Teaching kids about money, specifically, how to wisely spend and budget money can be one of the most challenging tasks. Until they reach a certain age, kids don’t have a good grasp on impulse control and they want to spend their money on everything they see. Let’s be honest and say that a lot of adults have this same problem! 😉 I believe that a big part of the problem is that most kids don’t have much experience with money. They may get $20 from Grandma at Christmas, but that’s about it. Our kids need to have the opportunity to practice with money in order to learn those good spending and saving habits. After all, it’s much easier to develop good habits while in their youth when the costs of their mistakes are low.
I realize there isn’t a one-size-fits-all method when it comes to kids, so I’m going to share a few different ways to help your kids earn money. Then I’ll explain how to teach your kids to wisely spend, budget and save the money they earn.
TEACHING OPPORTUNITY #1: CHORE VALUES
(This list above is similar to something I came up with for our kids a few years ago. If you like the values assigned, go ahead and download this list for free!)
Create a list of all the possible chores that could be done around your home and assign a monetary value to each. Then, place this list somewhere visible, so your children can choose how much money they’d like to earn. If there’s something they want to buy, instead of slapping the charge on your credit card, tell them to choose from the chore value list. Then, then can buy the item with their own money. By doing this, the child has to weigh out whether the time they’d have to spend doing chores is equal to the value of the toy they desire.
This approach was something my parents implemented in our home when I was growing up. If a friend called and wanted me to go to a movie with them, my parents didn’t just hand over a $20. I had to work for it. Sometimes, I had to complete everything on the list just to get enough cash.
Disclaimer: I think that kids should be expected to help around the home or have “chores” without expecting anything in return, except our gratitude. This chore value list is above and beyond their regular duties.
TEACHING OPPORTUNITY #2: ALLOWANCE
When our oldest child was about ten years old, Mr. Maven and I decided to change our tactics and give our children an allowance. They receive a monthly allowance, based on their grade in school, which allows them the opportunity to learn how to prudently spend, save and budget their money. This allowance is not tied to any chores or responsibilities. However, we have deducted funds from the monthly total when they’ve broken things, lost things or wasted food carelessly. The reason we chose not to relate their allowance to their chores has to do with what I said above. Everyone contributes to mess, dirt and wear and tear on the home and as such, should all be responsible for fixing, cleaning and generally taking care of it. No one is going to pay you to make your bed and brush your teeth when you’re an adult 😉
From this allowance, we encourage our children to give 10% in tithing (part of our beliefs: https://www.mormon.org), to save at least 10% (in their bank account or piggy bank) and then they may spend the rest how they please. As a result, our kids have purchased their own iPods, Fitbit and many other toys. In addition, they’ve opened savings accounts and college accounts with some of their money.
Over the past almost four years, they’ve really gotten the hang of saving up for things they truly want and forgoing things of lesser value. They’ve also had the opportunity to give through tithing and buying things for others. I will say that our nine year-old still has an issue with the money burning a hole through her pocket, but she’s become a lot more generous. Almost every month, she buys things with the purpose of sharing them with us or her school friends.
TEACHING OPPORTUNITY #3: JOB
Now, I know some of you will say, “Lauren, you’re crazy! My daughter’s only 8. She can’t get a job!”. Well-you’re wrong! Sorry 😉 This picture above is my oldest daughter in 2015. I responded to an email that a distant neighbor sent out to our “pet network” looking for a dog-walker/sitter. Although my daughter was only 10 at the time, she’s a huge animal lover and had been involved in training and walking our lab and a service dog. I didn’t know if my neighbor would go for it, but surprise! My daughter had a summer job, two summers in a row. She was able to save up for her own iPod.
Have your child can use his or her creative little eight year-old mind and skills to earn money. Is s/he a great crafter or knitter? Help him or her sell things on Etsy. Does s/he love to play around in the kitchen? Set up a lemonade or hot chocolate stand. Help him or her sell unused toys or games on eBay or Craigslist. Have your son or daughter petition neighbors to rake leaves, mow lawns, shovel snow, help with gardening or other household chores. Maybe he or she could walk dogs or pet-sit. The options here are endless.
