Teaching Our Kid About Money
Not too small to start learning about money.
April is Financial Literacy month, so I thought I’d share with you what a deplorable job I’m doing at teaching my kid about money. My kids are four and two, so at least we have time on our side. Suggestions are welcome!
We’re familiar with Dave Ramsey’s “give, save, and spend” jars to teach kids about money and our efforts are very loosely based on those principles. So far we pay my son a couple coins—exactly which ones depend on availability—for putting away the silverware. He is currently saving for a $50 Duplo set. At the rate he’s saving, he’ll be too old for Duplos by the time he saves enough. We also periodically ask if he wants to put something in his “give” bag (a sandwich bag in his piggy bank). As you can tell, we are highly organized and official about all of this. It’s practically the Federal Reserve over here.
Internal Conflicts
The poor child can’t be convinced that each coin has a different monetary value. How do you teach a kid about finances when they don’t understand the value of money? I’m sure being more consistent about the exact payment would help.
Then there’s the dilemma of which chores to pay them for, and how much. Will paying too often or too much teach them they deserve to be paid for contributing to the family? Will not paying them mean they don’t learn that money comes from work?
Does it make sense to teach them to give, save, and spend, when it’s all quite artificial at his age? Even if he understood some of the math, his money is only going to wants. We are going to meet his needs whether or not he vacuums to earn a quarter.
But then, like so many things, doing something is better than nothing. Everything doesn’t have to be perfect. I could become paralyzed trying to figure out the perfect system, but in the end it’s got to be flexible enough to work for our family, our unique children, and the shifting needs that time will bring.
For now, we have a very ad hoc system that seems to be teaching him at least something.
He doesn’t understand the value of a dollar, but he does seem to appreciate the value of his time. Maybe a little too much. He refuses to vacuum, even for a whole dollar! Which is fine, because I’m way better at it.
He’s also learning about competition in the job market. If he takes too long to put away the silverware, his little sister will swoop in, do the job, and demand payment. She also might pour sugar into the silverware tray. So we do prefer the quality of his work to that of a toddler.
Last fall, my son collected more than twice his body weight in food pantry donations.
Give
He is excited to give. Last year he gave ALL his coins to the VBS drive to purchase a van for the kids at a homeless shelter. My son loves vehicles and particularly loves his friends’ van, so I wasn’t surprised he wanted to give all his money.
I also knew that there was no real cost for him to give all his coins, and he didn’t understand what he could buy with them because we hadn’t been very good in the “spend” department. I felt the weight of this when he wanted to give it all away. Then again, most of it had been given to him as random change passed on by grandma or dad (he wasn’t doing a ton of paid chores at age 3). I decided to emphasize that he couldn’t get it back, that it is good to help people, and that it was his decision. He went through with it, and Neil matched his contribution.
I was glad he was willing to give his money, but I realized it wasn’t pure generosity since he didn’t understand money very well. The VBS was also having a competition between girls’ and boys’ donations, so mixed motives were at play.
Save
He’s recently started saving up for purchases larger than $1, and succeeded! His last goal was a new light saber, but by the time he saved up the$15 he changed to his $50 Duplo goal. It’s amazing how waiting can help us make good financial choices. Imagine if it took adults months to save up for purchases, instead of swiping plastic?
I’m proud that he saved $15, mostly through working. He was definitely motivated to do extra chores to reach that goal. It’ll be hard to watch him blow money on big purchases that I don’t consider worth it, but I hope the wait time helps him make good choices.
Spend
On the spending front–what is the difference between save and spend for a four year old? We don’t present him with a ton of options to spend money on a regular basis. I feel conflicted about his spending opportunities being so directed by us. If we take him to a candy store and ask “do you want to spend some of your money? (true story), are we teaching him to make choices about spending his money? Or are we teaching him to spend money on candy? If we take him to the Dollar Tree, aren’t we just teaching him to buy useless, flimsy junk? If we take him to Target, aren’t we teaching him to buy overpriced, trendy junk?
Confession: I mostly forget to have him bring his money places. Forgive me if I don’t remind him to cart around a noisy, metal, coin-filled bank that looks like Elmo’s head. I suppose he needs a little wallet or envelope of some sort.
A recent positive “spend” experience was when he noticed knock-off Duplos on clearance at ALDI after Christmas. The set was $4. He didn’t have his money with him so I said he’d have to come back later. He asked his dad to take him there as soon as he got home from work, so they counted out his money and went to buy it. I’m glad he picked out something himself, had time to think about it, and paid a reasonable price.
