Tuesday, May 19, 2015

Teaching My Young Children Important Money Lessons

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Photo credit- anankkml; freedigitalphotos.net
When I was a teenager, I said that when I had kids, I'd do certain things with my kids and money. When I was first married, I had other ideas about what I'd do to teach my kids about money management. And then when my kids were younger than they are now, I had even different ideas.
I find that my views on raising money smart kids evolves, and things that I said I'd do don't seem to be coming to fruition, and things that I said I'd never do sometimes end up happening... but you know what? I think parenting requires flexibility, and it's a good idea to do what works for you then, even if it isn't what you'd originally had in mind.

And so, I thought I'd talk about what I currently do with my kids to try to teach them important lessons about money in an age appropriate way.

My kids are 7, 5, 3, and 1- so most of these lessons are geared towards my older two- but who knows what the younger two are absorbing via osmosis...

I have a policy of honesty with my kids- if my kids ask me a question, I don't lie to them. I want them to know that they can trust me, that my word means something.
At the same time, I do feel that if you can shelter a kid from certain harsh realities when they're still young, it is important to do so for their emotional well being.

And so- when it comes to letting my kids know how much money we have, I don't tell them too much. I don't and wouldn't tell them "Our bills are so large this month; I'm not sure how we're going to pay them all" if that were the case. Things like that would just stress kids out too much- there's no reason why that stress should need to be on a kid's head- it's enough when that the parents are worried- the kids shouldn't be as well. I think it is important for them to have the security of knowing that their basic needs will be met, no matter what.

At the same time, I think it is important for my kids to have some basic idea of how finances work, that money doesn't grow on trees, and that you don't always have the money to spend on everything you want, and if you do, there will be consequences.
Therefore, I tell my kids "God provides us with enough money for all our needs and some of our wants. However, if we waste our money on wants, we may not have enough money for the things that we need, so its important to first spend the money we have on things that we need, and only use the money that is left over for things that we want."
That, essentially, is how I introduce the basic concept of budgeting to my kids- and I do that from as young as 3 or so.
Fortunately, we are currently in a position that we always do have enough money to cover our basic (albeit minimal) needs, so this isn't lying to them. If we didn't have enough money to cover our basic needs, I'm not sure exactly what I would say to my kids, because, as I said before, I value honesty. I'd probably still talk about using the money we have first for needs and only what is left for wants.

Another way I introduce the concept of budgeting to my kids is that when we go to the grocery store, I buy them a treat. Or rather, I let them buy themselves a treat. I give them a set amount of money, and say that they can buy what they want with that money, which means they can either buy one bigger thing to share, or a few smaller things for each person, etc... we price compare, I point out sales so they can get the most for the money, but in the end, the decision is theirs as to where they want to spend it. My kids also learn compromising, negotiation, and teamwork skills so that each of them can be happy with the decision that was made.

My kids know that in order to get money, we have to work.

As I said before- I don't share specifics about how tight our finances sometimes are with the kids because I don't think it is healthy for them to be stressing about finances, but I do want them to be aware of the general idea, about how much it costs to live. The other day, my five year old, Ike, was talking to me about money making opportunities, and it led to a discussion about how much money exactly Daddy makes. I told him how much Mike makes each hour of work, and together we calculated how many hours per week, and then per month, Mike works, and then with that, how much money Mike makes each month on average, and then discussed how some months Mike works fewer hours because of various reasons, so the money he brings home is less, and some months Mike works extra hours and stays late- something the kids aren't too fond of, but that results in a higher paycheck as well.
Ike heard how much money Mike makes each month and was amazed- it seemed like such a high number to him. "We're rich!" I explained to him that though Daddy makes "a lot" of money, things also cost a lot of money. I told him how much our apartment costs each month- and that our apartment is small, and bigger apartments cost much more money- and how much I spend on groceries each month- trying to keep the expenses down- and even that uses up a very large chunk of our income.
I spared him the details of all our other expenses we have- just pointed out the two biggies- so that the kids have some basic idea of how much it costs to live, even frugally...

I've explained to my boys about my jobs and how I make money from each job that I have. They understand that I sell certain gluten free goods that I make at home, and that even though I get paid x for each item I sell, and therefore more sales means more money, I have expenses as well- its not "free money", but rather there's gross and a net income.

While I always thought I'd give my kids an allowance, the biggest reason for that is because I think its important for kids to have money of their own, so they learn money lessons before they're living on their own and are fully self supporting. However, that just doesn't end up working out in our house for various reasons.
But I do give them plenty of opportunities to earn money.
For example- with my gluten free products that I sell, I tell my kids that if they help me make the items, they can have part of the profits. This way they learn that money comes from working. Tying allowance to chores may not be the best idea, because then kids might think they should only help around the house if they're getting paid... but at the same time, money for nothing is also problematic, because in life, no one gets money "just because they exist". So by my kids helping me with my income making opportunities, they're doing something extra- not something I require them to do- but they also learn that if you make an effort for a job you will be compensated financially.
I've done similarly when it came to one of my wild edible walks that I taught and couldn't find a babysitter- I told my kids that if they entertained themselves and behaved themselves while they came along on the walk, I'd pay them part of the money I earned teaching that class.

