Tips for Teaching Kids About Money

When it comes to budgeting, saving and spending, and anything else to do with money, as a parent you’re your kid’s primary teacher. Many times, kids don’t learn much about these concepts in school, so they need to learn it somewhere. During the holidays, it can be even more important for children to understand exactly how money works, where it comes from, and what they should do with it when they get it. This was a recent article I did for ThinkJr Creations, and I thought it was an appropriate time to share it here too!

You’ve likely heard the saying, money doesn’t grow on trees, but when it comes to your kids, you’re sure they think money trees are sprouting up all over your yard. The truth is, young children are still figuring a lot out about how things work, including money. When you think about it, some adults still can’t get a grasp on how to handle money, so what makes us think our kids will just magically be good at it? It’s up to us to instill good money habits in our children.

Teaching your kids about money doesn’t have to be complicated or boring. In fact, it can be quite the opposite if you approach it with patience and simplicity. 

Beyond the Allowance

Many parents think that simply giving their children an allowance teaches them about money. But if you don’t tell your kids what they’re supposed to do with that allowance, then they’re not learning much.

Remember, kids, especially young children, don’t get what money is for, so it’s up to you to tell them. Talk to them about how the different things they have, the food they eat, and their clothes are often purchased with money. Let them know how you have to pay money each month so they can turn on their lamp and have water to brush their teeth.

Keep this conversation short and sweet. Think of it as planting little seeds over time that will eventually sprout and give your kids an “aha” moment. How you want to work your children’s allowance is up to you, but it is often suggested to provide them with $1 per year of their age each week.

Some people attach an allowance to specific chores, while others simply give the allowance to teach money skills. One suggestion is to provide a small base allowance each week to teach money concepts and provide your children with an opportunity to earn extra money if they do particular chores.

These special chores should be tasks that go above and beyond what you typically expect your children to do. For example, special duties should not include cleaning their rooms, brushing their teeth, getting ready for school on time, or doing their homework. Instead, these extra chores could be things like helping fold laundry, feeding the family pets, or helping dust the furniture.

Save, Spend, Share

It’s also a good idea to start teaching your children how to divvy up their money when they receive it. For example, instead of merely thinking they can spend everything they make, teach them the concepts of saving a little bit, giving a little bit to charity, and spending what’s left.

One suggested rule of thumb is every time your child receives money, 10% goes toward long-term savings, 10% goes toward giving, and the rest is his to do with what he sees fit. He can spend all of the remaining money or spend a little and save a little for a larger goal.

This dividing of funds helps teach children important lessons that can set them up for future financial success. It’s also a great way to foster a sense of responsibility and compassion.

As Your Children Grow, So Should the Money Lessons

Obviously, a seven-year-old will grasp more than a three-year-old (at least in most cases). As your children get older, adjust the money lessons accordingly. For example, your child’s allowance would increase as he grows, and he should also get more control over his purchases and what charities he decides to give his money to. Plus, as children get older, they can handle more complicated chores, thus opening up the doors to earning extra income.

As your children continue to grow, you can start approaching the subjects of investing money, finding a job, etc. But that’s better suited for when they start approaching their teen years. For now, keep it simple and consistent. 

Key Takeaways

• You are your children’s main teacher, especially when it comes to teaching them about money matters.
• Give your kids an allowance to help teach them money concepts. A recommended amount is $1 per year of age each week.
• Teach your children the values of saving money and giving to those in need, as well as planned spending.
• Revisit your money lessons with your children as they get older.
• Keep your conversations about money with young children short and sweet, and be consistent.

Raising independent, confident, happy children is a big job. Luckily, you don’t have to do it on your own! Check out ThinkJr Creations for kid-friendly videos and resources that help teach your kids about a host of essential character-building traits and skills. Until next time!