At this stage of development, financial education is on par with teaching your kid to say sorry, even when they don’t mean it. To say thank you, sometimes begrudgingly. To brush their teeth, though they would rather be raised by wolves. You try to get them to pretend to be civilized, until one day, they kind of are civilized. Hopefully.
P.S. We recently learned that our son’s name is the same as Mr. Money Moustache’s boy. How cool is that?
Any tips for teaching kids about money? What was your financial education like? What do you want to do differently or the same with your kids?
Just the other day my 7yo says to me as we’re about to go shopping, “Dad, can I steal a dollar? I really want to buy something.” LOL. I’ve got three boys under the age of 11, and right now I’m just trying to help them understand that they don’t have to spend money every time we go somewhere. From their perspective I probably sound like a hypocrite because they do errands and grocery shopping with me, so they’re always seeing me spend money…I guess I need to do a better job explaining why I’m spending money. Overall I’ve had a tough time finding the line between letting them just be kids while teaching them about adult money stuff.
It is a bit confusing for kids. I remember thinking when you got change, you were getting more money than when you started!
Very cool! I have no kids so I unfortunately have no lessons/takeaways of my own to share, but I think it’s cool to see how you’re already impacting your son’s understanding of finances. I don’t think I received a good financial education growing up so it’s a top priority for me when I do have kids.
Yes, I had some teaching on frugality but not a ton on managing money. So I want to pass that on, too!
My parents were so frugal that I often didn’t have decent clothes for school or items I felt I needed. Because of this, I got my first job at age 15, mainly so I could buy my own clothes.
I don’t want my kids to worry about clothes, but their school work instead. With that in mind, I try to keep my frugality in check to make sure I’m not taking it too far. They are only 4 and 6 now, so they don’t care what they have or wear. But one day they will.
I feel like I am doing a decent job teaching them to save and be generous. They are good at both somehow!
I’m glad you can learn something about taking frugality too far from your experience growing up. I’m sure the financial education will change a lot as they get older. The only thing my son cares about now with his clothes is that they are NOT nice. That’s great your girls are good at saving and giving!
I’m not a parent, but I think the important thing here is that you are starting the conversation at an early age. I wouldn’t worry so much about getting it “right.” I don’t think there was ANY age my parents talked to me about money!
Yes, I hope that early exposure will help them be more aware and hopefully asking questions.
Starting the conversation when they are young certainly cannot hurt anything. When my kids were young, we educated them, but they continued to spend every dime that came their way. This concerned me at the time, but I decided just to let it go and let natural consequences do their thing. Around the ages of 8-10, they started saving more and setting goals (for purchases). As teens, they are now seeing the need for a job! This summer, I plan to have each of them pay the family’s bills for the month.
I think natural consequences will be very important–and also sometimes hard to watch. It’s encouraging to hear they started understanding it when they got a little older.
Great to just start the conversation, and let them know its okay to talk about money, many families don’t even do that. Our three are teenagers so we are able to share our complete budget and full cost of things with them. We are discussing college cost, student loan debt, scholarships etc these days. Just trying to give them as much information as possible. I have found talking about things they are interested in and adding money into it keeps them interested. Years ago we had a great conversation about smart phones their costs, monthly bill, how many hours you have to work to pay for one, etc. I guess maybe my kids thought i was going to get them new phones. 🙂
That’s awesome that you are having those conversations and informing them without making all their decisions for them. Ahhh, I’m not looking forward to the phone thing, but if we don’t buy ourselves new phones, we sure won’t be buying them for our kids.
Growing up I didn’t have allowance, but I did earn my own money when I started babysitting at age 12.
My husband and I have decided to give a small allowance to help teach money skills. When I go grocery shopping each week and the kids ask for a treat, I let them pick out one thing that’s a dollar or less. When my oldest started kindergarten, he was no longer grocery shopping with me, so we gave him $1 a week in allowance. Now that he’s in first grade we’ve upped it to $2 a week. This is not really contingent on chores, although we have reduced or eliminated allowance for really bad behavior.
We also sometimes find extra chores the kids can do for money, like when the yard was covered with sticks, we paid them a penny for each stick they picked up. My 7 year old is saving for a Wii game. My 5 year old is saving for his first car. Like a real car, that he won’t be able to drive til a decade from now. Talk about delayed gratification! He got it in his head when he was 3 or 4 and seems to have his mind set. At the rate he’s saving, he’ll be able to buy a better first car than I bought!
Oh my, you have a saver on your hands! That is nice! Your system sounds like a good idea. I just offered my boy a penny per stick in the yard this morning.
Our daughter is only 10 months old, so we have a little bit of time before the money management lessons start. I plan on doing the Dave Ramsey concept with our children as well. It goes beyond money, we want our children to be wise managers in every facet of life (what parent doesn’t?) whether it’s food, toys, etc.