While I offer to share part of my profits with my kids if they help me with my jobs, I do offer other opportunities for my kids to earn money. I expect them to help around the house with specific tasks, and usually they are willing to pitch in. But sometimes there's something bigger that I want done, and I know it is a lot to ask of my kids, so I offer that if they do that job they can have x amount of money, and give them the choice if they want the job or not. To be honest- my mom used to do that with us, for weeding the garden and mowing the lawn, but she paid us so little for those jobs that no one bothered doing it... so I try keeping the payment large enough, compared to their age, so it feels worth it to them to save their money instead of just spending it right away.

My fellow unschooling friend Holly's kids saved up for an entire year for something they really wanted. When I heard that, I mentioned it to my kids, about how they got something special because they decided to save up for something big instead of frittering it away on small things. Hopefully my kids will be inspired to do the same.

In our area, if you collect recycling bottles and cans, you can return them to grocery stores for store credit. The last time we went grocery shopping, we brought a bag of recycling with us, but I told the boys that if they find recycling along the way (that people had littered) to add to the stuff we brought from home, we'd get even more store credit. I told the boys that whatever money we got as store credit for our recycling, they'd have that much to spend on a treat for themselves. We did some math calculations to figure out how much money they'd be making from it all, and then once there they budgeted accordingly.
While I generally just tell them the budget for treats when we're at the store; this time I felt the added dimension of using store credit that they earned themselves via their recycling gave them a better picture of both earning money and budgeting said money.

When it comes to my spending money, I try talking my decisions through with my kids, about why I choose certain things over others- how sometimes by sacrificing a bit on aesthetics you can get more things for the same amount of money (like with the reduced rack produce I get), and how sometimes the cheaper item ends up being more expensive over time because it breaks and needs replacing. I explain to them why I often buy things online instead of in the store- because by waiting a little longer for the item to arrive, we can get the same quality or better even, for less money.
And I discuss why I stock up on sales, and why I won't buy certain items because they cost more than they should be charging for said items. The same types of stuff I talk about on my blog- just they see it/hear about it in real time instead of reading about it after the fact.

So this is how we teach them money lessons now.

In 2 or 3 years I have no idea what specifically I'll be doing to teach them proper money management skills for life, but for now this is what is working for us, and I feel it is doing a good job.
They're responsible with their money, and I see them making wise decisions, and not taking money for granted.

What do you do to try to teach your kids money lessons? How old are your kids, and do you see these lessons having an effect on them? Or do you feel money lessons should only be taught when older?


  1. Iove this! My oldest is 3 so we haven't really encountered "money" yet, but your approach is awesome.

  2. I have a 19 year old and I have tried many things.

    One of the things that taught him the most, came from trying to fix a problem. For a while he was terribly anemic, which was compounded by the fact that we have lots of food allergies, and he had a dad and grandparents who let him eat what he wanted for lunch (I have always had to work full time).

    Dad and grandparents got in the habit of letting him have a fairly healthy fast food option on a regular basis because of the high beef content. Fast food is always a scary option and I did not love this solution. So I decided to use it as an opportunity to teach him about money.

    I let him earn a small budget that would cover 3 of these entrees per week. He could have the fast food three times per week, or reheat what mom had made for dinner and save the money towards some gear he wanted. He started saving the money pretty quickly.

    Of course he is in college now, so his part time job pays for things like meals out. He still thinks it is crazy that his college friends want to eat out at every meal. He mostly eats at home.

    We always have lots of cheese, yogurt, fruit, veg, gluten free bread, home canned soups, pastured eggs, a cooked potato dish, and some pressure cooked beef or chicken in the fridge so there is always something for a quick meal.

    Two birds, one stone. That was one of my greatest successes. If I had my way, there never would have been a fast food problem, but it worked out okay.

    Your suggestions are great. You are a good mom.

  3. My LO turned 3 in February and we're now beginning to talk about money with her. She has chores and other things around the house as part of what everyone in the family needs to do, but we prefer not to tie chores to money. We're leaning in the direction of giving her an allowance from the family pot of money - her father and I both get a small amount of "fun money" every month. However, we'll be doing the 3 jars - spending, saving, and donations with LO's allowance. When she is older, I will probably offer to match what she chooses to put in her savings jar. As she gets older, she'll be offered or come up with herself ways to earn more money - similar to what you are doing with your oldest kids.

  4. Great article! I have done similar talking with my son, who's now 10. He gets an allowance, but it's small compared to the "$1 per week for each year of your child's age" that I often see as an American standard! He gets $1 to spend, 50c to save, and 20c to share each week. Occasionally he can earn extra by doing a special task, or I'll give him extra money for a specific purpose like the school book fair. You can read here about the time 3 years ago when he spent his book fair money on something other than books, and he faced the consequences.

  5. Nice article. Are kids being almost 5 and 3, we have not yet talked a lot about money. However, once and a while they just say: go and buy this. We then explain that buying requires money. For them it is not a problem. Money, you get from the bank. quite funny... so we explain them we need to work for the money. They start to understand.
    On other occasions we explain to the kids that we have other plans for the money, rather than spending it on toys or treats. I have the feeling they start to understand.

    You have some great ideas: we will give them an allowance soon, so they can buy stuff themselves, save up,.... and when bigger, there will be must do chores for the household and optional paid chores.

    Thx for the insight


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