How to teach young children about MONEY and FINANCES.
Our finances are incredibly important to our family. Likewise, we value generosity, responsibility, and self-sufficiency. Now, as parents, we struggle with how to impart those same financial priorities to our children. Here are some ways that we are teaching our young children about money implementing Smart Money, Smart Kids.
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OUR FAMILY HAS A LONG HISTORY OF FRUGAL LIVING
Don’t laugh (at least not too hard) at me, but I can still remember when bottled water started getting popular. I can still remember my dad remarking about the genius who was bamboozling people into charging a whole dollar for a bottle of water. He couldn’t believe that people would pay for it when you could get it for free out of the faucet. It was a wasteful extravagance
Further, my grandmother is still notorious for keeping, cleaning, and reusing every single plastic container that comes into her house. Finding the actual cottage cheese is a little bit like “Where’s Waldo.” Her aversion to single-use-plastic has nothing to do with the environment. Instead, it has everything to do with possibly needing that container and not wanting to purchase another. It is a cost-saving tool.
And, only when we became debt free did I finally take the bold step of buying name brand toilet paper regardless of whether it was the cheapest.
Frugal runs deep in my family.
MY KIDS HAVE EVERYTHING; HOW DO I TEACH THEM TO BE FRUGAL TOO?
Yet, here I am, and maybe you are too. Having been raised by parents who were also raised by parents who were money-conscious, I have deeply cheap practices. However, despite being raised by parents who were also raised by frugal parents, I don’t know how to teach my kids about money. My kids have already been afforded more opportunity, privileges, and extravagances than I was.
My kids have already been to Disney World; have had tennis, golf, and violin lessons; and even know their way around a Starbucks menu.
I don’t want to take these experiences, pleasures, or privileges away from my children. But I wonder whether I am raising monsters. It begs the question of how to make my children appreciate and steward money.
How do I teach my children what my priorities for finances are.
As you might have already heard me say, my family ascribes to the Dave Ramsey method for managing money. (If you want to read more about the baby steps and how they have been key in our long-term financial goals, click here, here, or here.
1. LIVING BELOW OUR MEANS
One of our most central priorities when it comes to our finances is to simply live below our means. At one point in our adult life, it was not unusual for us to have more month left at the end of the money. We didn’t take the time to plan our expenses before the month began, and instead we spent impulsively and childishly.
Now, we live each month well below our means. We certainly live comfortably, but we don’t have the nicest house we could afford, drive the nicest cars, or even wear the nicest clothes. Thanks, Costco!
Living below our means is also the key to getting out of and staying out of debt. If you never use someone else’s money to buy the things that you want, then you never have to worry about using your income to give money to someone else when you actually need it.
Further, if you are already in debt, being willing to reduce the grocery budget, defer that major purchase, or even part with your big toy, can help you get out of the deep dark debt hole you are trapped in.
And, once you are out of the debt hole, then you can use that money to plan for your dreams!
2. SAVING FOR OUR FUTURE
Saving for our own dream future is high on our financial priority list. This means fun now and later. This means vacations that are paid with cash and a comfortable retirement.
At this point, our family is planning some extended and even extravagant vacations. At the same time, we are socking major money away for retirement.
So, we are using that money that used to go towards debt to have the future many only dream of. Or, in other words, we are deferring some pleasures for even greater adventures later.
We have overcome our I-want-it-now sickness in an effort to get what we really want.
This doesn’t mean that we are deprived of anything. More often than not, it is simply a matter of “not right now.” In other words, we may want to go on vacation and purchase a new car, but we can’t do both at the same time. Thus, one happens, and the other waits until a little later –not right now.
Basically, we make our money work for us rather than letting it control us. We decide our priorities and dreams and pay with cash!
But, we know that none of these dreams and opportunities would be possible without support from generous viewers like you…I mean generous support from our parents. So, we decided long before we had children that one of our long-term goals will be to provide the same financial boost that our parents gave us. Namely…paying for secondary education.
3. SAVING FOR OUR CHILDREN’S FUTURES
One of our major financial priorities is to provide for our children’s futures as well. No, we don’t mean trust fund kids. Instead we are talking about setting our children up for success so that they don’t have to be bogged down in student loan debt.
The Federal Reserve estimates that the student loan debt as of the end of 2020 was more than $1.7 Trillion. (https://fred.stlouisfed.org/series/SLOAS) If you are like me, you know loads of people whose lives were crippled, stalled, delayed, or even destroyed by student loan debt.
I am resolved to ensure that my child is not on that list of statistics. This might mean planning for an in-state school, living at home, attending a community college, or even stacks on stacks of scholarship applications. But, my husband and I are taking tangible steps every single month to not only plan for our own future but to also set our children up for success.
So, our priorities may look like they start with ourselves, then shift to our family, but they are really all focused on one enormous goal: to be outrageously generous.
4. OUTRAGEOUS GENEROSITY
Our biggest financial priority is to live with outrageous generosity in our time, energy, and our finances. Our faith prompts us to cut our first check to our local church and then budget the rest. But, we would like to teach our children to take it even further.
Although we cannot support every benefit, auction, campaign, or NGO that sends us a request, we, as a family, are very strategic about how and where we spend our money.
But, even beyond our money, the priority that our frugal family has passed down to us, is to also engage in real and tangible service to our local community and even around the world.
And, this idea, the idea of giving our finances away, is one of the hardest for us to impart to our children. Naturally, children tend toward selfishness and hoarding. They yank toys away, they don’t share their snacks, and they want to do only what they want to do.