The time will come before you know it! It’s nice you already have an idea of what you want to convey–the details as well as an overarching approach.
We just had Kenny spend money he earned for the first time yesterday. He bought ice cream for himself, and he clearly had no idea what was going on (he kept trying to give the lady more pennies after he handed her the bills that actually paid for his ice cream).
Rob and I will do a highly unorganized cash only thing with Kenny until he starts to request opportunities to earn money/spend money. Once that happens, I think we’re going to buy FamZoo banking system to be a little more intentional about things.
It’s cute and funny to see them spend their money at first, since they really don’t understand entirely. I’m not familiar with FamZoo; I’ll have to look into it.
I don’t think you are doing a deplorable job at all. It sounds like while they may be too little right now to fully ‘get’ the basics of saving & spending (or the values of money), you can bet they will get it very soon. Our son is a senior in high school and I am always impressed at how organized & savvy he is with $$$. They learn quickly!
I’m hoping an early start will mean something is in place when their brains are ready for it. That’s wonderful that your son is good with money!
I think you are really doing a great job. My wife and I teach our 2 year old kid about spending. She doesn’t really know about money just yet. But what she knows is she wants to buy something from time to time. Whenever we are at the grocery store, she would grab something and show it to me or my wife. When I or my wife says no, she would put it back. Then after that, we explain to her why? It’s basically just saying she doesn’t need it.
It’s our way of teaching her about money. Granted she’s still too young but for us, it’s never too young to learn about finances.
I think teaching kids that they can’t have everything they want is a huge part of financial education.
That is one cute boy you’ve got there. Perhaps it’s time to make the “couple of coins” that he gets for putting away the silverware of consistent denominations. Then, when he’s able to do other chores, he’ll recognize the difference in the types of coins he gets, and he’ll gradually figure out their comparative values. How great that he likes to give! And he’ll learn loads of patience as he saves up that $50 – 2 coins at a time.
Yes–I’m ready to be consistent about his wages. And we actually had a little break-through with the coin values today!
We actually pay our daughter for particular jobs, not necessarily chores. If she doesn’t do her normal chores like making up the bed and cleaning up after herself in the bathroom, those extra jobs for money don’t even happen. She’s starting to catch on that if she’s responsible enough to handle what’s expected of her, she is responsible enough to earn extra money. Don’t be too hard on yourself, it’s a learning process for us parents too!
I like the idea of distinguishing between jobs and chores. We’ve done that somewhat on a conceptual level, but I don’t think we adopted the distinct terms for them. It certainly is a learning process for us too!
My mom just had me save up half of any big purchase I wanted. I don’t know exactly what constituted “big.”
Then again, I didn’t really get a proper allowance as a kid. Not til I entered junior high, I think. Instead, Mom and I would take walks and collect soda cans. (Alaskans are horrible about littering.) We’d take those and newspapers to the recycling center, and I got to keep any money.
So I learned to recycle and not to litter. Plus I got to learn just how gross beer smelled, since not all of it was gone sometimes. Mom would have to pour it out, and it stunk. I guess that was 3 lessons.
Mom was utterly against paying kids for doing their chores, though. She thought it sent the wrong message. I kind of agree with her on that. But given the other values you’re raising him with, I think it’s less of a risk.
Thanks for sharing your experiences, Abigail. My parents didn’t pay for more chores, but for certain more involved jobs they did. I remember a friend of mine would collect soda cans for money. It seems like a good way to learn a few lessons at once. I think as our son gets older the threshold for what he has to do to get paid will be raised for sure!
Good for you for teaching these important lessons so early! I plan to implement the give, save, and spend accounts with my children in the future.
I think there is wisdom in having children do some chores just for the simple sake of doing them and contributing to the household, while other chores should be paid on a commission basis. It is too bad that more parents don’t approach their kids’ financial literacy this seriously. Think of what it would do towards changing our current culture of entitlement!
I’m sure what is a chore vs. a paid job will change as our kids age, but he doesn’t get a lot of money handed to him by us or relatives, and we want him to have a way to earn money somehow. He just vacuumed out my (rather dirty) car for $2 this week, for example.
I didn’t get an allowance for doing chores – it was something that we always did as a family and it was viewed as a fun activity (at least when I was younger) because everyone was involved in washing the dishes, cleaning the house, etc.
I don’t have kids, but in my experience, I learned about budgeting and personal finance from a relatively young age. If I ever wanted anything outside of school activities, my parents required me to pay for half of the cost. One time I wanted to go to a summer camp that cost $500! I raised the $250 by selling lemonade, collecting empty bottles/cans, running a raffle and having a garage sale. It really showed me that I needed to work and hustle to make money. Something that I still carry with me to this day.
