How to Teach Your Kids About Money at Every Age
melaniedj • 11 November 2018
As a parent, you are the single most important influence regarding money behavior that your kids will have. Therefore, it is SO important that you teach your kids about money at every age.
How come over 70% of Americans don’t have $1,000 saved for an emergency? Why don't most high school and college graduates know how to create a basic budget or balance a checkbook?
The people who raised them never taught them, or if they did teach them, they taught them wrong.
Let me make this clear, the responsibility to teach your children about money is on YOU as a parent. YOU will play a huge part in how your child responds and manages their money for the entirety of their adult life.
I want to stress that although I only have one child who is just a few months old, most of my insights/opinions in this post come from my childhood and many of the tips come from other moms I know with older kids.
Will all of these work for you and your family? Probably not. I hope you can find some useful tips and strategies for teaching your kids about money!
HOW TO TEACH YOUR KIDS ABOUT MONEY AT EVERY AGE
(1) WHEN THEY ARE IN ELEMENTARY
MODEL & EXPLAIN SMART MONEY BEHAVIORS
Personal finance expert Faroosh Torabi says that as early as age three you can start laying a solid foundation by modeling smart money behaviours to them.
In my childhood, I can recall many instances where I was told things like…
Put it back, you already have one at home. I know _____ ‘s mom bought him that, but we don’t always get what everyone else has. Your backpack from last year is in perfectly good condition, you don’t need a new one.
So how do you practically implement this strategy?
- Keep a jar of coins to show that you don't waste things and small contributions add up over time. After a little while, redeem the jar of coins for cash or a gift card and take the kids out to eat.
- Explain to them WHY they can't have something. For instance, reasons could include- you already have one at home, life isn't always fair, or it's not in the budget right now.
- Have them re-use items year to year. This is a great idea for school supplies! If they already have a perfectly useable backpack, binder, pencil box, etc, have them re-use these items. Be sure. to explain that their supplies are in good condition and we want to reuse them to make our money go as far as possible.
PAY COMMISSIONS NOT ALLOWANCES
It is essential that your kids understand the relationship between work and money early on.
Paying your children an allowance doesn’t teach them how to manage money well, it teaches them that they don’t have to work for their money . Sounds like child welfare.
Kids who don’t have to work for their money become whiny and entitled adults who go through life feeling victimized.
I had many, many peers growing up whose parents were human ATM’s. As a result, these now grown up individuals still act like children.
Here are some tips for implementing this strategy!
- For really young kids, keep jobs/chores short and simple.
- Pay your child immediately after the job is done. This way, your child can make the connection between work and money.
- Be visual and keep money in the same place so they can watch it grow. Most kids are visual learners. Make a designated place for them to keep their money and make sure all the money they earn is kept there.
ESTABLISH CHORES THAT ARE NOT PAID
There should be some chores your kids have to do just because it’s part of contributing to the family.
It is important that kids know that they won't be paid for every little thing they do. Here are some ways you can implement this strategy!
- Have outside chores be a paid job and inside chores be unpaid. Keep it simple once again- mowing the lawn, washing cars, etc.
- Let your kids go door to door around the neighborhood asking if anyone needs work done. Ideas include mowing lawn for neighbors, cleaning, moving heavy objects, washing cars, etc.
(2) WHEN THEY ARE IN MIDDLE & HIGH SCHOOL
TEACH YOUR KIDS TO WORK
I’m not going to hold back here.
As a parent, if you don’t make your child get a job, you are failing them. Don’t be so focused on what your children WANT, be focused on what they NEED.
And no, I don’t care if your child doesn’t want to work. Kids don’t want to do a lot of things that are good for them.
Every single child should have a job, and I stand by that statement. Are they in sports? Are you pretty busy? Doesn’t matter.
Jim Koch, who founded Sam Adams brewing company said that even after he became a billionaire, his kids were still required to work.
His youngest daughter scooped ice cream for $7 an hour. When one of her coworkers asked her why she was scooping ice cream for $7 and hour, she just looked at the girl and said 'Because I need the money!’
TEACH YOUR KIDS TO WORK... HARD
In our family, hard work will be a tradition. I will repeatedly tell my children “the De Jongs are hard workers.”
If you can give your children the gift of learning that there is no substitute for hard work, you are giving them something priceless .
The value of hard work is one gift that my parents gave me. All four of us kids had to work, and not only work, but work really freaking hard . We had to work before school, after school, AND on weekends. All four of us kids played more than one sport and that wasn’t a free pass to not have a job.
Did we complain? Absolutely. Did that work? Hell no.
I have two sisters, and they both purchased their own cars [yes, even in high school], work both on the dairy and off the dairy, AND both played sports in high school. When I tell people this, they literally can’t believe it.
YOUR SISTERS BOUGHT THEIR OWN CARS WITH CASH THEY EARNED IN HIGH SCHOOL?
You bet. They are some of the hardest workers you’ll ever meet. What’s even better? They had enough money to buy BMW’s.
How did they have enough money to buy BMW’s? They both worked on the dairy in the morning (around 5am before school), and then after school and on weekends during sports they were putting in 10+ hour days at their off the farm jobs.
THEY WORKED HARD & SACRIFICED.
TEACH THEM HOW TO SET THEMSELVES APART
Teach your children that going the extra mile will produce great rewards.
No matter what job your child does, ALWAYS inspect it.
If they do a half ass job, they get a half ass wage.
MAKE THEM PAY
Start making your kids pay for their own clothes and entertainment.
The parents should still be paying for basic necessities like food, shelter (duh) , and medical costs. However, once they hit middle and high school, you shouldn't be handing over money for things like movies, eating out with friends, or clothes.
Once I hit middle school and really started working, I was responsible for my clothes and any entertainment. No, I'm not kidding. I cringe when I see parents just shoveling out cash to their kids who are perfectly capable of making their own purchases.
This is not cruel and unusual punishment.
This teaches kids the opportunity cost of money.
EXPLAIN THE POWER OF COMPOUND INTEREST
If you teach your kids one concept, teach them the power of compound interest.
Many people float through life with no idea what the concept of compound interest means. Show them a model that illustrates what will happen if they put $100 away every month for 30 years.
If you aren't sure yourself, check out my other blog posts for a more in-depth explanation.
TEACH THEM HOW TO BUDGET THEIR MONEY
In addition to having your kids pay for some of their own things, it's important to show them how to budget for those things out of the money they receive.
An important concept to understand is that your money has obligations (rent, utilities, clothing, fuel, etc), and it is finite.
By learning to plan how their money will be spent, your children will begin to understand that when they receive money, they need to consider what obligations they need to pay with that money, and for how long.
In other words, what financial obligations do they have until they are paid again?
Be sure to take your time walking through the budgeting process step by step.
(3) WHEN THEY GRADUATE HIGH SCHOOL
CUT THEM OFF AS SOON AS POSSIBLE
Financial expert Suze Orman agrees, cut the cord as soon as possible.
That sounds harsh, but if you truly love your kids, you will make them fend for themselves. They are an adult now, and they should have the expectations of an adult.
That is my one tip for when they graduate- set them free.
Literally, 100% stop paying for their crap.
My parents cut the cord when we graduated high school (it was pretty much cut during high school), and I survived.
In fact, I more than survived. I THRIVED.
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