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Teaching Young Kids About Money

I am sorry to disappoint you if you read the title and had high hopes for me telling you how to teach kids about money.  I so do hate to disappoint.

Rather, today I’m going to ask YOU to help ME teach MY kid about money. 

You came here today to read, and now I’m putting you to work.  I have some nerve, eh?

I work with a woman who told me a very wise thing recently.  Her children are older now, but when her kids were growing up, there was a saying in her family.  Each birthday brought every kid “more freedom, and more responsibility”.  Genius.

This April, my tiny little newborn will be turning five.

FIVE.

I’m not sure exactly when the right time is to teach kids about money, but I’m going to throw some stuff at the wall, see what sticks, and say five.  My mom remembers taking me shopping when I was around five, and she was looking for some canned beans.  She picked out a can, but was stopped by five year old me saying “mom, this brand is $.05 cheaper.  Let’s get these.”  So yeah, we’re going with five as the magical age for discussing finances.

Going with the simple route, my thought is to give Jack an allowance for chores, etc.  Again, with the simple route, I’m thinking $4 per week.  Too much?  In my mind, where life is perfect, and my son doesn’t tackle every child he meets, I will set up four mason jars in his room.  He’ll get paid in $1 bills, so that he can divide the allowance without having to struggle with in-depth concepts (“hey Jack, let’s talk about amortization”).  Each mason jar will have a label, and here is what I’m thinking:

  1. Save
  2. Jesus (offering for church.  Currently, he puts our money in the plate, but I bet my ass (side note: cursing while talking about church gives me complex feelings, but I am who I am!) that he will connect the meaning if it is his own money.
  3. Give (charity)
  4. Spend

So, now that you know my plans, what do you think?  Any tips from the experts out there; from those who have gone through this already?  Please educate me oh wise ones!

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28 comments on “Teaching Young Kids About Money”

  1. More responsibility and more freedom, is always good. Used that myself and my little ones are 39 & 35. But being the devil’s advocate, where is the responsibility (“earning”) for the freedom (“money”)? Your little guy most likely has chores and they were not mentioned, but it is best to couple money with work, as that is what the big world on the outside does. There is debate about chores connected to allowance, some say yes and some say no. But who gets money for free?

    • It will definitely be earned money. I said above he’ll earn it for “doing chores, etc.”, but I didn’t go in to it more in-depth. He currently is in charge of setting and clearing the table during meals, and cleaning up his toys and his room. I’m not sure what else to tie it to. Any ideas?

    • I did miss that word “earn”. It is hard to have jobs for the little ones, and I came to realize after all these years, that it really isn’t the job, it is the meaning. I love your plan and so will your little guy.

  2. My children are older, however, they have been – for the most part – very good savers. One thing that is key to helping children learn about money – is making them earn it. Yes, a good work ethic and learning the value of money go hand in hand. As they grew, the standard items I provided, might not be the ones like their friends had – so, if they wanted the “better” item, they bought it themselves. Guess, what – when they realize how much of their work it took to buy a $100 item – they wouldn’t spend it. Blessings from Ringle, Wisconsin.

  3. Qualifier – I don’t have kids and it was a fair few years ago that I was one, so I don’t remember when I started getting an allowance (or pocket money as we called it in the UK). I do remember that my parents did a similar thing to Dicky Bird though as we got older – they would buy us the basics and we could choose to upgrade with our own money.

    I’m not sure that I agree with connecting the allowance to chores, especially if they were chores he was already doing. Why is he suddenly being paid for something he was doing before? Adults get money because they have jobs; kids don’t have jobs because they go to school, so they get an allowance instead. Everyone has chores they have to do and nobody is paid for those chores – Mum & Dad don’t get money for cooking the dinner or doing the gardening, why should the kids? My sister is discovering the perils of linking chores to allowance – my 9 year old nephew has a price list of what he will charge for various things! He doesn’t get away with it all the time, but I guess it shows entrepreneurship!

