%, and he can spend 50%. He can either choose to save his 50% and add it to other earnings, or he can go out and buy whatever his little heart desires. At this point, (he's only 5 1/2) he just wants to spend whatever he gets. Definitely not a saver. We keep his savings jar in the kitchen so it's not a temptation to him. We'll keep his savings safe (and put it into an account once it's a big enough amount) for many years and when he's old enough, we'll let him use it...maybe towards a car? Something big, at least!

By this age, my daughter was getting an allowance that she had to break into 4 catagories: discretionary, short term savings, long term savings, and charity.

Her allowance is broken up approximately 30%/30%/30%/10%

Discretionary money she can spend on anything she wants.

Short term savings she can spend on things costing at least 4 weeks worth of short term savings allowance. She can't buy on impulse with this money-- she has to wait a day to buy something, even if she has the money to cover it. She figured out within a month of starting to get her allowance, at age 3, that if she put her discretionary money with this money, she got what she was saving for much faster.

Long term savings is for college.

Chartible is for whatever charitable cause she wants to give it to. She's bought a present for a child through the Family Giving Tree, she's given money the the Red Cross for disaster relief and to the Humane Society to help animals.

I really think this structure for her money has helped her learn how to handle it.

I am a divorced mother of 8 year old twins and a 9 year old (all boys). On Saturday mornings after they do the chores we have Saturday morning payout. Its time for their allowance, but the first thing they do is get there banks. I make sure that the denominations of money is in $1 bills and change. After we go over the star chart I will call one of the boys to the front of the room I will say some very positive things about the week and things he needs to work on we all clap for him and he gets his allowance. I will say "ok what do you do first". His response will be "pay yourself 1st". I allow him to choose how much money will go in the bank. He will get to spend the rest on whatever (not candy). Once a month we go to the bank and make a deposit. Any extra money that they get, they must pay themselves first, then they can spend the remaining amount. They love it !!!!

One of my fiends has three jars for each child. One is for savings, one for charity, and one for spending. They divide it up 80% savings, 10% spending and 10% charity, I think but obviously you could do it however you want.

Good luck!

Hi R.,
I just wanted to tell you that my dad opened up accounts for my sister and I when we were 8. So I have been a member with my credit union since then. Some banks have kids savings programs- mine did. We didn't get an allowance so our money came from holidays and birthdays.

In terms of spending it I think you should let them spend a portion but maybe explain the importance of saving and maybe just have them keep a minimum in their accounts (if you decide to go that route). Most accounts require a minimum of $25. Anyway, I think it is great you want to teach them about money. Good luck!

http://www.prosperity4kids.com/moneymamabookpiggy.shtml

Here is a book and piggy bank that outlines 4 accounts. Savings, spending, donating and investing. It is an adorable mamma piggy with 3 baby piggys. Get one book and 2 banks. We did it with our children and had them read the book then we discussed it. you put different percentages into each bank.

Try "Moneywise Kids" it's a game for kids, but might be too old for yours?? Try amazon.com or something like it and search money games. There are a ton of them and kids usually love playing with money and budgeting!

My kids do tend to get money from various relatives, so I've started splitting it with my kids or cutting it in thirds. I put 1/3 in the college funds, 1/3 in the regular savings and they get to keep 1/3 at home. My son is still a little young, but with my daugther, if it was birthday money, I let her buy one thing from the money that is "frivilous", otherwise I have her keep her 1/3 of the money in her piggy bank.

This spring, to teach my kids about spending their own money, I had both of my kids take $10 of their own money to a local carnival for rides/entertainment. My in laws had spent a ton of money the prior year on rides and food, so this year they paid for food and the kids paid for their own entertainment. It really taught them about making choices with their money. They picked different things. It was very interesting to see which one was cautious, which one was done quickly, etc.

I also let my daughter (age 8) buy things she really finds important with her own money (not toys). For example, she wanted to have a color year book this year and it was $10 - she used her own money to do it. Same goes for a birthday party she went to where the birthday girl wanted to make a donation to an animal shelter in lieu of gifts because her cat had just died. I gave her what we would have spent on a gift and then my daughter put an addition $5 of her own money in the donation - it was completely her idea. I think if you set up guidelines for the money you let them keep around the house you can teach them to be responsible about the money they have.

Here's a cute little book I stumbled upon. It's titled "Rock, Brock, and the Savings Shock". It has great rhyming text and a really good message about money, including valuable interest charts. I got mine from Amazon as a gift for a friend who was having a baby named Brock, and she read the story at her shower and everyone (many teachers in the room) loved it!

HI R.,

One of the things I will teach my child is social responsibility. Sure, I would let him buy what he wants but he should be saving some of his money and finding a charity to donate some of his money as well. They sell piggy banks (Babies R US online) that have 3 sections, save, spend, and donate. A portion of his money should go to each that way he is learning to save, but to give as well. The more generous you are the more you will see in return (at least that's what I believe and plan to teach my daughter). Good luck!

When I was your son's age my parents gave me an allowance each week and taught me the basics of budgeting by having me split my allowance into three categories. I put a portion in my piggy bank for saving towards the future (college), I put a portion in my wallet for spending, and a portion in another container for charity. I remember the amount starting off fairly small. The spending money was just enough to buy an icecream at school (75 cents) so I had to make a choice between buying a treat or saving for something bigger. I feel like this got me off on the right foot where money in concerned and am planning on doing the same thing with my two kids once they get a little older.