How Do You Teach Kids About Money?
Posted by Cap in Personal Finance |A reader’s request:
I was wondering if you could post a question to your readers? I never learned as a child, teenager or even as a young adult how to handle money. So for YEARS I just had a lifestyle of just blowing money and never saving a dime. I’ve even made the same mistake with my older children, but now that I am able to control my own spending I have no real idea what is the best way to teach my younger children how to save, be wise about money or even invest. Would any of your readers be interested in sharing with me anything that has worked for them? Thanks!
I’ll keep this short, since I know very little and won’t be a parent anytime soon (I hope). In my opinion, consistency is very important. Example, if you want your kids to sleep on-time everyday, you’ll set a consistent bed time and enforce it. Same deal with money; if you’re going to give your kids allowances, keep it consistent. Explain to them how much they’ll receive and never budge if they want more. If they want more, they’ll have to either earn it or learn to save up.
The related post below goes into a bit more detail on what I mentioned above. But since the reader is asking for other’s opinion, feel free to chime in with your thoughts and comments. I would definitely appreciate it!
Related Post:
11 Comments to “How Do You Teach Kids About Money?”
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June 9th, 2006 at 6:13 am
How do you teacj kids about money? You beat them (the kids).
June 9th, 2006 at 7:39 am
There’s always the question about whether to pay kids the same allowance every month (the “salary” model), or pay them by the job (the “hourly wage” model) — or a combination of both.
When I was a kid, my brothers and I got a regular allowance, and we were expected to do work around the house and yard. When we moved to an acreage and started a tree farm, the work increased dramatically, but the allowance did not, which left me feeling rather used. I’d spend all day out working the trees, or in the summer work my way through a long list of chores that took most of the day to complete, every day, and still get my puny allowance that was the equivalent one record album (back in the days of vinyl) per month.
Children who are paid by the job make a direct connection between work exerted and money earned. However, it may affect their altruistic tendencies if they expect to be paid for every little thing they do. “Junior, will you empty the dishwasher for me?” “Sure, if you give me a dollar.”
A combination may be a good solution. Kids may get a monthly “salary” as compensation for an agreed-on set of weekly chores, but be allowed to earn extra for big jobs. I kind of did that with my boys, but I wish I’d done it more formally. I wouldn’t pay kids just for emptying the dishwasher when they’ve been asked. But for large chores like washing the car, or seasonal chores like weeding, parents and kids can come to an agreement on what those jobs will be worth, and when they should be done — that is, washing the car when the parents ask, not running out and washing it three times in one afternoon because Junior wants to go out to the movies that evening and needs the money.
Parents and kids also need to be clear about what parents will buy for their kids and what kids must buy for themselves out of their own money. Kids are quick to spend other people’s money, but when it comes to their own, they can be downright misers. Junior sees something in the store and says, “Can I have that?” My response is, “Did you bring your money?” That produces a downcast look and a “no,” and pretty soon Junior decides he really can do without that thing that looked so wonderful. Occasional treats are fine, but they should be initiated by the parents wanting to give a treat, not by the children’s begging for one.
June 9th, 2006 at 8:24 am
My son is only 2, so I’m still thinking about what approach I’m going to take. I have some ideas, but you’ll have to wait 15 or 20 years to find out if my ideas worked out okay.
That said, I’m a big fan of parenting by example. If you talk to your kid about the financial choices you’re making and why, they’ll have some idea how to approach financial decisions. It doesn’t work to just say, “you can’t have an iPod.” You have to say “you can’t have an iPod because it costs the equivalent of one month’s worth of groceries. We don’t have enough money to buy both and still meet our other obligations, and it’s more important to buy groceries than gadgets”.
That’s a very clumsy example, but I think you can find real-life situations to teach kids important lessons.
Also, I like the idea of giving an allowance but having my son divide his allowance into different pots. Maybe 25% each to long-term savings (college), charity (he gets to choose which one), short-term savings (for a large toy or something like that, and instant gratification (small toy, candy, whatever. But I don’t know if that will really teach him to balance priorities, or just make him rebel against my making him control his money in the way I think is best. I’ll just have to feel my way, I guess.
June 9th, 2006 at 1:01 pm
Or you can just beat them.
June 9th, 2006 at 3:22 pm
My 7 year old son has been driving me crazy all week! He received $20.00 last weekend from his grandmother for getting good grades on his report card. I let him buy one thing he wanted with his money and made him put the rest away. All I have been hearing all week is “I want to spend the rest of my money”. He told me that this afternoon and I asked him, “Well what do you want to spend that money on?” he goes, “I don’t know, I just want to SPEND it!”. Sigh!
June 9th, 2006 at 8:49 pm
Parent: Here’s your $20 from grandma for good grades. What do you want to do with it?
Kid: I dunno, I just want to SPEND IT!
Parent: [smack][smack]
Kid: On second thought, I think I’ll just open an EmigrantDirect account. At 4.6 points, I’m sure to beat inflation!
Parent: Barely. [smack][smack]
Kid: Well … maybe I’ll invest into some quality index funds.
Parent: You goddamn right you will.
June 10th, 2006 at 5:54 am
Wow! You should have your own radio and TV show and give financial advice to parents of young children! :-)
June 10th, 2006 at 7:50 am
The best advice I’ve ever seen for teaching kids about money? Have them teach you
June 12th, 2006 at 7:26 am
Ah, if only the world works the way you want it, Max.
What stock momma mentioned about combination of allowances and earned income sounds about right. set allowances for “small items.” If they want more for a particular thing that’s not covered, they need to earn it themselves.
You know SkyeBlue, if he really wants to spend it for the sake of spending money, let him? Regardless if you have a set allowance for your son or not, there will be a time that he’ll wish he has that $20, and would wish he saved it.
$20 is a lot for a 7 year old, though. I know it sounds silly, but I think explaining to him that he should save it, just incase he needs it later on for something he really wants, may come across better—instead of say, telling him to not spend it at all. *shrug* any form of delay gratification and saving mentality can add up if applied frequently enough.
anyway, the younger you start the better things will be later on, regardless of the method, I think (yes, maybe even the beating, minus the childhood scars and all that).
btw I totally missed this but the reader also ask for websites that may teach kids about money.
that’s a fairly tough one, the only thing I can think of is orangekids.com from ING Direct. It covers topics on saving, investing, spending, and other general money musing (such as earning your money, etc.). Fairly decent site, though I have no idea how interesting it could be for a kid.
edit: oh yeah, practicalmoneyskills.com from VISA is also another good one for the older kids. I just realized it after looking at my free mousepad from them. lol.