So, how do we teach them these financial priorities that not only make them self-sufficient adults but teach them to value their family and others?
Honestly, I don’t know, so I turned to someone who did know!!
SIMPLE FINANCIAL LESSONS FOR CHILDREN TO LEARN ABOUT MONEY
Already an avid Dave Ramsey Show podcast listener and reader, I found Rachel Cruze’s book “Smart Money Smart Kids.”
I voraciously consumed the book desperate to find the answer. Although disappointed to find that she did not have a quick, simple solution, I was encouraged by her incredibly practical approach to teaching kids about money.
More importantly, her objective to create deep and responsible financial priorities in children was inspiring.
Unlike so many other books and financial how-tos, this book doesn’t focus on how to teach children about reading a prospectus, but instead teaches them to generate income (work), enjoy the money (spend), plan for their future (save), and to be outrageously generous (give).
PRACTICALLY TEACHING OUR FINANCIAL PRIORITIES TO OUR CHILDREN
Using the book as a guide, each of our children now has 3 money jars in their rooms:
After they earn money, which I will get to in a minute, they are required to budget it. They must first make a gift of some sort, then they must divide the remaining between spend and save.
Give, Save, Spend Jar Rules
Further, their save is not merely a save for anything jar. Instead, we task them with saving for something. For nearly a year, they were saving for Disney World. My son has even started a car saving fund. And, my daughter claims to be saving for a horse, but that jar has only a few dollars in it, so she might shift her focus before she reaches her goal.
My husband and I still have absolute veto authority over their “spend” money, but for the most part we let them spend or waste it on anything that won’t hurt them.
Although we prefer that they spend it on quality items, watching that new toy break or get lost is also a good lesson in stewardship.
But, most of all, this practice puts children on the path to outrageous generosity. My children have never balked, whined, or even questioned whether they should add their money to their give jar.
In fact, we have a rule that they have to put at least 1 of their dollars into each jar. Meaning they can never put all of their money in save or all of their money in give. Our children value money very little at this point, but I can see that they are already developing the value of generosity.
Each week they see their little wad of money in their jars grow. And, each week they see that money leave their room as they donate it.
It makes me so proud of them!!
LONG TERM FINANCIAL LESSONS FOR CHILDREN
The book Smart Money, Smart Kids, is replete with other wisdom and financial inspiration for your children. From starting a business to saving for college, the book is chock full of meaningful, practical, and simple advice for making them happen.
Dave Ramsey and Rachel Cruze discuss how each of their children is required to start a business in their early pre-teen to teenage years. The parents even require that the children create profit and loss statements, business plans, and inventory.
They offer practical tips for how to and when to purchase a child’s first car.
But, most importantly, the entire book, though certainly not denying the potential for building great wealth, concentrates on those central tenets that are important in our own home: living below our means, planning for our future, planning for our family’s future, and living generously.
HOW TO GET YOUR CHILDREN STARTED WITH MAKING THEIR OWN FINANCIAL DECISIONS
But, how do you get your children started down this path? How do you get your young children to integrate the practices of spending, saving, and giving each and every week when they don’t have a job?
Well, you give them jobs!
Although Rachel Cruze will refer to it as a “commission,” I will still call it an allowance.
In our home, an allowance is the weekly remuneration a child receives for being a constructive and obedient member of our household.
It is something that they receive but not without earning it.
We have implemented 3 tiers of earning allowance:
- Tasks you complete because you are a member of our household (things that mommy and daddy ask you to do to help at any given moment)
- Tasks you complete daily without being asked (brushing your teeth, getting dressed, etc.)
- Tasks you complete for the household
HOUSEHOLD CHORES FOR YOUNG CHILDREN
Examples of the household tasks that even young children can do are:
2 year old: put toys in basket, put dirty clothes in hamper, carry silverware to table for dinner
4 year old: dusting, emptying trash cans, setting table
6 year old: dry mop, vacuum, feed and water animals, clean own room
We keep a chart of our children’s chores on their bedroom door. And, at the end of each week, if they have completed their chores, they receive their allowance.
In our house, each child receives an amount equal to his or her age. They get a raise as they get older and take on more responsibility.
Then, after they are paid, they are required to budget it. First, they have to put at least $1.00 in their give jar, at least $1.00 in their save jar, and at least $1.00 in their spend jar. The rest, they can budget how they like.
One of my children loves to put it all in savings. Another likes to shake it up and divide it differently every week.
Regardless, they are starting patterns of budgeting, enjoying their money, planning their future, and even generosity at a young age.
TEACHING YOUNG CHILDREN ABOUT MONEY
So, if you are like me, then you walk a difficult balance between wanting to give your kids everything but not wanting to turn them into spoiled brats. And, if you are like me, you navigate a difficult course of how in the world to accomplish that goal even while they are young.
Creating those patterns now (of saving, spending, and giving) are how we are teaching our children to value the same priorities that our depression era grandparents had.
Avoiding the student debt black hole, the endless cycle of living paycheck to paycheck, and even deferring pleasure are hard concepts.
Allowing my children the space to enjoy their many blessings –the mounds of Christmas presents, the comfortable amenities, and even the extravagant vacations is not something that I intend to stop. However, fostering an appreciation for wise and prudent financial practices is important too.
But, if you are like me, you have no idea where in the world to start. So, I suggest implementing a few of these tips. Or better yet, read Rachel Cruze’s book Smart Money, Smart Kids.
You might find that with a little effort on your part, these practical tips will transform how your children use, talk about, and plan with their own money.
I hope that these practices help you and your family teach your children about money too.