That’s a good idea to pay half for extracurricular activities. I remember hustling to find babysitting jobs. I would take a plate of cookies to neighbors with young children to introduce myself as a potential babysitter–and landed a lot of jobs that way!
Awesome! We are already working with our kids a little bit when it comes to money, but they are only 2 so they will likely learn more as they get older too.
That’s great you are starting early. I’m sure there’s only so much two-year-olds can learn about money, but you will all be ready when the time is right!
I think you are doing great 🙂 my daughter is 4 too and I know what you mean about teaching them different coins and notes are worth different amounts! I am in the UK though so it’s kind of handy that our £1 and £2 coins are gold so she kind of understands that gold is better than silver or coppers! x
That’s nice that your daughter is learning the coin values–and that yours are color-coded! We are finally having some progress with coin values here, too.
Our kids are 8, 6, and 4 and we try to incorporate little money lessons into our daily activities. The boys understand basic concepts and enjoy counting coins and collecting dollar bills. Occasionally we offer them chances to make money by doing special chores. They end up saving the majority of their earnings/findings.
Sounds like you guys are setting a good foundation. In the next couple years, you’ll see him really starting to understand things a lot more.
Thanks for sharing how you’re incorporating financial lessons into your young kids’ lives. We hope our early efforts will culminate in a solid foundation.
At this age, I just try to teach then the difference between needs and wants. Needs, I will address. Wants require a little delayed satisfaction. When DD gets money as a gift, she is required to save an amount. I let her choose how much. The point being she can’t spend it all, and hopefully she will acquire this “habit”.
Good reminder–needs and wants is such an important lesson that we hope to pass on to our kids, but the conversation about it is just beginning. That’s a good idea for the gift money. Saving is such an important habit and there’s really no need to blow it all at once!
We started an allowance with our older daughter when she was 4 and able to consistently pick up after herself. It was mostly done as a way to teach her that money is a finite resource. Instead of asking for something every time we went somewhere, she needed to decide if she had enough money and if the item was worth spending her money on. Usually, it wasn’t. In the last 2.5 years she has made her share of latte-like purchases, but she also managed to save $19 for an American Heart Association fundraiser at school and paid for a couple of things that she broke. She’s pretty good at the math at this point, and understanding the value of a dollar. We explain that we can get a whole carton of ice cream at the store for the price of 1 Mister Softee, but she still has the freedom to make that choice if she wants. Just last week I showed her a compound interest calculator online. She decided she was going to save all future allowance and tooth fairy earnings in her saving account. She now has her allowance being direct deposited on the condition that I will withdraw her money when she wants it (but no more than 6 times a month).
I love your blog. I found it by googling, because my husband sometimes says we “pretend to be poor.” The federal government thinks we are, our friends must think we are, but I don’t feel that way because of our savings/spending habits. It’s a weird feeling to be so out of sync with society. It’s always reassuring to find other like-minded souls on the web.
Yes, we love hearing from kindred spirits. I love that you use this term too! Thanks for sharing your experience with your daughter. It’s encouraging to hear that the lessons are sticking and she is interested in saving her money after seeing the calculator. I think those habits are much more likely to stick when they are faced with real spending choices. Great job!
Well, we don’t have kids yet (trying to make one through IVF) so it’s a little bit of a moot point for us.
We will try to introduce the concept of money, saving, working for money etc throughout their childhood lives.
It sounds like you’re doing a great job of teaching a giving attitude, plus he’s learning to save. Habits at such a young age ‘compound’ into their adult way of doing things, so awesome job with that!
Tristan
Best wishes for your IVF outcome. I never thought of these lessons “compounding.” That’s a clever way to put it. I sure hope they do!
The most effective thing my parents did was to put us in charge of our own expenses starting in high school. They would give us an amount of money each month that they estimated would cover everything we needed- school lunches, various fees, books, clothes,etc. Then that was it. They wouldn’t pay for anything. I immediately started bringing lunch from home and buying my clothes at Goodwill. My mom recently tolde that my sister would run out of money by the 3rd of the month. Same gene pool, same upbringing, different temperaments.
My older son is 4, but we are waiting till he understands basic money concepts (4 quarters in a dollar, that kind of thing) before we start with allowance. He does have chores, but I’m not sure we will tie those,to allowance? Still thinking it through…
We vacillated over whether to do allowance or paid chores. In the end I think either way is fine so long as they are contributing around the house, and learning about money. Thanks for sharing your experience–that seems like a great way to learn budgeting and money management!