My kids have gone around the neighborhood on occasion, looking for such opportunities. Just last summer, my daughters made popsicles and little chocolate bars to sell and our neighbors bought them out! We also have a community newsletter where my daughters babysitting and petsitting services are advertised for free.
TEACHING KIDS ABOUT MONEY: THE STEPS
Once you’ve established what works for you and your children, make it a habit. You may discover that having a chore list with assigned monetary values is a win-win. Or maybe, you want your children to learn to find creative ways to earn money. You know your kids best, so make it work for your family.
When your child acquires money through a job, doing chores or allowance (or some other way), sit down with them and talk to them about what their plans are with that money. How much are they going to spend? Are they going to save any? Is there something big they’ve been wanting that they should save up for? After you’ve heard them out, I would suggest providing some strong parental guidance 😉
STEP 1: HELP YOUR CHILD OPEN A SAVINGS ACCOUNT
Being able to save and not blow through your money is a practiced, learned habit-not a talent. There are always things your child is going to want to buy, but teaching them the importance of saving with serve them for life. Saving money will teach them patience and perseverance; traits that are often lacking in our instant society.
Our kids have two accounts; a regular savings for big ticket items like a phone and a college savings account that earns a little interest. When we give them their allowance, we encourage them to put 10% into each account (or more if they desire). The 10% rule is nothing new. I remember my parents teaching me this same thing when I was young. It’s a great starting point. If your kids are doing great at 10%, suggest they try 20% to achieve their goal even quicker.
STEP 2: BUDGETING
I don’t know about your kids, but at least one of mine seems to want everything on the planet. If someone else has it, this kid wants it! Sitting down with your child and helping them budget for the things they want is essential to helping them understand how to use their money wisely. It’s a great time to teach the important differences between needs and wants.
Grab your computer or phone, open up a note and have them type the list of things they really want to buy. I try to ask them questions about the items such as: what will you use it for? How long do you think it will last? Is it worth your money? Are you still going to want it in 6 months? Asking questions forces your son or daughter to examine their true reasons for wanting the item. In many instances, upon answering my questions, my child will decide it’s not really a worthy purchase after all.
Once they’ve chosen their goal, figure out with them how long it will take to earn enough money to purchase the item they desire.
STEP 3: SPENDING
(This may seem like a no-brainer, but helping guide your child’s spending habits is super important! Real life example: every single time one child in particular receives money, they spend it in one exciting trip to the Dollar Tree. And every single time, this child is incredibly sad later in the month when they don’t have the money they need to buy ____ item they see at Walmart, etc.)
Ultimately, the choice is up to your child, unless it’s something you just don’t allow in your house. (We have a rule about our kids only buying one sugary item per month with the allowance we give them.) However, you can still ask them the same questions I suggested in the budgeting section. Do you need it? Is it good quality? Are you going to actually use/wear it? Allowing children to spend their own money gives them the opportunity to learn about return policies, quantity or quality and even helps them improve their math skills.
- Allow your kids the opportunity to practice earning money (chores, allowance, job using their talents)
- Open a savings account for your child/ren; encourage them to save
- Help them budget for things they want by calculating the time it will take to earn enough to purchase
- Ask thought-provoking questions to encourage wise spending
I’m not a finance expert, but in my “mom-fessional advice”, I’d say that now is the most important time for you to start teaching kids about money. If they’re in first grade or higher, then they’re old enough to understand the basic concepts. Teach them how to properly budget, save and spend their money so that they can develop good lifelong money habits. Your kids will enjoy the opportunity to have a little money to spend and you’ll love being able to say “no” to the million little things they want at the grocery store without feeling even a little bit guilty.
What are your techniques for teaching your kids about money? Are there some I haven’t included here? Let me know if the comments!