Teaching Kids about Money

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So many people ask how to teach their kids about money, hoping we can give them a 1-2-3 formula to use that will help their child become a wise caretaker of his money and maybe even a future Bill Gates or Oprah Winfrey. Many parents ask this question because they are terrified that their children will turn out just like themselves when it comes to spending money. They hope that the “Do as I say, not as I do” method might actually work in this case.

The bad news is it won’t. Children usually become “chips off of the old block”. It really is a monkey see, monkey do world. They almost always learn by example – your example, dad and mom.

The good news is that you (parents) can change. That is the first step in the formula. Put into practice the things that you want your children to learn. I know a lot of you don’t want to hear that but I’m afraid that is the way it is. The good news is that it really isn’t as hard as you think. If you expect a 5, 6, or 7 year old to learn to handle money wisely, surely you as a grown adult will be capable of doing it too.

I read a lot of novels. You can learn quite a bit about human nature from novels. In almost every novel I read, the hero works as hard as his men and expects no more out of them than what he expects of himself and the men love and admire him for it. Now I know I’m talking about a novel but think about it with regard to these everyday life examples. How do you feel at your job if your boss places strict demands on you to do certain things that he is not willing to do himself? Resentful, angry and frustrated? Your children feel the same way if you expect them to be wise in money matters when you are not.

The second step in the formula is to teach children how to earn money before they learn how to handle it. This should seem logical and you may say “Well of course everyone knows that!” but do they? The people we deal with on a daily basis don’t seem to know that. How many people do you know (maybe even you are guilty of this yourself), who spend money they haven’t even earned. Do you instantly say not me! Hmmm… How many dollars worth of credit card debt do you have? Isn’t that spending money you haven’t earned yet? We need to keep our eyes open to how we handle money, before and after we earn it.

The best way to help children learn positive work ethics and give them a chance to earn money is through chores. There is nothing wrong with age appropriate chores and jobs. Chores help to teach children the weights and balances of earning and spending – Earn $10 and you can spend $10. A lot of parents live with the idea that one can spend $10 and then frantically try to work to get $10 to pay for it. Another alternative that seems to be gaining popularity is to mooch off of someone like their parents or to become indebted to a credit card company.

Is it surprising why children are getting confused? It is because they are receiving mixed messages from dad and mom. This is why it is so important for parents to get their acts together first.

I believe in giving allowances for chores that are done. This is a great way to teach our children the earning – spending concept. It teaches them another life skill to prepare them for when they enter into the work world. It’s simple. Do your job, do it well, do it on time and you will get paid.

Whatever you do, don’t give your children allowances when they haven’t earned them. You are doing your children a great injustice when you do this. They learn early on that they don’t have to do a thing because mom and dad will pay for it. Twenty years later, parents find themselves with a 28 year old man sitting on their couch, watching their TV and munching on pizza and chips that their hard earned money paid for. They can’t figure out how to get rid of him or what went wrong. By giving kids money and “stuff” without having to earn it, they learn to be takers and not givers. Then we wonder why, as adults, they have the attitude that the world owes them something for nothing. They have learned that they have no reason to bother to lift a finger to contribute to society.

Some people refuse to give allowances because they say that children should do things because they are members of the family. They need to learn to do things without expecting a reward. I agree with this to a certain extent so what I did was divide the jobs up into certain categories. For example, feeding the cat, walking the dog or raking grandma’s yard could be done just to teach the care and responsibility for someone else because we love them. This teaches responsibility towards those we love, expecting no reward.

Things like keeping their rooms clean and beds made could be included under the allowance category. There were also times when we would have extra large projects like painting a fence or cleaning a very messy garage. In these cases, I would give the kids a little extra because they were such big jobs and the kids had worked so hard doing them.

Like everything else there is a happy medium. Everyone likes a reward for a job well done. Even God rewards us for jobs well done. If we never give our children an allowance, they could become resentful.