    And my devil’s advocate bit – 50% of his allowance seems like a lot to be expected to give away! Also, you’d need to think about what your expectations are for the Save jar. What is he saving for and how long is he expected to save? For instance, if he wanted a $3 item, would be acceptable to use the $3 he has put in his Save jar over the last 3 weeks, or would you expect that to come from the Spend jar even if it has taken 3 weeks to get that much?

    Good luck – whatever you do, I bet Jack will be so excited!

    • All great points and questions!

      For us, growing up, chores were an expectation of the family and you didn’t get paid for them. However, the idea of just giving a kid money for doing nothing isn’t setting a great precedent. How often does someone just hand you money for sitting around doing nothing?

      I’m wondering if maybe I’ll add chores to his existing ones and explain with the more responsibility, comes great rewards (like Spiderman, right?).

      I’m doing the four jars and 4 $1 to make it super easy concepts. Perhaps as he ages, the amount will go up, so his dividing of the money will remain but not be as “severe”.

      Good point about the savings and what he spends that on. I haven’t really thought that through.

    • I have three kids, 15, 12, and 5. The 5 year old doesn’t get an allowance yet (just turned 5) but will soon. My older two get an allowance. It is not tied to chores…like posted above, my opinion is that you do chores (like set the table) because you live here, you EAT here…you are part of the family. I am not above paying for extras though – No one wants to scoop dogpoop at the end of the winter…so frankly it’s worth $10 to me if i don’t have to do it 😉 We don’t give much allowance either. Especially looking at my 15 year old. She is putting off a parttime job as long as possible, which is her choice, but I am not paying for that. She gets $6 (She was up to $15 but my husband lost his job this summer and I think it is important for everyone to tighten their belt, not let the kids keep spending freely while I can hardley by groceries) a week. That comes to $26 a month, $16 of which she pays for a cell phone with…that leaves her only $10 for fun money unless she picks up a babysitting job. To be honest, parenting as you are probably finding out is a big game of trial and error…we have probably changed our allowance plans a handful of times over the years. I used to say no cellphone until 9th grade and she ended up with a basic one in 7th…gotta be flexible. I have considered the following for our youngest, which might be what you are thinking. Chores (which he has now, doesn’t get paid for and won’t) and JOBS which if he doesn’t do them he doesn’t get paid. They jobs would be more of a weekly list where he can decide which day to do them where the chores are daily.

    • I love your philosphy Mrs (?) Dreier! I agree, standard chores are part of the rights and responsibilities of being part of a household. But I love the idea of hated chores being traded for money. Just the thing to spark the entrepreneurial spirit in those that way inclined.
      When I was a teenager my Mum gave me the option to keep getting weekly pocket money, or to swap to an “allowance” which meant a larger monthly amount, but she no longer bought me any clothes, etc. I think I’ll do that with my kids (as yet just twinkle in eyes) but possibly start it a bit younger – maybe with sweets, or something else like that.
      Linking pocket money to the household fortunes is also essential. Maybe introduce the idea of investing in things to reduce future outlay? I can’t think of any 5-year-old appropriate example of that right now, but for adults, e.g. buying a bus or train permit if you travel a lot; join a cinema club if you like flims; buying food prep equipment to do your own canning, etc…
      Good luck Sarah – looking forward to hear all about it! x

  4. I think it’s a great idea and very similar to Dave Ramsey’s view–he truly is a financial guru in a way that makes COMPLETE sense as far as I’m concerned! I’ve got friends who have gone through Financial Peace University and they’ve paid off massive amounts of debt and ARE living debt free! It’s incredible! Anyway—we use an earning based system–certain jobs equal money. These are things above and beyond the ordinary-make your bed, brush your teeth, etc. Then the kids’ dollar bills are divided between give, save, spend. It’s a simple concept, and it DOES make a difference for the kids to give their own money in the offering! Our kids LOVE walking up with their own money! 🙂 Anyway–sounds like you’re right on track with what I would suggest! Check out Dave–he’s straight to the point–right up your alley! 😉

    • I listened to Dave for YEARS on internet radio. I like most of his concepts, but eventually stopped listening because he was quite socially conservative and it seemed like he was getting more and more vocal about it on his show.

