Money-Smart Kids

Want to know the top 5 things you should drill into your 4-10 year olds to make them smart about money?

1. Money is an exhaustible resource. When you use it, it’s gone. Make smart choices about how you use it. That means realizing that when you spend your twoonie on a popsicle, you forgo the can of pop or bag of chips.

2. Save something. There’s no lesson that will teach this better than the lesson of habit. You make your kids brush their teeth, right? Make them save too. Saving 10% is enough. It’s a hard habit to break and one from which they’ll reap huge benefits.

3. More money doesn’t make you a better person. Some adults would do well to learn this lesson. The amount of money you have has nothing to do with the content of your character. The kinds of shoes you wear, the brand on your clothes, the type of car your parents drive, the size of your house all have nothing to do with how smart, sensible, kind or fair you are.

4. If you want more money, get creative. Entrepreneurs are born from the desire to be in control and make things happen. Encourage your kids to set up lemonade stands, wash cars, walk dogs, deliver papers, fetch groceries, weed gardens, shovel snow. Don’t insist they save half. (Do you save half?) Apply the normal savings rules.

5. Make wise choices about what you do with your money. This requires that you give them some: that’s called an allowance. It’s not free money. It’s the money you normally spend on them, put in their hands so they can learn how to make wise choices. Over time they’ll learn that if they blow their money on crap then they won’t have it when they really want it. Once you start an allowance, keep your hands out of your wallets.

Are you giving your kids an allowance? And what kind of example are you setting –what lessons are you teaching — as you go about your day-to-day life?

24 Responses to “Money-Smart Kids”

  1. At what age do you start an allowance? I’m pretty sure I got birthday money at 3 and 4, but it was only at 5 that I knew what it meant. At that point my mom gave me the above Gail approved money talk and we went to open a bank account for me.

  2. I set up automatic allowance from bill pay. First, I am more likely to be consistant. Second, it gives the kids a chance to do the paperwork with cashing and determining where the money should go. So the kids fill out various deposit slips. My kids are 12 and 14 we have been doing it for years this way. Each kid gets the same $20/month. Child one never buys anything. He always wants to loan people money at 10% interest. Child two is saving every penny for a trip to WDW. She has several hundred dollars at this point.
    Child one wants to try out his hand at the stock market. Maybe we will try an online account for this but am unsure at this point. We love gail. DD and I watch her every sat. If I had not watched gail all these years there would be no allowance. But, Gail is right after watching my sister struggle with money still to this day. It is better to start young and learn from your mistakes.

  3. I give the $1/year/wk allowance, so 10yr old gets $10/wk, and the 6yr old get $6. They have their care and share jar, and their savings jar, although they both have saved more than their 10%. The oldest one is saving up a bit every week for a new back pack, and she bought all of her new back to school supplies this year. The care and share money comes out for school fundraisers mostly. It is good for them to understand when that money gets used, otherwise it becomes just another savings jar.

  4. @Amelia – I don’t know if Gail would say differently, but my parents (as I came to understand when watching them with my younger sister) always gave us money from the beginning so it was never a new thing. When we were super-young, it just went into our bank account (a sub-account attached to my mom’s), and all birthday money went there too. As we got older, it was increasingly placed into our hands.

    Gail, thanks very much for #4 – I’m always so surprised by parents who don’t put their kids to “work” from the beginning, and then are shocked when they have to pester their child 16 years later to get a job. Like money habits, work habits are established early. I think if you encourage kids to be innovative or to take on a ‘job’ from an early age, for which they are paid, they will work automatically, and not just associate it with that crappy thing adults have to do to live.

  5. avatar Cheeky Mommy Says:
    January 16, 2012 at 11:31 am

    I have to agree that allowance is a very important part of a child’s education. I actually grew up on this system after my mom read one of Gail’s books, however, if you don’t ‘keep your hands out of your pockets’, it isn’t nearly as effective. If you keep buying them stuff as well it turns more into an ‘expectation’ that Mom and Dad will give you money and still buy you stuff, so you can waste the allowance money or save it without really sacrificing anything. My parents are really great with their money and come from humble beginnings, but since they were very wealthy by the time I came along, so it was hard for them not to spoil us. Not complaining though, because my mom taught me so many great things about money from a young age and I am forever greatful!

    I believe that the habit of savings has two parts: 1) the habit of actually putting money aside and 2) SACRIFICING what you want NOW for something in the FUTURE. If you don’t make your kids sacrifice, the savings is easy when you have no real expenses, but doesn’t come naturally later on when there are competing priorities for your money.

    I have a 1 and a 3 year old, so like Amelia, I would also like to know at what age I should start this whole allowance business!!!

  6. Question – I am really itching to hear what other parents do for three categories of spending.

    1. Birthday presents for other kids?
    2. Clothes?
    3. School field trips and special event lunches?

    Is this sharing? Planned spending? Everyday expenses?

    Up to now I have been splitting birthday presents with my child – he pays 50%.
    I usually buy all the clothes.
    I also usually pay all field trips, lunch money issues, etc…

    Help / Thoughts??

  7. I am not a fan of giving kids money for their birthdays or holidays. I’ve seen with nieces and nephews that they don’t appreciate it and just blow it on crap instead of saving any of it.

    Since it’s not my place to teach them money skills, I’d rather bypass the kids entirely and give their parents a cheque strictly for RESPs

  8. @ above – my son is 12 years old and gets $12 per week, has since he was 8, and is great with money although somewhat reluctant to spend any of it.

  9. “Set a good example”, would also be a good point. I know parents who try and teach their kids about money, insisting the child learn to save and make frugal choices, while they themselves are making impulse buys when they walk by the DVD bin at Wal-Mart.

