How to Teach Your Kids About Money Matters
- 12.28.09
- Personal Finance, savings, Tips
I am not yet a parent but in the not so distant future, I will be. As a parent, you want to give your children the life skills to survive on their own when they grow up. Part of that is teaching them about saving money. How do you do that? You have to teach them intentionally!
Work. Work is how money is made. There has to be an emotional and intellectual connection between work and money. Because this connection needs to be emphasized, you should never use the words “allowance”. Instead, you should use the word “commission” or “incentive” to your kids. When your kids do chores at home, they get their incentives. If they don’t do their chores, they won’t get get paid. However, be considerate in giving chores to your kids depending on their age and capacity.
Giving. Let your kids’ giving be spontaneous, and give tons of affirmations for giving to anything. Guide your kids about how much and where to give. Just let your kids grab some of their cash from their piggy bank to offer during mass. Giving their own money makes your kids less self-centered and brings them depth of character.
Saving. When teaching your kids about saving, the goals should be short-term. When they have saved for say a PSP, and they buy it, there is a sense of pride that will make parents smile a lot more than if you simply bought it for them.
When your kids are small, you can use a small transparent container or coin jars for their money savings so they can register visually see the saving going up and the spending bringing their balance down. As they get older, use envelopes for giving, saving, and spending. When they reach the teenage years, they should have a savings account of their own.
Spending. Spending is done differently when you are spending money you earn. It is one of the rewards of disciplined saving and working - the celebration of a goal-reached! When spending occurs in this way, your kids’ self-esteem will be maximized because he was able to accomplished a goal. There is a sense of accomplishment, of a job well done!
Neo
Well I’m not a parent yet but I will be in the distant future…I will tell my kids about how tough it is to earn money and so use it wisely.
Thanks for writing about this nice topic.
Thanks
TC
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Paul
I will teach my kids to understand the value of money…Reminds me of global poverty….so sad
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Annette
I agree with teaching kids about money. W. Buffett started investing when he was a teenager. The earlier, the better. We can’t rely on our schools to teach financial literacy.
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Polo
Hey! I’ve just found your website and I’m so satisfied that I’ve already bookmarked it. The connection between money and work is the best way to educate children. Congratulations for sharing this nice post I think you did it very good!
Best regards!!
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Matt
I don’t have kids, so take this with a grain of salt. I think the lesson of work=money needs some refinement.
It would be better to teach kids to be financially independent and not reliant on someone else for a paycheck. It’s little more than teaching serfdom.
The next generation, more than any before it, must learn how to be entrepreneurial and innovative. The days of the guaranteed job are gone.
Becoming a wealth-generator, rather than a wage-earner is a far better lesson.
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Tyrone Reply:
December 29th, 2009 at 12:03 pm
I agree with you Matt. I remember I have this officemate before in my previous company. He told me about his brother, who at young age, is very entrepreneurial already.
He gets various things from various advertisers as he is a part time lifestyle columnist of a major newspaper here. One time, he received a lot of boxes of candies from one advertiser. His little brother wants some those and since he does not want these candies, he gave his little brother a lot.
One time, he asked his brother where did all the candies have gone until his brother told him that he already sold some to his classmates in school!
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Angel Cuala
It’s nice that you finally made a post like this, and I am glad to know that I am not the only one who make similar posts especially in terms of parenting.
Anyway, the truth is there is a big difference when you are already a parent. But I think the more important thing is how you communicate with your children and the quality of bonding time with them.
If you fail in this aspect, they will not follow your advises no matter how good they are.
Happy New Year!
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Tyrone Reply:
December 29th, 2009 at 12:05 pm
Nice aspect Angel. I will try to build up that communication to my children in the future.
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Matt
I think Angel has a great point.
Just thinking how many times I’ve like a message, but not the messenger. If you don’t have trust, most lessons will fall on deaf ears.