      He has every single right in the world to share his views on his show. Just like I felt I had the right to stop listening. ;-D

      Like post people in the public eye, I wish he just stuck to the intent of his subject (money) and left his politics out of it. Just like I wish Ashton Kutcher and Darryl Hannah would shut their mouths about the environment, etc. ;-D

  5. We’ve gone multiple money routes with our kids. The one that works the best is this: They see something they want in the store. We buy it and it goes into the “Bank of Mom and Dad” and remains in original packaging. We put the value of the item on a dry erase board and they then have to work to purchase the item. Once they hit the value of the item it is theirs, they have earned it. If they find something that they want to purchase with money they have earned toward the item in the bank they can, but they lose that progress toward the item and have to start again at $0.00.

    I will say that when paying them for their work, things they are expected to do (un load the dishwasher, set the table, etc) are only worth $.25. I’m not doling out loads of cash for being a normal human in a family. You get more $ based on the types of jobs your doing. Picking up after yourself gets you no money. Helping someone else clean up a mess will get you somewhere. And shoveling the sidewalk of the little old lady next door, or helping the lady across the street with her groceries will get you extra.

    I like the idea of the labeled jars. I think that’s cool and if my Bank of Mom and Dad goes bust, I may steal it.

  6. ** I meant to say the one that works the best for us, 🙂

  7. When I was a kid we had two different classes of chores – those we did because we were part of the family (cleaning our room, helping clean up after dinner etc) and those we could do to earn money (fold a load of towels, iron, wash windows, “deep clean” the kitchen etc). Pretty sure what was in each classes shifted with time.

    Each of the “earn money” chores was assigned a specific amount of money – I think a load of towels were 75 cents (of course I’m pretty sure gum still cost 50 cents at that time!).

    We then had three jars: savings, tithe and spending. 10% went into savings, 10% went into tithe and the rest went into spending. When we were very young I think 10% was communicated as a dime from every dollar.

    We also were responsible for paying our “dues” at our Awana club. (again something like 50 cents a week)
    This money *had* to come from our spending. If for some reason we owed people in the family money we had to pay them back first and then our Awana dues and if we waited till an hour before it was time to go and there were no available money chores that was our own fault and we didn’t get to go. (Yeah – only did that one once)
    .

    Hope this helps with some ideas!

  8. I have a 2yr old and an 11 yr old. I dont give either of them an allowance. When my 11 year old sees something she wants,or money for something specific (& I can afford it) I will get it,but it will not go to her until agreed upon extra jobs are done. A new nail polish might equal a load of laundry or two, or a cute purse might equal a yard pickup. Chore done…i hand over the goods! This works because she is not often out shopping and stuff without me because im an over protective mother (aka realist). Soon Im sure,as she ventures out more with friends I will have to hand over money,but I will probably use the same method.

  9. First of all let me say that I am sure that what ever way you decide to go about this, it will work out fine in the end. But I can share what we did when our boys were young(36/38 now!) We never paid for chores around the house, that was part of being a family. If I was going to pay you to sit the table then someone was going to pay me to cook the dinner! But if they came to us and ask if they could say…….shovel the drive way then we would tell them they could and we would pay XXX. But if we had to ask them to shovel then it was not paid. They were always on the ball about asking!! We had jars instead of the ever popular envelopes, so the kids could see the money. After they were a bit older we started using a ledger and showing them how to use it. ( around age 8 to 9)

