Money for Kids
We all want our children to grow up to become successful, capable adults who are able to earn a living, pay their own bills, and save for the future. These are skills that must be taught, just the same as we teach our children table manners and how to dress themselves. However, how often do we give our children the opportunity to learn those skills? We all need to begin early to teach financial literacy to our kids, and continue to teach them as they grow older. From the time they save their first pennies, children can start learning how to manage their money. Below are the basic skills they need to learn:
Counting Money for Kids
Many people remember their first piggy bank. They loved putting coins in and then periodically taking them out and counting them. This is, perhaps, the beginning of financial literacy for kids. Make sure each of your children has a cute little bank in their room that is easy to open. Give them coins for their allowance or for money they earn, and help them count the money. By the time children are four, they should be able to understand that nickels are worth more than pennies, and quarters are worth more than nickels. Dimes will confuse them, since they are the smallest coin, but they are worth more than nickels or pennies. If you live in a country that uses different coins, the principal will be the same. The purpose at this stage is just to help your children be familiar with the different coins.
Many young children are natural savers. They will love having money in their bank. If they want to purchase something with their money, take out the coins and show them how many of their coins it will take to buy that item. Often, kids will change their mind. They will not want to spend all their coins to get a plastic bracelet, or similar item. Sometimes, however, they will want to make the purchase, proud that they saved the money themselves. Whatever they choose let them make the decision. If they spend all their coins on one item, they will quickly learn that they won’t have any coins left to purchase something else they want next time. They will learn from their own mistakes. In addition, they will learn to budget.
If you want your children to learn how to grow their money and build a real nest egg, I highly recommend the book, "Growing Money: A Complete Investing Guide for Kids."
Ways for Kids to Make Money
Most parents give their children money from time to time to make different purchases. Perhaps you give your kids a couple of dollars when you go to the Dollar Store; or you might hand your children money at an amusement park or a video arcade. Frequently, they will be back within minutes for more money, without appreciating how fast they are going through all that cash. Instead of continually handing money out to them, why not help your kids find ways to make money? Then, when your family is on an outing, you can still give your children a specific amount money to spend at the store or arcade. If they want to spend more, they have to use their own money.
Many of the ways for kids to make money have been used for decades. They can mow lawns, walk dogs, check on the houses of neighbors that are out of town, baby sit, and perform similar tasks. However, look around and see if you can help your kids find other ways to make money, too. For example, is there something your kids can do to help you at work? When I sold real estate, I mailed out a couple of thousand brochures from time to time. I paid my children to put labels on the brochures. When my kids were growing up, I also paid them to wrap Christmas presents for me. Ask your friends and neighbors if your kids could earn a little extra money by performing similar tasks for them. Children are proud and excited when they earn their own money, even if only amounts to a few dollars a week.
By their early teens, our daughters wanted to earn a little more, but they were not old enough to have regular jobs. However, they also had greater needs, and we realized that we were constantly giving them money. In addition, we resented giving them money when they were just sleeping late on the weekends and during the summer. Finally, we came up with a solution that made us all happy. We agreed to pay them one half of the minimum wage if they would volunteer for our church or a non-profit organization. This was one of the best things we ever did for our daughters. It gave them community service hours for their school. More important, however, it gave them the opportunity to develop good work habits and help their community. They volunteered in our church nursery, they worked with handicapped children at a therapeutic horseback riding program, they helped young children complete projects at the art museum, and assisted at many community events. We paid them, and felt good about giving them the money.
Children and Allowances
Of course, if you are like most parents, you will spend money on your kids. You will give them money for entertainment, lunch money, and clothing. By the time our daughters were in middle school, we began allocating money for them in the form of allowances. In other words, we allowed them a certain amount each month for entertainment, an additional amount for lunch money, and a separate account for clothing. They could not “transfer” the amount between their accounts. That means that they could not spend their clothing money, for example, to go to the movies with friends.
We found that the clothing allowance, in particular, prevented a lot of fights with our daughters. Rather than just taking them shopping and having them grab everything in sight, we gave them a set amount of money each month. They could go on a shopping trip each month, or they could let the money accumulate and go on a larger trip every few months. We supplemented the allowance by purchasing those items that they did not want to purchase with their allowance … in particular, underwear and a new coat each winter. We also bought them a few special clothing items for Christmas and their birthday. Once we started doing this, we completely eliminated all the arguments over clothing, and we taught them to manage their money so they could purchase those trendy items that they really wanted.
Teaching Financial Literacy to Kids
Financial literacy is a lifetime process. Little by little, you will go from teaching your children to count coins, to teaching them how to work, budget and shop. All of these skills will help your children grow up to be responsible, capable adults. By the way, all our daughters have grown up to be financially independent, and three of the four have careers that require them to use math on their jobs all day long!
If you are interested in reading more about helping your children learn about money, you may also want to read some of the following articles:
It Is Never Too Early To Teach Your Children to Invest
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