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Jeffrey
Nice post. I have a kid myself and I do agree with everything that was discussed. Teaching our kids about money is essential to their future as they will be part of their foundations when they grow up. I also agree that the communication between a parent and a child is important. A kid will never listen to a parent if he does not trust his parents. Relationship and open communication is the key to effectively teach our children to be diligent in handling money. One good thing that I can also add is modeling. We can teach our kids about money through modeling. Let’s do what we preach and show them how it’s done. And most importantly, we have to show them WHY we do it. I’ve read a lot of books about personal finance and they all give us the same question. WHY? It should be instilled in them while they’re still young so that when they grow up, they would be definite in what they want and how to do it.
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Snow
I spend money wisely and I teach my kid to save money by example. Hoping he’ll absorb the idea in the near future.
Btw, happy holidays Tyrone and have a great new year…
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James
I remember when I was back at elementary, I am the only one who is able to carry a water jug (coleman) at school, and kids in those age are restless, everyone wants to play, in the end everyone gets tired.
One point in time, I did get addicted to the Magic The Gathering Cards. But since its pricey for me back then, I needed something in order for me to join my schoolmates who were also playing it..
So what I did was instead of playing all day whenever Im free at school, I just watched those who are playing to conserve my energy and then when time comes that my schoolmates come running towards me to take a sip off my water in my Jug, I started charging them 2 pesos for every sip (I use the Coleman’s top cover as a glass) and it mostly takes them 2-3 sips.
By the time my water runs out, I have already earned around a hundred bucks or so, enough to buy myself a pack of Magic The Gathering Cards. Then I come running to the school drinking fountain refilling my Jug.
Wonder why they did not want to Drink on the Drinking Fountain??? Well, its a trade secret… Lol…
but seriously, what I did was I started creating rumors on how dirty the Drinking Fountain was. How everyone drinks from it with their lips sticking to the water source, I even told them that the water coming out of the drinking fountain was the same water that is being used on the Comfort room and whatnot.
See how gullible my classmates were. Lol. But that is something no one taught me to do, but because of necessity I was able to think of it…
But then my small “monkey” business stopped when my frequent customers brought their own Jugs. Lol…
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Mighty
Nice article Tyrone. For parents with young kids, teaching them about money makes sense. But parents often neglect it and let the school do it for them.
How about if the kids are already grown up and it’s the parents who need to learn about money matters? LOL.
that’s also important, I think. coz it’s never too late to learn about financial matters.
mighty
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Vimal
Good article.
Now i am 20 year old & when i was 14 i had started supporting my father in his business.So i learnt a lot from my father on how to face liquidity crunch & if you have lots of liquidity then how to use it in a right & effective way in order to get high return.
But the only problem i faced was i wasn’t able to focus on my studies. I was so much involved in the business that in school i always use to think when i the bell ring so that i can go to the office. And at the end it was totally bad situation for me i didn’t had any knowldge about the all subjects so now i’m in my final year of graduation & i’m learning from the basics.
So my point is we shouldn’t involved children so much to earn money otherwise they will become greedy. In order to earn money they will always think of doing some work so that they can have some bucks & won’t concentrate on studies like me.
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Tyrone Reply:
January 3rd, 2010 at 4:20 pm
Did your parents force you to do it? I think anything in extreme case is always bad. Parents should not force their children to do work for their children just to earn money. They just need to instill that money is not easy to earn so children should know how to save at such a young age.
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Tim Reply:
January 6th, 2010 at 3:34 pm
I agree. I’m trying to collect books that would teach my child about money management that I could perhaps use when he turns 3.
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Vimal Reply:
January 11th, 2010 at 10:34 pm
No tyron, my parents didn’t forced me to earn money. It was like giving hands to my father in his work. I use to go to my shop whenever my father had some work or when he has to go out because i am the only son of my parents.But soon the thing happen to me was i just got addicted to earn money that i wasn’t abel to concentrate on my studies & i endup in not knowing anything about the subject.
Now in college i have selected commerce degree & i can’t opt for engineering or doctor because my i don’t have academic knowledge.But nevertheless i am now working hard to gain the knowledge because i belive it is still not late & at last whether it is doctor or engineer or a businessman he has to earn money only to survive just the way he earns is different.
