Teaching Kids about Money

[mom2-4monkeys]

As a new WIRR I am digging my self out of debt. I want to make sure that my kids NEVER have to deal with this crap. Now my kids are still very young (2-3yrs and 2-1yr), but i want to teach them to be responsible. How does anyone go about this? When did you start?

[NancysSummerSip]

Welcome, mom!

The kids are old enough to do simple chores; you can start by paying them in coinage they understand (pennies and nickles) and showing them how to deposit the money in their piggy banks. Some people might consider that bribery, but it's an early way to teach kids that work has a value.

Then, when they have some coins saved, and they want something in the store, tell them they have to use their own money from their bank if they want it. If they have enough money, fine. If not, keep working and saving until they do.

At their ages, I'm not sure if the concept of an allowance will work. You can add it, along with the chore money, as time goes on.

Good for you for getting them started young. No one did that for me.

[steff]

I started my son on chores when he was 5. We made a chore chart & hung it on the fridge. Started with 1 chore for each day. Simple things at that age.... put socks away on laundry day, help carry out the trash on trash day (even if that means carrying an empty cereal box), help change bedsheets (they can handle taking sheets off the bed and can be fun). Each time the chore was done, he got a check mark/star. Each star was worth $0.25 at the end of the week.

Each year after his bday, another chore was added to the chart for each day. These were ones that had to be done every day. help put the silverware away when mom does the dishes. feed the kitty cat. Bring your dirty clothes to the laundry room/laundry basket. additional chores were worth $0.10 at the end of the week. (you could make each one a quarter, at the time we couldn't afford a big steady allowance)

By the time he was 10, I said that I shouldn't have to remind him about his chores. The list is there, he's done it long enough to know what needs to be done each day. If a chore wasn't done, then - $0.10 at the end of the week for each one not done. Taught him that things still have to be done every day/every week and if you don't pitch in and do your share, don't expect $$ for not doing it.

Now at age 16, he still has chores, but the $$ for them is a flat rate. $20 a week....and if you don't do your chores, I'm not paying anything. I'm not reminding him to take out trash, I'm not reminding him to change the cat box.... if he doesn't remember, then he doesn't get paid. He should know by now. He's also old enough to do yard work & help out at gramma's house for extra money. Gramma WAY overpays, but that's her choice. He gets $20 a week from her for coming over and taking her trash out on trash day every week. He will use her as a "bank account" and save up several weeks, even months of trash duty money for something he wants. I no longer buy video games, he does.

[freshnewday]

Here's what I've done for what it's worth:
I googled graph paper and found a free graph paper creator. Each square represented a dollar of our mortgage debt. I had been talking to my kids about it, but when they saw page after page of squares their eyes got huge. I wanted them to understand that when I don't buy them sodas when we are out and such, it is not because I am being mean or stingy. It's because we have a bigger goal as a family. As we have paid down our debt, they color in the squares.

I also made a brick shaped graph paper design. Each line of bricks represents $1,000. They color a line when we pay off a grand.

This started as a teaching aid for the kids, but I have found it motivational and encouraging for me to see the squares and bricks get colored in.

My kids are pretty little, so I explained interest by comparing it to a present. I told them that we borrow money like borrowing books from the library. We have to give the books back to the library, and we have to give the money we borrowed back to the bank. The problem with borrowing money is that in addition to giving all the money back, we have to give them a big present of money. The present is ginormous. If we paid our house according to our agreement, we would give them three times the cost of the house. In fact, we could have bought 3 houses, we have to give them so much money. This is how banks make their money. If we give them their money back earlier than agreed, we won't have to give them as big of a present.

[mourningcloak]

My mother bought my son (8) the Dave Ramsey Financial kit for children. So my son gets an allowance, earned by keeping his room clean and helping out throughout the week. The Dave Ramsey kit came with three envelopes - Spend, Save, and Give. I take his allowance and put 10% in save and 10% in give. He does what he wants with the rest, usually putting it into the spend envelope. For my son we use the save envelope for larger ticket items that he wants - last year it was tickets to go to Medieval Times and spending money for his month in PA with various family members.
It's never too early to start children learning - my son grocery shops with me and knows about coupons and picking items that are lower price/oz if the quality is the same. When my son asks for McDonald's I explain why we don't have the money for trips like that, usually with something that hits home - Last weekend he wanted to go to the movies and I didn't budget for both so the choice was Micky D's or the movies. When we go to site seeing, I might give my son $10 in the morning and explain that is his spending money for the day. So every time he wants something, I remind him to think if he has enough money and whether or not he thinks he'll see something later that he'll want more. I also always remind him that just because he has $10 doesn't mean he has to spend that. If he doesn't, that money is his to put in one of his envelopes when we get home. I'm hoping these things help keep him out of trouble when he's older!

