Teaching kids about finances.
Teaching my kids how to be smart with money has always been very important to me as a parent. I believe if they can learn how to handle money when they are young, then they will be much more successful as adults. Honestly, I would rather them make money mistakes with $5 than make the mistakes with $5,000 (ya know?!?!). But, it can be hard to know exactly just how to teach kids about money.
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Here are a few things that have helped me to teach my kids about money:
- Money Confident Kids Website. This website is full of FREE resources, games, printables and activities to help kids understand finances. I have found so many helpful information here.
- Object Lessons. A few years ago we did this fun object lesson with our kids. It was a huge success and I loved watching the wheels turning in my kids head as we counted out the money, it’s something I hope to try again one day!
- Smart Money Smart Kids: Raising the Next Generation to Win with Money by Rachel Cruze and Dave Ramsey. This book is one of my favorite books I have ever read. It outlines exactly what to do to give your kids the knowledge they need about money. I highly recommend it to ALL parents.
- At Home Money System: The most successful thing I have done to help my kids learn about money is through our simple money system. Having an at home money system gives kids a hands on approach to budgeting, saving and spending. I am sharing all of the nitty gritty details with you about this below!
Yes. My kids get an allowance. No, they are not spoiled.
I know, I know! Allowance kindof has a bad rap, and a lot of people don’t understand why we use one.
I get it! Many people think allowance is a handout, and do not want their kids to grow up spoiled or entitled.
So why then would I give my kids an allowance??? Well, I will tell you!
I believe that there is a right way and a wrong way to use an allowance. If done correctly an allowance can be a wonderful TOOL in helping kids learn how to spend wisely.
Here’s the thing…..I received an allowance as a child….but, I was expected to buy my own clothes, make-up, shoes, extra curricular activities, outings with friends, etc.
Honestly, 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, and I believe a big part of this is because I was given an allowance and learned how to manage my money at a young age.
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 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.
Using an Allowance as a Tool
So, how do we use allowance as a tool? I will share with you what has worked for us, and hopefully it will work for you too!
Once our kids turn eight years old they start receiving a small allowance of $5 a month. This is what I call the “practice allowance.” The $5 is meant to help them get into the habit of saving and tithing.
We teach our kids to save 20% and tithe 10% to our church. The rest of their allowance money can be used for spending.
This spending money is usually spent on buying small treats or toys, birthday presents for friends and family or to save up for something a little larger. (my son is currently saving for a lego set!).
At age 13 the kids graduate from “practice allowance” to a bigger allowance. They now begin to receive $25/month and are responsible for buying more of their own clothes and activities.
Once they turn 15 the amount will increase again, along with more responsibilities. My goal is to slowly teach them how to manage their own money and provide for themselves.
The way I see it, I could either pay for their clothes myself and my kids will learn that mom buys clothes. OR, I could give them an allowance, they can buy their own clothes, and they learn how to manage money and to decide between needs and wants. Either way the money still comes out of my pocket.
I have been so proud watching my kids manage their allowance. They save WELL more than the expected 20%, and have been so responsible with their money.
My oldest has learned to shop at discounted clothing stores; such as Ross, TJ Maxx, Uptown Cheapskate, etc. Instead of complaining to ME when something costs to much, she gets to make that decision for herself. I honestly wouldn’t parent any other way.
How Does It Work?
Visual learning works great for kids! So, I have bought my kids these savings tins to help them practice saving, spending and tithing.
I couldn’t find the exact savings banks that we bought for our kids, but I did find a similar version on Amazon here!
These tins help to make saving money a little more fun for the kids. My kids love that they have their own key to lock up their very own personal bank.
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 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 pay them using change to make it easier to tithe and save. 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:
1. Their future is important to them
Kids care about their future. If we give them the opportunity to care, they will!
I have been so impressed with my kids as I’ve watched them 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.
We talk often about their future and the expenses coming. They understand that they will need to buy a car, help pay for college and provide for themselves as adults. Because of this conversation, they work hard to save and plan ahead.
2. Some things are just not worth spending money on
Each of the kids have had 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.
Once I give them the choice to buy it themselves with their own money, they pause to really think about this decision. Some times, they use their money and buy what they want. Other times, they decide it is not worth spending money on.
I love watching them make these choices. They learn so much more by making the decision themselves, rather than me saying it’s not worth the money.
3. The harder they work the more money they will have
You might be wondering about this section…..yes. My kids are paid an allowance (not connected to chores). They also know that money comes from working hard.
How does this work? I will explain it to you!
My kids do not get paid for the majority of their household chores. I believe that helping keep the house clean is just part of being in a family and should not receive payment.
However, I do pay the kids for what we call “extra chores.” These extra chores are chores above the basic house cleaning. My oldest gets paid for mowing the lawn and my youngest gets paid for feeding the dog.
Whenever they want to earn extra money, they can ask me for an extra chore, and I will give them one.
4. It feels good to give.
Our kids are taught that paying a tithe to our church is a way to help and bless others who might not have much money. We also believe that our Heavenly Father blessed us with our wealth, and will bless us by giving back to Him and His church.
Instilling this into our kids have been a huge blessing. I love watching them give to others and to our church.
These are the things that have worked well in my family. I have loved watching my kids make mistakes with money and then learn from those mistakes. It’s not always easy to see them fail….but the lessons they learn afterwards are worth it!
What works for one family won’t work for all families. Try a few of these ideas out, find what works for your family. Your kids will thank you when they are older, I promise!
What I have learned about living a sweet and frugal life on ONE income
Money Lessons for Kids: The night we taught our kids the TRUTH about money
The Envelope Money System: A Beginners Guide