Teaching kids about money from an early age is important. My parents used the envelope system to show my siblings and I the importance of budgeting for spending, giving and savings. They kept it in their closet and doled it out as needed.
Despite their best efforts, I failed at those money lessons when it came to adulthood. I had no concept of debt load, credit and money management. When I got to the place that I was earning my own money and managing my own bills, I was on a slippery downhill slope.
I want better for my kids. I want their eyes wide open. And therefore, I started teaching them real life money lessons early.
Power of Money
They quickly learned the power of money from pre-school age on. When they had money in their hand, they were able to buy treats, play arcade games and try out new experiences.
While I guided them, and really controlled what they were exposed to as far as options, I always made sure they either paid themselves or saw me pay. They knew to get what they wanted or needed, money had to exchange hands.
Piggy Banks are a great tool during the pre-school and early elementary years. About once a month my children would get their banks out and count their money (even if it was just counting the number of coins before they recognized the differences.)
By the time my kids were half way through elementary school, they had their own bank accounts (both savings and checking) and enjoyed going in and interacting with the tellers.
They were able to earn money through chores around the house and even for neighbors. In addition, they received an allowance.
The savings rule was put into place then: save 50% of all money earned. (Doing this from the start made the transition into teenage earning, even easier, they had to save.)
The kids quickly became adapt at the language they needed to talk about money. With statements like:
- What is my balance?
- Please transfer $X to my checking.
- Can I have $X as $1s, $5s or whatever.
Even now, as they are all teenagers and we have transitioned to online banking, they miss the interaction with the tellers. Talking money was a very good life lesson.
Even if you are not ready for the real deal, there are lots of realistic money games you can play with your children that teach real life money lessons.
Manage the Grocery Budget
As the kids got a little older, I had them become more involved with managing the day to day expenses of our household. The biggest of those is our grocery budget.
Being a single mom of four, meal planning has always been a way of life. I cannot juggle everything otherwise. From week to week, each child has a meal their are in charge of: planning, list making, preparing and cleaning.
But the shopping, can you imagine trying to manage four shoppers with different agendas working with the same money? Yeah, me neither.
Each week a different child is responsible for collecting the grocery list and doing the shopping. When we started they would be in the store with their list, a calculator and a phone. And I had to do lots of hand holding to make sure we stayed on budget and got everything we needed for everyone’s meal.
They were always so proud when they came in under budget, or found a substitution that would work better or more economically. But more importantly, they loved the power that controlling this part of our budget gave them.
There is no better teacher than real world situations, real money and real consequences. Encouraging our teens to contribute to the cost of their activities and extras is a great way to teach them the power of money and the sacrifice you sometimes have to make.
Let Them Learn the Hard Way
While kids are still under our roof and our protection, is a great time for them to learn some hard money lessons. There is nothing wrong with them having to go without, or not have the latest and greatest. It is also important for them to learn the natural consequences of bad financial choices without having to go without food or shelter.
Here are some other ideas of ways you can help guide your child toward a healthy relationship with money, good financial decisions and empower them use their money wisely.