You may ask, “What do I do if I really don’t have any extra to give my children at this time in my life?” First, you don’t need to give children a lot. Even a small amount can seem huge to them. You can also pay them in other ways. For example, if you do this job, I will let you watch TV or play video games for an extra hour. Sometimes these things are more important to a child than money. My grandson mows my yard for me. He would do it for nothing, but I like to pay him a little for it. One day when he was done mowing we walked to a convenience store by my house and I bought him a slushy. He was more excited about that than about all the money I had paid him before.

If you really have nothing to pay them at this time, that’s OK too. Children have a very keen sense of justice. They usually know when mom and dad are not paying them because things are in “crisis” mode. If you have been fair with them in the past, they know you will be fair with them in the future when things aren’t so tight.

Step three is to be sure and teach your child about savings and tithing. I will never forget the first allowance I ever received. I was about 7 years old and my allowance was a quarter. I remember two things about that day. The first was that my mom said that out of any money we earned, we were to give 10% to God. I didn’t know about percents at the time and had to ask how much 10% of 25 cents was. She said it was 2 1/2 cents. I remember being confused and asking how I was to give half a cent. Then she said the second thing I will always remember from that day. I couldn’t give half a cent, so I should give 3 cents because that extra half cent would show our thankfulness for all of the many other things that God had given us as gifts that weren’t in the form of money.

To this day I have always given my tithe without hesitation and I round it up to an even number. Because there are so many extras that God has blessed me with other than money; the sack of tomatoes from the neighbors garden, the used car someone sold me at a discount, the meal that was brought to me by a friend when I was sick and so on. Do you see what a big influence my mom’s words and actions had on me? She was my best example as you are the example for your child.

As far as savings goes, I always tried to teach my kids to tithe, save a little and spend a little. I have found though that the best way for a child to learn about saving is through the “hard knocks” of life. Maybe for a child, I should change that to the “soft knocks” of life. 😉 There is no better way for a child to learn to save than for that child to quickly spend all of his money at a bubble gum machine and on candy bars and then see a sibling, who has carefully saved, be able to buy a really cool toy the next time they go shopping.

Another way for kids to learn about saving is, when they desire something very much, to have mom or dad tell them to save their money for it. You can’t break down and buy it for them because you will defeat the purpose. It’s hard I know. It’s even worse being a grandmother and not breaking down and buying them everything they want, but after a while you will come to realize how exciting it is for a child to save and save and then finally reach their goal’s end.

How much should you pay a child for allowance? My first quarter was enough for me to buy four Hershey’s bars with almonds, to tithe and to save a couple of cents. I thought I had died and gone to heaven — four whole candy bars! For this reason, I have always regulated my children’s allowance to make sure that they have enough money to buy four or five candy bars. I wouldn’t want to say, since some think I’m an expert in finances, that my whole belief system revolves around the price of candy bars but hey, if the shoe fits, I must proudly wear it. Of course, as the children grow and take on more responsibilities they should get gradual “pay raises” in their allowances.

Just a couple of closing thoughts: With more money comes more responsibility. Keep the amount of money you give your children in proportion to how responsible they are. This will help them to learn to use their money wisely rather than to waste it because they have more than they know what to do with. In the same way that you wouldn’t give a ten year old a new car to drive because he isn’t responsible enough yet and doesn’t know how to use it properly, don’t give your children more money and things than they can responsibly handle.

Teach your children to use their own money to buy those things that they want so badly, rather than buying lots of things that you can’t afford. This will this teach them how to save, how to be more discerning when presented with an opportunity to buy something and how to care for things better and appreciate the things they have more.

Lastly, but possibly the most important: teach your children to use a small part of their money to buy gifts and to give to others. This could include anything from buying a family member something little at a garage sale to giving 50 cents to the humane society or to that special offering for missions at church. Remember, the whole object is to learn to be wise stewards of their money and to be givers not takers.


Do you wish that raising kids was easier? In the “Saving With Kids” e-books, Jill and Tawra share techniques to teach kids responsibility, to help them get organized and to help them have more fun. Check it out now!

