Are you teaching your children how to manage their money? When is the right age? Where do you start?
Well, in my experience I have found that no age is really too young. Even if you don't yet have kids you can at least start a savings plan (and would have a head start). But, if you have kids here are some ideas that I use in our home.
1) We have a family meeting each week where everyone gets their allowance
- Give here whatever amount you feel is necessary. I have made it tiered based on age and am currently giving a flat amount to each child of $5/week.
- Make it fun! I might have one week where I throw in a random bonus amount to their general allowance or just add to their savings account, but I ALWAYS share it with them.
2) Have the kids take their own money and put some aside for tithing and some aside for savings.
- Here , we use the 10% principle to each.
- VERY IMPORTANT NOTE: The child needs to receive all money and be the one who physically puts the correct amounts into tithing, savings, etc.
3) All kids get to choose if they want to contribute additional money to savings, tithing, or the vacation fund.
4) Count the money!
- I always have them count on their own out loud to me (if possible) or count with me for the younger ones. This builds on their counting skills, improves money exchanging skills, and helps them understand how much they have.
- This gets all children excited as they get to see their savings account grow and sometimes even their spending money if they aren't losing it all. I also count the vacation money so the dream of our family agreed item/vacation becomes more of a reality each week. This has been so successful that my kids regularly contribute back some of their spending money to our vacation fund.
5) Spending the Money
- In my house, the kids get to use their spending money however they choose (purchases still subject to parental approval).
- Make sure the kids get to pay the cashier themselves and help them count their change and verify it against the receipt. This helps create even more excitement and again builds skills.
6) The Parent's role
This part can vary quite a bit, but I have found that it needs to be constantly changed and adapted to each child depending on growth.
- At first, I let them spend it instantly at the first store we went to because they were so excited to buy on their own.
-Then, I intentionally took them in a store with lots of toys and they had no money left to purchase anything. The hard part here is for the parents NOT to step in and buy anything which I know is tough if you are like me. But, if you can hold back it will start one of the most important lessons of this entire financial education: IF YOU SPEND EVERYTHING YOU HAVE ON WHAT YOU DON'T NEED THERE IS NOTHING LEFT TO BUY WHAT YOU MIGHT NEED LATER. It also helps to begin the next phase where I begin training them not to buy on impulse.
- After the first couple of weeks watching them throw their spending money away, I decided to try something different. I really wanted them to understand that buying on impulse does not produce good results in the long run. So, I then started having them take notes of what they wanted to buy in the store without spending a dime. Then, on the next trip to that store after visiting at least a few in between and letting time pass if they still feel that purchase is good and justified I allow them to complete the purchase. I feel this should help them curb any impulse buying, and give them the chance to appreciate their hard earned money.
7) Start the bank Account
- When your child is successfully creating a savings account that has grown enough it's time for the next step. My goal is $100 for each child. Once they hit that number I take them individually to the bank with me and open their very own account. From here, I have them fill out their own deposit slip each trip and review their balance against the previous balance.
8) Ideas for tracking
- I encourage tracking of all "accounts". I use a spreadsheet so the kids can see clearly how the accounts are growing. It also helps with accountability and reference if a child mixes up money with another sibling or loses a purse. But, a notebook or notepad works just as well.
I hope this helps begin the journey of teaching your children how to manage their money at an early age.
