It’s important to teach children how to manage their money.
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Around 8 months ago, my 6-year old son walked into our family room with a big stack of twenty and ten dollar bills, close to 200 dollars worth! I immediately gasped and thought, “Holy smokes, my son held up the local 7-Eleven.” But he soon informed me that the money was from his piggy bank. You see, his grandparents have been giving him money on birthdays, and other special occasions, and he has been stashing it away. Mainly because he did not know what else to do with it. It was a ‘light bulb’ moment for me as a Dad, and I was a bit disappointed in myself that it took me so long to get on board with teaching him about financial responsibility.
Since that day, my wife and I have been working on some money concepts with him. If we start talking to him now about what each dollar in his piggy bank is worth, and letting him buy stuff with his own money, he will develop a better understanding of personal financial responsibility. But more than that, I want him to understand that money will not just be given to him for the rest of his life and it needs to be earned.
I have seen personally how teenagers go away to college, armed with credit cards, and have no firm grasp on why they should stay out of debt, or worse, any concrete plan on how to pay off the credit card bill each month. So the downward debt spiral begins. I don’t want this to be my children and we are doing the following to hopefully keep it from happening.
~ Concept of Savings. The first thing we did was take $50 from his stash and we went down to the bank and opened up a savings accounts for him. It was a great opportunity to introduce him to the concept of interest and how his $50 can be used to make even more money for him. Plus, he found it fascinating how the bank holds on to the money for you and keeps it safe for when you might need it in the future. Our plan is to have him add more money to his account every few months and let me look at the statements and see how his savings is growing.
~ Teach Them Good Buying Decisions. Our son needed a new bicycle as he outgrew his old one. So we told him he could use his money to buy himself a bike. So off we went to several stores to do some research on the type of bike he wanted. The bike he wanted, equipped with gears, and all the bells and whistles, would have used up all his money. Upon telling him this, his immediate reaction was, “That’s OK, I want this bike, I can use all my money on it.” I then sat him down and explained to him that he could make that decision or he could buy a cheaper bike, but one that would still work great, and have money left over to buy something else he may want in the future. Initially, that was a very hard concept for him to understand because he was so enamored with the expensive bike. He was in the ‘I want it now, give it to me now, my life will suck without it’ mindset. Heck, I am the same way when I see the new flat screen plasmas at Best Buy! But we were able to talk it through, and in the end, he realized that the cheaper bike was just as good, and he liked the idea of having money left over for a snowboard this winter. Real world buying decisions and there consequences were on full display that day!
~ Let Them Earn Money. My wife and I gave our son the option to collect, sort, and turn-in our recyclables as a job in which he could earn money. He took to the job immediately and does a great job collecting and sorting the cans and bottles. Every couple months, I help him load the recyclables into my truck and we take them down to the local recycling center and he helps the man unload the truck. He then gets to sign his name on an “official paper”, gets a piece of candy, and usually around $20 per trip. You can see in his eyes how proud he feels upon completely the task and earning money in the process. It has been a great learning experience for him and I encourage you to do the same thing with your children.
I have found the most important thing is to keep it at their level and talk about money in a way they can understand. What techniques do you use with your kids when it comes to teaching them about being responsible with money? Looking forward to your comments and suggestions!
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Photo by theritters.
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I really need to work on this more- thanks for the inspiration!
Hi! I have two boys. When oldest turned 3 I started giving him allowance $1 per year of age (at that time $3 a week.) $1 goes to God (to church) $1 into his own savings account, $1 for spending. Each year they get an extra $1 per year of age. They have to buy all the stuff they want themselves. I remeber my now 10 year old when he was 4, he had saved $3 for spending. He wanted cookies in the store that were $3 I said he could afford them, he thought about it and then said no I can buy 3 things at the dollar store. I was so proud. This helps when they want stuff in stores, I say “did you bring your money?” Then they can’t get mad at me for saying no (they still do sometimes.) My older son does odd jobs for people and has bought his own Wii and 1/2 his tuition for summer camp for a week. They so get this concept. Now the 10 year old gives $2 to church $2 to savings and $6 spending. My 5 year old does $1 church $1 savings and $3 spending. This works great for our family. And my kids are pretty good with there money.
