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It is so important to me to teach my kids how to be smart with money. I want them to learn while they are young how to handle money, how to budget, how to save and how to spend wisely. I would rather then make mistakes with $5 than with $5,000 I wanted to share a few things that have worked for us as we’ve tried to teach our kids good money habits. Parenting is such a personal thing, and there is more than one way to be a fantastic parent. This is the way we feel is best to teach our kids, but understand that others may disagree and may have other ways that work for them and their family.
A few years ago I read Dave Ramsey’s and Rachel Cruze’s book titled Smart Money Smart Kids: Raising the Next Generation to Win with Money. This book is so well written and gives really good advice for how to go about teaching your kids about money. I really really recommend it to EVERY parent. Check your library for it or buy it on Amazon, either way, just read it! I have implemented a lot of the lessons I learned from Smart Money Smart Kids: Raising the Next Generation to Win with Money, but there are a few things we have chosen to do different with our own kids.
I know, I know! There are a lot of people who are against giving kids an allowance. I understand the reasoning’s behind not wanting to pay your kids an allowance. I do. I get it! None of us want our kids to grow up to be spoiled or entitled. We all want our children to understand that in order to have money, you have to work for it.
So why an allowance???
We decided to give our kids an allowance after discussing with my husband the different ways we were both raised. I did receive a monthly allowance while growing up. With that allowance I was expected to tithe 10%, save minimum of 20%, and with the rest I was expected to buy all of my own clothes, make-up, shoes, etc., and pay for any extra curricular activities or outings with friends. I grew up to be very responsible with money. I did not become spoiled, entitled or lazy. I did not expect a free handout once I became an adult. Instead I learned early in life how to budget and save and spend wisely. Instead of asking my parents to buy me a brand new pair of name brand shoes and being disappointed when they told me it was to much money; I instead was given a set amount of money and I learned to decide for MYSELF that the name brand shoes were to much money and I would rather shop around for a better deal. I am so grateful to my parents for helping me to learn this lesson. My husband did not receive an allowance, his parents were against it. However, they paid for all of his clothes, his extra curricular activities and outings with friends. He is good with money, but he is the first to admit he wishes he had received a money lesson similar to mine in his early years. Because of these two life experiences we have decided to give our kids a small monthly allowance.
Once our kids turn eight years old they start receiving a small allowance of $5 a month. We teach them to save 20% and tithe 10% to our church. After they save and tithe they can then use the rest of the money as spending money. They use it when they want to go to a movie or other activity with their friends, they use it for buying birthday presents for friends and family, and any other thing they want to save up and buy with it. Once they reach age 13 this allowance amount will increase and they will then be expected to buy all of their own clothes. My oldest will be turning 13 (yikes!) in 6 months so we have been planning how best to make this work. I went through and added up how much money I spend on her clothing and activities a year. I divided that number by 12 (for 12 months), added a little bit of extra to help cover the amount she will save and tithe and I have come up with her monthly allowance. She will be receiving $20 a month and will be responsible for budgeting that money to be able to pay for everything she needs to pay for.
Chores are an excellent tool to help kids learn valuable lessons.
We have some chores in our household that my kids are expected to do without receiving any money whatsoever. Cleaning is a part of life and I want them to learn to keep a house clean just because that’s what you do. They have daily chores and weekly chores that they must get done before playing with a friend, going outside to play or having any screen time.
My kids daily chores include making their bed, picking up any clothes or clutter off the floor, doing the dishes (each has a separate job for dishes) and practicing the piano.
Saturday is the day we work on weekly chores. On Saturday they are expected to:
- Sort their laundry first thing in the morning. I then wash and fold the laundry. That evening once the laundry is done they put their clean clothes away in their dresser.
- “Deep clean” their bedrooms. Deep cleaning in our home consists of picking up all clutter on floor or dresser, organizing their closet, cleaning out from under the bed, dusting, vacuuming, and making their room look very presentable and nice. I always check after they say they are done to make sure they did it thoroughly.
- Change their sheets on their bed. They take off their sheets and bring them to the laundry room for me to wash. They then get a clean set of sheets from the closet and put those on the bed.
- We have 6 weekly house chores that we rotate through each week so that they all get a turn helping with each chore. These house chores are different rooms in the house. Each room is suppose to have a thorough cleaning, I have typed of lists to go along with each of the rooms so they know exactly what is expected. These 6 chores are: Entry way and foyer, kitchen, basement, bathroom, great room and your choice (the choices include cleaning out the car, doing the laundry for the day, or washing all the windows).
I wanted my kids to learn that a part of life is cleaning the house and you never get paid for that (unfortunately!). But, I also want them to learn that the harder you work the more money you will receive. So, we came up with some chores that they get paid to do. We raise chickens and the kids are responsible for feeding, collecting the eggs and routinely cleaning out the coop. They are suppose to mark it on the calendar after they do their chore and they are paid 25 cents for each day it is done. At the end of the month I add up how many days they did their job and give them their pay. We have also provided a list of EXTRA chores they are few to do whenever they want to earn more spending money. My kids utilize this list often when they find something they want to save up for.
Teaching Money Habits
When our kids turn 8 and begin to receive an allowance we buy them a savings tin that we found on Amazon years ago. You can buy the girls version here and the boys version here. These tins have three separate slots for saving. I like them because they make saving a little more fun for the kids, they love having their own key to lock their money in their personal bank, and it makes separating the money easy. You do NOT need to spend money on savings banks though. Feel free to set your kids up with three envelopes or three jars, anything that will store money will work!
The very first things our kids do after receiving their allowance or chores payment is go get their savings bank and tithe 10% to our church, save at LEAST 20% for their future, such as college and a car. I often will pay them with change to make it easy to divide the money up between. If it’s time for their monthly $5 allowance then I will give them 4 one dollar bills and 4 quarters. They know that two quarters go into their tithing bank, one dollar in their savings and the rest into spending.
The lessons I have seen my kids learn since implementing these methods have been HUGE and absolutely PRICELESS. A few of the things I have watched them learn are:
- Their future is important to them. More often than not they save MUCH more than the required 20%. They understand that they will be responsible for a lot of their future expenses and are very motivated to save for those moments.
- Some things are just not worth spending money on. Their have been moments in the store when they have fell in love with a toy. I always remind them that they have their own money to spend and if they want to buy it they can. So often they have expressed that that particular toy looks fun, but is just not worth spending their hard earned money on. They choose wisely when they make purchases.
- The harder they work the more money they will have. A few months ago one of my kids was continually not getting completing her chore with the chickens. When this happens I don’t nag them, I just go outside and do it myself. The end of the month came and one of my kids earned her full wages, the other child who had not been making her job a priority earned very little. She was very disappointed by this, and the next month she was outside first thing every single day making sure she was getting her job done, she did not miss a single day that month.
- It feels good to give. We teach our kids that paying a tithe to our church is a way to help and bless others who might not have much money. My kids love to stuff their tithing bank full of money, they have mentioned to me that they want to help other people and would rather give them money than buy something at the store that will only be fun for a day.
These are just a few of the things that have worked for our family. I have loved watching my kids make mistakes with money and then learn from those mistakes. It has been amazing when they begin making smart money choices all on their own.
What are some methods that have worked in your family to teach your kids money smarts? I am constantly trying to learn and improve in whatever ways I can.