  10. I wish my parents taught me about saving 🙁

    They were good about if i wanted something i had to get my own money. started babysitting as soon as I could, but i just spent everything i made!!

    my kids are going to learn the 10% rule. I started doing that this year, each paycheck i woudl transfer 10%, it helped me out so much when my car needed work and cost $400 i didn’t have!!

    finally getting my Husband on board. we want to start a family this year, and i told him he needed to get his act together.

  11. I was watching the TLC show “The Lottery Changed My Life” with my 7 year old. I asked him what he would do if he won the lottery. He said he would save it so he could buy a car. I told him he could buy a car with the money right away. He said, “I know but that car won’t last forever and I’ll need to buy another one. I need to save money so I can buy a new one when the first one breaks. And I need to put money away for insurance because you can’t drive without insurance!” I think we’re doing something right as his first reaction to the idea of winning money was not to spend but to save 🙂

  12. @ Karen

    1. Birthday presents for other kids?
    -What we do is we spend pre-birthday gifts, like discounted items but great toys that they had overstocked or what not…instead of paying full price we pay like 25% discounted…saves on bday gifts and stuff…usually we spend around 10-15 for a toy, you’d be amazed what they sell during boxing day. If my daughter wants to buy something extra it’s outta her allowance money.
    2. Clothes?
    -we set a certain amount around $50 per kid per month…if they want something like 40 dollar jeans or 25 shirt…so I spend what I normally would 50/mth and if they want extra it’s outta there allowance…basic neccessities.
    3. School field trips and special event lunches?
    -hot lunches we pay for because it’s way cheaper/less stressful to think about it when it’s only $8 mth for three weeks (every thursdays is hot lunch), plus it’s a little something extra from mom/dad.
    School field trip is a set amount….if we know about it in advance..well in advance we usually set aside till the time comes and send money (no more than 30 for extra stuff) if they want to go all out than they usually have there allowance.

    Most of this is because they are young(don’t know for older class trips (Europe)…my oldest is 9/7/5 so I doubt there is gonna be a lot of trips to the big city, mostly local (small community here).

  13. my 15 year old works around the house for her allowance. jobs that are not her responsibility already.. so her room is not a paid job, neither is feeding the barn cat she insisted on getting… etc. the things I need help with are the things she gets paid for.

    however, she saves NOTHING… whenever she runs out of cash, she asks for extra jobs to get the things she wants…

    and i get the “You never buy me anything”…. i respond with .. my job is to pay for your needs, your money is to pay for your wants….

    just bought her one of those banks that digitally counts the coins as you put them in .. maybe some incentive to sstart saving there……

  14. @BKS – I would have to politely disagree with you about giving money. If I give a gift to anyone, I don’t think it’s my place to tell them what they need to do with it. If they want to spend it on crap, let them spend it on crap! It’s their choice. I loved getting money from relatives when I was young since I could put it toward something I wanted. My niece asked for money from everyone last Christmas and bought herself a laptop which she uses all the time! Made me feel good to see her so happy and know I contributed toward it (so not everyone spends it on crap either!).

    The RESP contributions are a great idea though too!

    I too have the questions about allowance since I have a 3 and 6 year old. For those who asked about this, – Gail’s book (which I haven’t finished yet!) is out in paperback and it’s only $7.99! It has some great tips!

  15. I don’t have any children yet, but I often think about how I will handle the money talk with them. I don’t know about allowances! I heard Dave Ramsey say that he had his kids do chores around the house for money. He ran a commission type of system in his home. This taught them about money and work. I think I might try that!

  16. My son is going to be 5 in july and I think we’ll see if he’s ready then for an allowance. He was looking at a picture of cereal in the flyer the other day, and say it was $4.99 and he said “it’s four. That’s not a lot, is it?” so he’s got some level of understanding. On the other hand I’m sure if I asked him how much our house was, he’d say the biggest number he could think of (30).


  17. As a person who was raised with little to no consistent allowance I’d say give your kids an allowance and try to make it consistent. From that I learned money isn’t reliable and not always available rather than learning to save some when you have it so that when you don’t you have your savings. I think a steady allowance is a great thing for children.

  18. My son is 6. I will not be giving him an allowance at this point, mostly because I don’t feel he needs one and it’s not in my budget. I ensure he has all of his needs and some of his wants. When he gets money for various occassions, I encourage him to save it. If there is something he would really like to have we look at his savings and see if he can afford it. For example, last night we were out and he told me that he would really like a car mat for his dinkies and that he would get a lot of use from it. I agreed that this would be an item he would use a lot and told him I would pay for it but he would have to pay me back from his savings since he just received a lot of items from the holidays.
    As for giving cash as gifts, I don’t have a problem with it. When my son gets cash or a certificate its a great learning tool. He received $55 from a gift certificate and a returned toy that didn’t work. We went to a store and he was able to pick out a few items that he really wanted, but also had to put a few back because he didn’t have enough money for all of them. This helps him learn decision making skills and to plan his purchases.
    I am not a fan of tying allowance to chores. Chores should be something the child does to help the household. If there are extra things to be done or they ask for a way to earn money, then allow them a task to accomplish this if possible.

  19. When my kids were smaller, around 9 & 7, I went to the bank and brought home our entire week’s salary, then divided it into the categories/bills that needed to get paid before we could have spending money. When the kids saw how expensive life can be, and why we don’t do pizza lunch, etc. without saving up for it first, they stopped asking for everything they saw they wanted. Both my now teens save up for big purchases, work part time when they can around their school schedules, and save n spend their money fairly wisely for the most part. Best lesson I ever did with them re; money!!!

  20. avatar Melaniesd Says:
    January 17, 2012 at 3:50 pm

    Karla – Fabulous life lesson!!
    I suppose one could *try* to accomplish that with Monopolly money too – to create the visual.

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