Photo by: theritters


  1. says

    Great suggestions on teaching kids about money, its importance and significance. Both my son and daughter were investing by the ages of 6. They were working by ages 10 to save even more. Get this…They paid for their college education with…their own money and investments. I’m so proud of them!!! If only parents would stop the buy/buy/buy and please/please..more pleasing of kids at a young age and actually teach them about money early. And…its not hard at all!!!!!!!!!!!!But we..Americans are so brainwashed by commercials/TV/Peer pressure ..its sad. If only parents knew..what potential their kids have early on. And WE can aid them just by being proactive. How come this is so hard for many?

  2. Brenna says

    What are some ways this was accomplished?? We have already started our oldest daughter on a savings account…any money she receives, birthday, allowance, extra chore money…she gets to keep half and half she has to save..I am very interested to have some more ideas and comments about what worked for you. Thanks!

  3. Heike says

    Liking the post and trying to implement it with my 10yo dd – it’s hard to see her make wrong choices sometimes but she is learning.
    Question on the 28 yo on your couch eating your food….I have inherited that “problem” from another mom, and am trying to figure out how to “get rid of it”….any suggestions? (we’re not talking about my husband here. it’s another ‘house guest’ or ‘adopted daughter’, whichever way you want to look at it…)

    • says

      First I don’t mind answering questions like this but let me start by saying it is very hard to because it is like shooting in the dark. I don’t know the full situation which makes it hard to answer. But will try with the little bit of info I do have and if it won’t work for you maybe it will help someone else.

      I once had the counselor who was training me say that in some situations you only have two choices. We try to find solutions to a situation that will make everyone comfortable and happy. This isn’t always possible especially if one or more of the persons involved is not lifting a finger to try to help find a solution or make the situation better.

      Why we think we need to make people like this happy and comfortable or find a solution that makes them happy too I do not know. We all tend to fall into this trap at some time in our lives or with someone in our lives.

      Anyway he said you can try many different things but the bottom line is you can either accept the situation as it stands which means not allowing yourself to have even the least bit of resentment, anger, bitterness etc. towards that person and let them keep doing what they are doing or you can break it off with them and not have anything to do with them.

      In your case this means you either keep allowing them to do what they are doing and not resent it or you say you have 2 weeks to find work, and this amount of time to find a place to live or pay me so much for room and board. If you don’t – by this date – your bags will be packed and sitting on the porch.

      I know this sounds so awful to do but do you really think doing this would make you any more miserable then you are now. At least this way you would eventually have your home back and be out of your misery. The way you are now you are still in it and the 28 yr. old is feeding on you emotionally and literally. It’s called manipulation plain and simple. Our kids do it, spouses do it, friends do it and it isn’t good for us or for them. It is like we are giving a drug addict his daily supply of drugs. None of us would dream of doing something like that but we do it all the time in other areas.

  4. Heike says

    Thanks so much for your feedback. I know that’s what I have to do but I feel so “mean” doing it. I don’t know why, I really shouldn’t feel bad about it at all. Thanks to you and Tarma for being the way you are! You’re a great help and support!

  5. Mary Jane says

    Just saw a joke today that went like this, “Teach your children about money and the real world at an early age….buy them an ice cream cone and eat thirty per cent of it.” referring to taxes, etc. It was worth a laugh, but the truth is that our kids have to learn that NOT everything they earn is their disposable income. Government and pensions, etc. will take their share. I remember when my teenage son got his first part time job, figured out how much he should get on his pay check, and was then shocked to see all the deductions that came off, before he ever cashed it. That experience became the catalyst for having him talk about people who abuse the social security systems in our country.

    • says

      That is why when my kids would say they would be making $6 an hour I would tell them to only think that they are making and will have $4 an hour to use or spend. I also try to teach them that they need to factor in things like paid medical, vacation and how far they have to drive to work. They (and many adults) over look the fact that if they have to drive 60 miles round trip for only 4 hours of work that by the time they pay for gas they are down to about $2 an hour.

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