Also at home they each have 3 banks to put each dollar until we go to bank & church. -Becky
One other thing we do is we have a sponser child and this helps them to understand how much we have and how little others have.
And at Christmas we pick a charity to raise additional money for (we love Samitan’s purse gift catalog, for gifts we buy things for others in our family members name, last year we bought blankets and sports equipment as gifts for the grandparents, my kids picked what they wanted to buy -you don’t actually buy you pay to have those items sent where needed.) This helps my kids think about others too, and the grandparents love it because they really don’t need anymore gifts from us.
What is a good age to start teaching the kids about money? My two and half year old tears paper to pieces but when it comes to money she holds on to it. It’s amazing to watch her how she folds them and stacks them away.I don’t know how she learnt the concept of money but it’s fun watching her.
I just heard of a new “toy” for kids that could be a great teaching tool when they are of age to learn about debit cards. It’s a piggy bank that works like a little ATM machine. If the child wants money, they insert a card to get the money and can see how much they have left.
I have a friend whose son wanted her to buy something. She said, “I don’t have any money right now.” His 5-year-old response: “Just go to that machine and get some.” Kids don’t understand that the money doesn’t just appear like magic. I think this piggy bank would be a good way to help them to understand that you can’t take out what you don’t have.
Hang on, *I* want the ATM piggy bank! :) (Some strange part of me wants to start collecting piggy banks and filling them all with change… Too bad piggy banks don’t generate interest.)
This is another thing I don’t want to have kids for, I’m an awful teacher sometimes… I never got an allowance as a kid, but when I was around 13 or so my Mom started letting me watch her handle the finances. I watched the whole struggle with debt and everything enough to learn I didn’t want it myself! I also learned how to save money, clip coupons and grocery shop, though I still have a long ways to go before I reach my Mom’s level of grocery shopping.
I always liked getting change as a kid and putting it in my piggy bank, the sound it made going in was always satisfying to me. :) I still love that noise too, so I still save all my change! When I was little, a penny was a precious resource, why should I look at it any different now?
It’s disappointing that the article nor any of the comments so far, mention encouraging the child to have a special savings to pay for their own college. Making the connection between how much money you make and how good your grades are, and what major/career path you choose, and extracurricular activities you do, should be started early and reinforced throughout the child’s life in the parents household. Knowing that you have X in the bank for college, and based on what you want to do, you are going to need stellar grades to get the scholarship to help you attend the college of your choice, because you don’t have enough savings, is a bigger motivator to get better grades than any punishment the parent can meet out.
But more than all that, it’s a way of focusing the child on self investment. Savings for a rainy day, or a toy, is just savings for consumption. Savings for college or starting a business is about investing in your self and funding your own dreams.
Bonnie, I wrote the article and I completely agree with your points and that will definitely be part of the teaching for my son as he gets older. Gotta crawl before you can walk though.
Great post about how you’re teaching your son about money and saving. It’s funny how I’ve already done this with my oldest who’ll be 17 very soon and realize that I have to start all over! My younger children are 4, 3 and 1. It’s time I start with the two middle ones ’cause they’re always asking for stuff… absolutely no concept or understanding of “we can’t afford that right now.”
I like how you set your son up with a job where someone else pays for his work. He’s really able to understand that most of us work for our income in a way he might not if you just dole out an allowance. Nice job!
I believe teaching kids about money is a must for any parents. If you teach your child how to spend and manage money wisely, not to save it, he will learn from your example that money needs to be earned. I also think that it can be a good idea to pay your child for helping you with some chores, so that he has some money to spend and to save :)
Wow. You are doing a great job teaching about money. It is our responsibility as parents to teach our kids financial responsibility. I would encourage to teach them about giving back.