  10. These are all really awesome ideas!
    We also do not pay for chores the kiddo does regularly- fold/put away laundry, sweep the floor, put dishes away. We do pay for washing dishes, scrubbing the tub, and other chores that she doesn’t do regularly. We do $.25 per chore, unless is a major chore (scrubbing the tub), or I just REALLY want someone else to do it (I gave her $2 once to wash the dishes for me).
    All of the money she gets, she puts 1/2 into savings (gives it to me and I transfer money from our checking into her savings), then she splits the remainder between her spending jar and her saving-for-a-real-horse jar. We don’t require that she donate any of the money because it’s her money. Being forced to donate it makes it not her money. Plus, we donate our time which is easier for her to see that she is making a difference.
    If there is something specific she is wanting, we typically find more chores for her to do. I love the idea of purchasing it for her, and then having her work towards it.
    I don’t remember getting paid for chores. As soon as I was old enough I babysat. A LOT. I remember the first major purchase I every paid out of pocket for- Bright blue high-top sneakers with oranges dots around the soles with the words “do not run faster than the speed of light or these shoes will disintegrate” written under the dots. They were awesome :0)

  11. Agreed. Our kids are only 2 & 4, but we’ve been talking about the introduction of money and how we want to handle it for a long time … and have done lots of ‘talking’ with them already. Even at their age, they already have “chores’ they’re responsible for … and they won’t suddenly start getting an allowance for these. Some chores are just a responsibility of being part of our family and we all chores to do to take care of our family and our home. But there can certainly be above and beyond stuff that is connected to money!!

    There are some great books out there with all different levels of stuff … “secrets of a happy home”, “rich dad, poor dad”, “Millionnaire mind” and an abundance of parenting books.

    I like that you’re a year ahead of us … looking forward to hearing how this goes!

  12. Taxes. If he becomes an entrepreneur then he can start now understanding that the money that he brings in belongs to the government as well as Jesus 🙂 My dad told me when I was old enough to understand that some of my money went to taxes. He took my “tax” money and put it in a savings account for me and when I went to college he gave it back to me. All those years I really though kids had to pay taxes too. He said it used to amuse him that I would complain about how the goverment was using my tax money when I was like 10 years old. And unlike Santa Clause, kids don’t talk about taxes so I really never knew. Now that I own my own business, that 30% of every dollar I earn not being mine hurts just a little bit less. Just a little, though.

  13. My husband is starting the Dave Ramsey Jr. set with my daughter (nearly 6). We’ve set up some things as family chores…you just do them because you are part of the family, and some things are paying chores. For now, the paying chores are emptying small trashcans, cleaning up the art table twice a week, organizing the recycling and carrying it to school (where they have a recycling program fundraiser), dusting the surfaces she can reach, and assisting my husband with the vacuuming (moving chairs, picking up toys, etc.). She’s got Give, Save, and Spend envelopes.

    I think it’s good to remember that the money is not the point of allowance/chore payments. Smart money management skills are one of the best gifts you can give your kid.

  14. My only thought is that 50% of his allowance to be given away is excessive. Perhaps a Save jar (cannot be touched and is banked frequently) a Jesus jar (although again 25%, is more than a tithe, perhaps this jar can be in coin and he can give half to the church and the other half to a cause of his choice, this will help him to think of others, not blindly giving for the sake of giving), a save for fun jar, so whether he saves for a toy/trip whatever is up to him, but there must be a goal, so he can think about it and decide what he’d like to save for write it on the jar and cross off each dollar as he gets closer- this I believe will teach him the most about how much things cost, the time and effort needed to get the thing that he wants.
    The last ‘jar’should maybe be a wallet, this is his spending money, he can if he chooses add it to any of the jars or spend it anyway he chooses. Good luck and happy parenting!

  15. Like many other commenters, we didn’t give an allowance either. You do chores in our house simply because you live here and everyone helps out. That being said, we also paid for extra jobs so the girls could have spending money when requested. We probably overpaid, but they didn’t ask for money often so we paid approximately minimum wage. But they had to seriously work for the time they were being paid! No dogging it!
    Our girls also grew up with the interesting perspective of witnessing people pretty clos to them “crash and burn” financially and they have both stated that they are NEVER going to be like those people! They both have jobs now and both have savings accounts and look like they are going to have smart spending habits.