[happyscooter]

When our children were in elementary school, I used the envelopes for about 2 months. I didn't use it for bills, I used it for the leftover money. So I would take $100 and tell them I have this and this to pay for this week. It might be a Scout camping trip, church trip, birthday party to attend, fast food one day, renting 2 video games/movies. They knew how much each item was and they had to determine what to pay as we couldn't afford everything. I also put money in an envelope for groceries and let them see the actual cash.

When you write a check, they have no concept of the $$$$. Much like some adults nowadays.

[freshnewday]

A big goal of mine was to try to guide my kids away from their mentality that if they have money they have to buy something.

This ties in with what Snicklefritz said with kids learning to make better decisions so that they can have something that will bring them a lot of joy vs purchasing an item that will soon go in the give away pile.

We separate their money into the 3 categories: Give, Save & Spend. I encourage them to save some of their spend money so that they can have dreams and options. If all the spend money is gone, they can't even think about buying something they see.

We also encourage the kids to wait at least a day before deciding to buy something. Writing down the things they like in a notebook also helps with this.

I want my kids to feel that they can have anything they want to have. If they work hard and long enough, they can reach any goal.

I have seen encouraging improvement with both of my little ones handling of money. We still have far to go.

Sometimes they are sad when I don't buy something for them. I want them to know that sometimes I am sad too when I choose not to buy something I really want. We are all sacrificing to have the family in a better place. I want them to feel that they are a part of the team. I talk to them about the sacrifices Mommy and Daddy make. I want them to know we are not just being mean, but we are trying our best to make the best decisions we can for the family.

I've also talked to them about how their likes have changed, and I tell them that some day they will not care for the certain toy they are really wanting currently. Just as they outgrew Barney, they will outgrow the Lego set they now have their eye on. I share how my tastes have changed too. All of us in the family need to be careful and keep this in mind when choosing to spend.

I grew up very poor, and the pain of that along with a difficult upbringing can be challenging for me. I have to work on my inner voice that says, "You can't have that." or "What kind of mother are you that you can't even buy ____ for your child?" I tell myself "No, I could work enough and buy that if I want to, but I am choosing not to for the better of the family."

Thank you to all who have contributed to this discussion here! I find this board so very encouraging, and I very much need and appreciate the support!!!

[mom2-4monkeys]

Thank you for all of the tips. Although my kids are still very young I want to have a plan. I do talk to them alot about why I don't buy them _____. I take the girls grocery shopping and explain that we made a list (based on sales & coupons thanks GC thread) and we ONLY buy what's on the list, no extras. They seem to be "getting" it. I like the idea of chore and envelopes, I will start those soon. Thanks Again!!

[mizbear]

I use a points system with my nieces. The points can be turned into money or trips to favorite places like restaurants or starbucks. I find it hard to say no to them because I want them to have everything I didn't- but spoiling them isn't going to teach them anything.

[MittenKitten]

The Financially Intellegent Parent is a wonderful book.

I have been talking to my DS#1 who is 7 1/2 about money and what we do with it for years. Since I don't want him to feel like we are one step away from losing our home I talk to him about what we CHOOSE to spend our money on.

We also talk about value for our money. For example we went to Target today and he wanted to buy some Legos so we talked about how much he has, what sets were a good deal for the amount of money.

We have had conversations about loans, good debt vs bad debt (like a mortgage vs credit cards.) He also has a couple of shares of Apple and AT&T and a college and savings account. He often asks about them. I also have him put a percentage of what he earns and monetary gifts into savings/investments.

when he is older I plan on letting him use prepaid credit cards and debit cards to learn how to use them wisely.

I will do the same for DD who will be 3 in April. DS#2 is nonverbal autistic so that is a whole other ball game.

[Peace77]

For very young children, show them money and explain its' worth.
Young children think that nickels are worth more than dimes because they look bigger.
Penny = 1 cent
Nickel = 5 cents
Dime =10 cents
Quarter = 25 Cents
Dollar = 100 cents

For older children, teach them about what things cost.
A friend's son was pestering his mother about buying a new car.
I was curious and asked him how much he thought a car cost. He said, "about $60.00" I'm sure to a child, $60 was a lot of money but not nearly enough to buy a car.

Another discussion might be to explain "Needs vs. Wants."
Most kids are I want..... I want...... I want........

For an older child or teen, you can teach the value of compounding with the story of the penny doubled daily for 30 days vs. $1 million.

[mizbear]

peace- You hit the nail on the head with needs vs wants. I have said that so many times that my nieces have started corrected me when I start to grab things at the store- DO you really NEED that or do you WANT that?
THe little one is really a trip. We walk through the mall and I get ready to look at a purse or scarf- and she says "We're not 'sessorizing today."