Our oldest is 5 and a half, and I think it's time to start really teaching him about money: how to earn it, save it, and spend it. I'm just not sure how to go about teaching him in a way that will be meaningful.
He has a piggy bank, and it's pretty full. He knows about the bank, and (we) opened a savings account with his birthday money last year.
The next step, I suppose, is an allowance. Obviously, something small -because he's still little, and is pretty sure that the size of the coin is = to it's value. (He's still working on the fact that a dime is worth more than a nickle.) So, how much?
Then there's the other issue: do we give him an allowance no matter what, or do we ask him to do chores and then give him an allowance? I want to instill that as a member of the family, we all pitch in around the house -and that helping out is not optional (and not dependent on choosing to be paid). I also don't want him to get the impression that people just hand you money and you then go your merry way.
Finally, once we've provided him some sort of income, however small, how do we best teach him how to save money, how to spend money and how to use money to help others? I've heard of people insisting that kids put 1/3 to savings, 1/3 to charity and 1/3 for spending. Has anyone done that? How do you enforce it and has it worked? As a practical matter, do you use an envelope system? Extra piggy banks?
Any ideas out there?
Kids and Money
July 19th, 2010 at 01:45 pm
July 19th, 2010 at 01:58 pm 1279547916
July 19th, 2010 at 01:59 pm 1279547987
July 20th, 2010 at 12:30 am 1279585856
July 20th, 2010 at 01:28 pm 1279632511
It is not tied to chores. I wouldn't worry about the allowance thing. If you give your kid an allowance when they are 16 or 20, then you are looking at kids thinking money grows on trees. But, before they can work, it's just learning how to manage money, in my opinion. (We both had allowances until we were about 13).
We don't do the 1/3 thing either. & i wouldn't do that with my kids. The kids end up saving all of their money, in a sense, at this age. To me, this is part of the learning process. If the kids wanted to take their $2 every week and blow it on candy, I would let them. They would then learn that they don't have anything saved for bigger purchases, etc. I'd probably encourage the 10% to savings thing when they got a real job. Maybe when they have more substantial income.
On the charity - I think charity is good, but we focus much more on non-cash giving. I know way too many examples of broke/bankrupt people giving way more than they can. Which is also why I think 1/3 would be absurd. I'd much rather encourage my kids to find other ways to be giving.
We just put their allowance in their piggy banks, and deposit it in their savings account when it gets to be a lot.
July 21st, 2010 at 12:22 am 1279671755
When kids start the habit of saving to invest, and actually using that money to make more, they learn from a young age that they have the power to create any financial reality they choose. That's what we want kids to know. That they are in charge of their decisions and that there are consequences. Money is a great teacher that way.
Playing games that introduce empowering ideas about money is a great way to learn this together. Check out "Blast The Money Trap", by the Money Academy.
July 21st, 2010 at 05:01 pm 1279731691
July 21st, 2010 at 05:23 pm 1279732987