Monday, May 4, 2009

Teaching Our Kids About Money

I didn’t know there was such a science to giving kids' allowance.

The Chart

My husband and I started giving an allowance to our oldest child about a year ago, now eight, (update: he is now ten) and had set up a complicated chore sheet so whenever he accomplished putting his backpack on the hook or throwing away the trash, then he received a checkmark. How many checkmarks he received at the end of the week would determine how much money he would receive for his allowance. At the end of the first week, we were already tired of tracking his daily accomplishments.

Allowance Separate From "Chores"

Later I was talking to a girlfriend about our efforts and she had said her husband had done a lot of research on giving allowance to their daughter and they had set up some system of setting money aside, giving to charity, and teaching her how to use her "spendable" money wisely. I discovered that allowance could be introduced to kids as young as two or three and it is suggested to be separate from “chores” which is a family responsibility. Geez, we thought we already blew it and we had just begun on our journey of teaching our children about money.

Financial Health

We work hard to make sure our children are emotionally and physically healthy, but what about our child's financial health? “A parent is the most influential teacher in a child's life - especially when it comes to money,” claims Susan Beacham in her award-winning “Healthy Finances” column in the Chicago Parent Magazine. She continues, “When you teach children they have choices about what to do with their money, you begin to teach them self-discipline and how to delay gratification.”

Get A Piggy Bank

To my surprise, there is just a swarm of information on teaching our kids about money on the Internet, but they all seem to start off by recommending getting our kid(s) a “Piggy Bank.” So there are all kinds of piggy banks out there and not just the one slot kind anymore. Now they are more of a learning tool and Money Savvy has several versions with four slots which allow our children to determine if the money will go to “save,” “spend,” “donate,” or “invest.” The Sharper Image has a robot that talks and says things such as “I’m hungry, please fill me up,” or if you take any money out it says, “I hope you have a good reason for withdrawing your savings.” Beacham says, “Teach your child that they have four choices for the money in their lives … and the child who learns this lesson will do more with their money than just spend.”

Invisible Money

Terri Cullen writes the “Fiscally Fit” column for the Wall Street Journal Online and points out that our kids are just not as familiar with the hard currency of money these days because of “the declining visibility of cash in American society.” She indicates that it is “even more difficult to teach children about such an abstract concept as managing money. Today, even the smallest of transactions take place electronically. You can charge a burger and fries at Wendy’s … or wave a Speedpass ‘wand’ at the pump at Exxon.” Nan Mead, director of public affairs at the National Endowment for Financial Education in Colorado, says, “There’s an increasing abstraction in teaching children about handling money because kids don’t see parents go to the bank and put money into a savings account,”

A "Knowledge-Based Ecnomy"

Chairman Alan Greenspan at the 33rd Annual Legislative Conference of the Congressional Black Caucus in Washington, D.C. in 2003 remarked, “a strong and effective system of education is one fundamental way to strengthen our economy and raise living standards, and education about personal finance that helps consumers of all ages meet the challenges and demands of our increasingly knowledge-based economy is one important component of such a system.” Maybe long-term money education will help our economy in the long run, but also help our kids currently to control instant gratification and be able to give to others readily.

A Dollar More Each Year recommends introducing money early in our kids’ lives and suggestions giving an allowance of one dollar for every year of age every week. In our household, we have set it up that we pay our five and eight year old when we get our paycheck. I go down to the bank and withdraw their allowance in one dollar bills. On their wall at home, pinned indiscreetly behind their closet doors (ssshhh, don’t tell anyone), are three envelopes labeled: Saving, Charity, and Personal. When the kids receive their allowance they put 20% in their Savings envelope, 10% in Charity, and the rest go in Personal which is theirs to spend whenever or however they choose. About twice a year we put their “Savings” into their saving account we set up for them at the bank and they can not touch this money (saving for college any way we can). Their Charity money can go to any charity they choose which usually involves helping another child.

More Info

If you want to learn more about how to teach your kids about money, I would suggest going to Money Instructor ( or Money Savvy Generation ( for more information.
Together we can teach our kids how to manage their money and just maybe, as Alan Greenspan points out, to learn economic principles so that they can help their country when they grow up. (published in La Jolla Light - January 2008)

What tips or ideas do you have about teaching your
kids about money?


  1. I wrote this article for a secular paper - so I would like to add that the "charity" money goes to the church and the kids bring it and put it in the offering bag. My husband and I want to teach our kids how to give to God and His church early on so the concept of giving to Him is taught at an early age.

  2. We like Dave Ramsey's steps for teaching kids responsible finances. :) It's crazy that we're responsible on their views and habits with money.