It was the week before Christmas and I had to make a quick stop by CVS with my 3-year-old in tow. As usual, he made a beeline to the toy aisle. I reminded him that Santa would soon bring plenty of new toys, but he wasn’t taking no for an answer. When I put my foot down, I had to drag my screaming son from the store and listen to wails during the whole drive home. The situation stunk, but it was the wake-up call I needed. I talk to my clients about money every day, yet I hadn’t said a word about it to my own child. Mom fail! As soon as we got home from the store, I started researching teaching kids about money.
How you teach your kids about money depends on their ages. You might give your child an allowance or tie their allowance to chores. Some people don’t like the word allowance because they feel it suggests entitlement. Others believe children need to learn that being part of a family means participating in caring for the home, so tying money to chores is a mistake.
No matter what system you choose, there are three essential aspects of money that your kids need to know: spending, saving, and giving. We use a Moonjar bank with one jar for each category, but you can easily use mason jars, envelopes, or whatever you have on hand. What’s important is that your child learns to divide their money between three different categories.
For very young children, the spending jar is used for small purchases like candy and stickers. As they get older, you can start teaching them about opportunity cost. If they spend all their money on one item, they can’t also buy another.
Young spenders will make mistakes. Your child might be set on buying something you just know they’ll quickly lose interest in, but remember that these are lessons your child needs to learn, too.
When your child is young, the saving jar is not for college or a car. Concepts like that are too far off for a small child to consider. Save those discussions for when you have a teenager talking about what kind of car they want.
For preschool/elementary aged kids, saving means setting goals. Let them think of something they want, maybe a lego set or a doll outfit. Make sure it’s not so pricey that they won’t be able to afford it for months. If they do want something expensive, consider offering to match their savings so they can reach the goal in a reasonable timeframe.
Every time your child adds money to the jar, count up how much they’ve saved and talk about how much they need to reach the goal. The anticipation will be fun and teach patience.
Let’s face it, living in beautiful Scottsdale, it’s easy to forget that not everyone has this life. Kids growing up with so many comforts and conveniences need a reminder of how lucky they are from time to time. This is where giving comes in.
This year, we took part in the “Angel Tree” at church and selected a boy just a couple years older than our son. The soccer ball we purchased sat on our table for a week and every time our son asked about it, we reminded him that we were giving it to a little boy whose family couldn’t afford to buy one. Did he really “get it?” I’m not sure, but when it came time to turn in the gift he happily handed it over.
Teaching your kids about giving should happen year-round, not just at the holidays, and they need to see you act on it, too. Where you donate your time and money will depend on your own values, but whether you give to your church, a food bank, animal rescue, or anywhere else, talk to your kids about where you give and why. Let them choose where they donate their money, and let them see first hand where their money goes.
Teaching kids about money is a huge responsibility for parents. If you’d like to do more research, here are some great resources:
Smart Money Smart Kids by Dave Ramsey & Rachel Cruze – Dave Ramsey’s is America’s trusted voice on money. In this book, he and his daughter Rachel cover everything from the basics of spending, saving, and giving to more challenging issues like avoiding debt and paying for college with practical advice for kids of all ages.
FamZoo – While I haven’t personally tried this service, it sounds pretty interesting. FamZoo is a virtual family bank that helps busy families teach kids good money habits. For a monthly fee, you can automate allowances, give rewards for chores and odd jobs, and even give your child a prepaid card. Since our children will most likely be using cards or other technology to pay for things rather than cash, FamZoo helps them learn to make the mental connection between money and “plastic”.
The Centsables – This interactive website features games, animation, and hands-on activities designed to help teach kids about financial literacy.