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Tim Reply:
January 6th, 2010 at 3:38 pm
Vimal, I partly agree on what you say. When my younger brother experienced earning money from work he forgot to focus on his studies. Like Robert said in his book, how you earned the money can be addicting. Some questions I guess you have to ask yourself and teach your child is…
1. How much money do you want?
2. Why do you want the money?
3. When do you want the money?
And teach them to give back.
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ariston | 15 SEO Related Resolutions
sir Tyrone, thanks for this info! and as new parent myself, this is a big help…
A Prosperous New Year to you and your loved ones!
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edmund lao
very true… everything starts at home. I am a product of early training,,, that is why I am frugal…
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elmot
financial freedom indeed really starts at home…and the way our parents taught us about money and finances will greatly affect too our way of life in the future.
Great post Tyrone. Happy new year Bro!
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Issa@youwanttoberich.com
Hi Tyrone! I swear by Monopoly, Robert Kiyosaki’s game board of choice for kids. My daughter absolutely loves it and gives her a taste of what is to come - knowing when there are opportunities, when to grab, when to let go, when to throw the dice. We still have to translate it, though, to something that will make her a lot of money but I we are laying a foundation there in her brain and in her gut. More power to you and your blog!
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Jay Castillo
Excellent tips Tyrone. We have just started to let our 4 year old son be the one to give at Church, although it’s not actually his money yet.
I also intend to teach him how money can work for him and earn passive income when he’s ready and also teach him about the money jars method by T.Harv Eker.
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Kristine - Freelance Writing Philippines
Great read, although this post hit me (especially the ‘teenage savings part.’
As a teenager, I never had any money saved. I didn’t have that kiddie savers bank account when I was a teen, but I had when I was a child (which was gone in a few years…oh how stupid of me.)
At 22, I really do not care that much if I am saving money. In a way, I think it’s bad, but I think it is also good. When I have money, I share it with my family and friends. I buy what they want; it doesn’t have to be expensive. When I am out of money, I’m still thankful, and I begin to think about my next payday. (law of attraction :P)
So far, I’ve never ran short of money…and I am surprised that I could see where my money is (like a new TV, new clothes, make-up etc.) and I get to help other people, too. I guess my mom taught me to be thankful when we have and we don’t have money, and to share it to others instead of keeping it to ourselves.
On the other hand, I guess it’s also bad because it’s only now that I think about establishing my life savings :p Not too late for a 22-year-old, but still a bit late.
The only thing that I can’t stand is when people get too wound up in saving their money that they become frugal but in a totally wrong way. Like for example, not giving their kids what they need (like a laptop for school) because they teach them to be frugal and to save their money and go to computer shops. Or perhaps a couple taking their baby in a carrier, and riding in a motorcycle instead of taking a taxi just because they save their money.
It’s good to teach kids how to budget their money, but when something is too much, then it becomes destructive, as well.
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George Serradinho
As a small kid, my parents use to say that money does not grow on trees. As I got older, my father made me work for money and that taught me so many things.
We went on holiday last December and my mom gave my son, Tyron (aged 7) R100 (+-$13) and told him he could spend it on anything. As we went through the shops and he bought items. He worked out how much he had spent and what was over without looking at the slips. He could remember the item and the price. I know that he will be great with money, numbers and even maths. He made me a proud father
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John Design
I’m reading up on this whole thing at moment. Need to save money big style!
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ed
Hi. I like your idea on teaching kids how to make money by working for it. On the other hand, I think focusing on work=money aspect will give them the notion that nothing is free and that nothing can be done willfully. I mean, when it comes to dealing family chores, as a part of a team, everyone should still be sharing their part to accomplish those daily chores. I would apply this though, to a higher level like fixing the ceiling or doing the landscape!
Godbless.
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elvie
thanks for the info, this comes in handy as I have several kids, and I agree with you that parents must teach kids how to handle money matters and saving for their future.
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