    I also need to agree with a couple other commenters that I think being forced to give may backfire. Half sounds like an awful lot to me and he may grow to resent having to give that much. I thought 10% was given to the church customarily. I could be way off about that though, I admit that is not a topic I am terribly familiar with. I do agree that it will have much more meaning for him when it is his own money. I bet he will be positively BEAMING the first time he adds his own money to the plate.

  16. We have banks at our house labeled save, donate, spend, and invest. We haven’t started giving allowances yet, but have talked about chores not being tied to allowance.

    Our daughter uses her “donate” bank for religion (not Jesus, but still religion), but also for other “donate” items like when she sees diasters on TV and wants to give some money to help the kids. We want to teach her that donating to religion is important, but there are also people in your community and the world who need help too and it’s all ultimately one pot of money that you have available to donate from, it’s about how you want to distribute it.

    She does, though, take very seriously the decision of which coins to take from her donate jar each week for religion. And she was pissed at me last week when I forgot to let her bring her money (OOPS!).

    Instead of doing all $1, maybe do 3 $1 bills and 4 quarters….with the rule that something must be added to each jar every week, may it be a quarter or $3. My daughter would put all of her money in “donate” if we would let her.

  17. Marlowe’s three, and already asking for a chore chart so she can start earning money. I told her as soon as we were solid on the potty training chart, we’d discuss higher finance. I don’t have a problem equating chores with allowance. I grew up that way and have a kick-ass work ethic and a pretty clean house. Since the girls ate still so young, we’re not dealing with saving, donating, etc. just yet. Marlowe already has a list of four things she wants to buy, so I’m sure she will grasp saving soon enough! I think your plan sounds great. Look forward to hearing how it goes!

  18. We are trying to figure out the same thing because my son thinks that when mommy says she is out of money, that he can just ask daddy. I explained to him that the money mommy spends is the money that daddy works so hard to make. I don’t think that they get it and mine turns 5 tomorrow!! Biting nails. It seems like only yesterday we were headed into the hospital to have him. I hope that you come up with some good things but we tried a few things at the store and using coupons and paying cash so that he knows what the money is passing through his hands. It still doesn’t seem to work so we are going to work more on understanding money and then moving on to the allowance. My parents raised both my brother and myself and we grew up with very different things so I hope that it isn’t all on us 🙂 They decide a little bit about their frugality on their own. Good luck!

  19. “America’s Chrapest Family Gets You Right on the Money” read it, game changer.

  20. I agree with everything you are going to try. It really will teach him the value of a dollar. My best friend makes her kids save for the big things they want to buy. Her 9 year old son just bought his own DS with several games and still has money in savings. 🙂

  21. I have been struggling with this issue myself… Personally, I won’t give my kiddos money for doing their chores… I believe that the whole family has jobs to make things work in our household/farm. To make everything run smoothly. Part of what makes up the family. I do the cooking/cleaning and most of the animal feedings. Sometimes hauling in the wood. Hubby is the “bread winner” in the family (so to speak). He helps as needed and chops wood and hauls it in. Kiddos have the responsibility of cleaning their room, helping set the table, feeding the dogs/cats/rabbit, and sometimes chickens. Now, they do have options to help out with something that is not there chore. Possibly bringing in the firewood so Daddy doesn’t have to. Helping with clean up after meals, etc. This is where they earn their money. To harsh? I don’t know. We are still incorporating it… So, I guess we’ll have to wait a bit and see…

    But then there are the b-days and holidays where, instead of getting presents, relatives give money so they can get what they want. I refused to get my kiddos electronics… and they actually saved and got them… I was impressed! Except that there are so many family members… It doesn’t seem to take them very long to save… So why work for it? They even have enough left over to put in their savings…. Sooo… I say good luck! We do the best we can do! Looking forward to reading about your progress! 🙂