Teaching Children about Money

A lot of things have changed in the past four years, and not just for me. While a lot has changed for me personally (my wife and I have finally founds some ground to stand on financially and in our careers), even more has changed in our society. The recent recession caused many people to re-consider their finances. While it was a difficult time, I think many people are starting to recover from the huge losses that they faced.

Even though the stock market is back up (for the most part), everything isn’t back to normal. There’s an increased awareness of financial responsibility if you look around. Not only among adults, but also among adults teaching their children about money.

teach children about money

My Nephews Learning about Money

While I am far away from most of my family, the popularity of Facebook has allowed me to stay up to date with my nephews’ lives. It was just a couple of months ago that I saw this picture (above) posted by my sister-in-law. It’s a picture of my two oldest nephews learning to deal with money. While I didn’t get a chance to talk to my brother and sister in detail about their plan to teach their children (my nephews) about money, I did gather that they are implementing two big changes as my nephews get older.

Allowance

They are issuing them an allowance. It isn’t just a free gift to their children, but they are letting them earn money by helping out around the house. My nephews are now eagerly doing the dishes and any other chores that they can do to earn the precious dollars. It’s really amazing what kids will do for a few bucks, isn’t it?

I remember when I was a child, my brothers, a friend of ours, and myself would all work together to wash cars in the neighborhood. We would get $5 per car and those precious five dollars would go toward our next Nintendo video game. In one summer, we accumulated a lot of games just from our entrepreneurial efforts. While we spent all of our earnings that summer, I wouldn’t trade that experience for the few dollars that we could have saved. It taught me more about setting and reaching financial goals than anything else.

Give. Save. Spend.

My brother and sister have also done a remarkable thing, with simplifying the budgeting process. As you can see in the picture, they have designated a certain percentage for giving, saving, and spending. 10% in the giving jar, 50% in the saving jar, and 40% in the spending jar. It’s simple and effective. Not only does it teach them about how much to save, spend, and give, but I imagine it is teaching them about percentages and basic math calculations. The clear jars helps them visualize their success as well. I imagine them receiving a few dollars for their chores and racing to put their money in their jars – whether that happens or not, I will have to see next time I go visit.

How to Teach Children about Money

While I am no expert, there are many ways to teach your kids how to manage their money. Here are several tips to keep in mind when you are making your plan.

  • Keep it simple – A plan that is too complicated may make them lose interest. You have to remember that it will take years to teach them everything. Don’t try to do too much at once.
  • Make it Fun - There’s nothing worse than making kids bored with dealing with money. By creating games or showing your excitement, it can help them also feel excited about learning how to use money.
  • Let them DO something - The best way to teach children about money is to let them actual do something with it. Whether it is giving them dollar bills to visualize and put in a jar or something different entirely, the key to remember is that they should be using it. If it’s not real or tangible, it will be more difficult to grasp financial concepts.
  • Help them Set Goals - I love financial goals. I think a great way to teach money to children is to help them realize their goals. Whether it is saving up to buy a video game or to help build a well in Africa. Kids need a goal to get them motivated.
  • Personalize Your Plan - Make the plan for YOUR kids. Don’t just find a plan on the internet and use it if it isn’t relevant to your children. Telling your kids that they are going to save up for a skateboard when they don’t like skateboarding will teach them the wrong things. It has to happen organically.

For those of you who have kids, what other advice can you lend to readers wanting to teach their children about money?

8 Responses to Teaching Children about Money

  1. These are great tips. Our oldest is five and we’ve recently started teaching her and our other kids about money. For young children, the goals really need to be concrete to help them understand. We’ve always had a change jar and generally use the build each year for extra spending money for vacation. That really helped our daughter start to understand the power of money and that if we save we can accomplish goals.

  2. We are about to have our first child and money is going to be something that I am going to try and get her to learn about as early as possible. Making it fun is the most important part because you have to be able to keep their attention or it just wont sink in for them.

  3. My parents taught me about money by giving me an allowance and letting me blow it by spending it on stupid things. By the time I was about 7 or 8 I realized I didn’t want to buy candy and junky toys anymore. I started investing in stock when I was about 10.

    I am very thankful for what my parents have taught me about money. I’m on track to graduate debt free from college. Not that it’s been easy turning down my dream school-but it’s been worth it.

    • Chase

      My parents did the same exact thing. It was actually a suggestion from a teacher.

      He told my parents no matter what I did always give me an allowance and to never buy me anything other than essentials (food, clothing, etc).

      As you pointed out, you learn at a very young age that miscellaneous things such as candy etc aren’t worth spending your money on when you have a savings goal in mind.

  4. This is great! I remember when I was a kid my parents did something similar with me and I believe it gave me some of the core financial skills that I have today.

    I also really like the idea of a “give” jar. I never had one of them growing up, but I think it would be the most satisfying of all the jars.

  5. Corey

    As always great insight. While our daughter is only two years old, we plan to teach her financial responsibility very early. I believe one of the things that made me so passionate about investing and personal finance was the fact that my parents made me earn everything I ever received.

  6. Melissa says:

    We do something like this with our son too. The other thing that he really enjoyed was Dave Ramsey’s Financial Peace Junior. He loved the stories and learned quite a bit too.

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