I didn’t know how to manage money. We didn’t have allowances when I was a kid and any money we got as gift ended up with mom for “safe keeping”. While that makes total sense, with no concept of what healthy money management looks like, I had to struggle for a while before finding my personal methodology as far as handling this very important aspect of life meant. Which is why teaching kids about finance early is so very important.
My kids don’t get allowances either (I prefer they care for their home because it is their home) but recently now that my son is 8, he is allowed to earn by doing jobs we don’t feel like doing or need an extra hand with. Say, weeding or sorting and folding loads of laundry or helping re organize the kitchen.
And we don’t give him the money. He’s got a book where he notes down how much money he earned. He adds his earnings and subtracts (consequences or expenditures as need be). Yes, it had gotten him a little too involved into what he will buy next but we are working on the balance between saving and buying. That too will take time.
Teaching Kids about Finance is Not Just About Money
You can go here if you have a teenager, and want to learn ways to teach them about money.
1. Talk about Money
I have never shied away from talking about the cost of an item or class with the kids. Talking to them about something being too expensive, and why has been very important to be for those are the conversations that led me to at least not over spending at every turn. It helped me understand early that some things are just not worth spending the money on, while others even though extravagant expenditures are totally worth the financial commitment.
These conversations go towards showing that as a family you can talk about almost anything.
2. Get Excited about Deals/Savings
I love a deal / discount. I even have friends who are never shy of talking to me about how to where they get things cheaper and worth the amount. Getting something priced just right is wonderful. In India, where often people say they bought something for $500 when they actually paid $50, it is refreshing to be able to just enjoy deal shopping and doing it with my children. Money saving can be fun too. They see how important it is to not just buy something and ensure that you have gotten the good price on an item. To check around and do the work that is needed.
Seeing your parents be mindful about their expenditures is a wonderful way for children to learn to do the same. It extends into being mindful about most actions also.
3. Money Saved is Money Earned
We do our own yard work. We clean the house ourselves. We drive instead of flying when we can. My husband and I are a team when it comes to saving by doing something ourselves instead of paying something to do it for us. And we explain to our kids the importance of doing that. And how the money we have not spent is money we can put towards something else.
And not just for saving, there is love we put into our gardens, home, work and our trips. The value of self work extends into self worth and valuing the work you put into doing something vs just paying someone to do it for you. (When we do avail of help, we ensure our children understand how that money is better spent on outsourcing so we can do other things like maybe getting help to clean the house for a party so I can cook etc) .
4. Brainstorm Ideas to Save Money
Kids love this one. Out of the box thinking is encouraged where we ask the little ones to give us ideas on how to save on something. Like when my son was supposed to have his birthday party. He wanted to have a Nerf party at a location but of course that was a lot of money for just 8 kids and he wanted to invite around 20 friends. So, we thought about ways we could have a Nerf party at home. The conversations we had were intense as he thought about different party ideas. We ended up having a super fun Lego party instead with all his friends.
It takes a lot for one to find ways to do the same thing others can afford to spend money on, in cheaper but creative ways. Neither is right or wrong, just different but can be just as fulfilling and that is wonderful to ingrain into children early.
5. Be Positive About Work at Hand
The above can be hard. Making home made creations for occasions or working at home or finding that perfectly priced thing you really want can all take time and patience. Both of which are extremely essential to building a positive attitude within kids. To be optimistic plays a big part in this. Teaching kids about finance takes perseverance at both ends.
6. Donations/Tips are Essential to Soceity
So important to share with children early the importance of donating and tips for service rendered well. This surely instills the importance of giving for charity or when someone has worked hard for you.
7. Perseverance Pays Off
This is such a wonderful lesson that gets imbibed when you work towards saving. And this trait goes into a life long journey of being patient and slowly but surely going towards a goal.
8. Money Needs to Be Earned with a Purpose
Investment is such an important part of money management. And this is why when we started giving my son jobs, we asked him what he was going to save towards. His end goal is a Lego set that is quite expensive and he’s so joyful in adding to his final total every time he gets the opportunity. Travel, high end gadgets etc, all should be saved up for. This is a such a simple way to o the same.
9. Not Every Job Has Equal Pay
The first day I told my son I would pay him $2 for a small section of the yard, he pulled ONE weed and said, “I’m done.” . We continued our conversations about how you have to finish a job your started before expecting a return. Children get paid way too much without thought. I mean, when I hear kids getting $20 from the tooth fairy for losing a tooth, it seems way too extravagant.
Even when our son helps us, we do pay his anywhere from $1 – $5. As they get older, I imagine we would increase it to $10-$15 again depending on the job.
This is so important to teach children that not every opportunity pays equally but it all adds up and is of value.
10. Helping is Different than Earning
All the above being said, it is very easy for kids to fall into the trap of doing everything with the expectation of getting money in return. It’s like candy to them. For they learn quite quickly that it will add up. This is why it is important to have simple things they do around the house like emptying the dishwasher or help clean up before a party so they know the difference between helping someone and working for money.
Find out more ways teaching kids about finance here can be done here on Dave Ramsey’s site.