Teaching Our Children About Money

Financial literacy is a core principle of our family, and importing this value to our kids is a parenting task for  which we assume full responsibility. We believe that the ways we give, save, and spend are a reflection of our values, and we  want to shape our children to see themselves as a steward of God’s resources. Creating intentional spaces to discuss money with our kids continues to be one of our favorite parts about parenting. Right now our three kids are each managing their money in different age-appropriate ways. Here’s how we’ve approached money as our kids have grown...

Preschool - From an early age we want to teach our kids the value of work and its  connection to money. Around the age of three, we give our kids the option of doing chores that were simple and easy to complete and pay them $1 for each task. They are paid immediately for tasks such as sweeping, arranging shoes, and washing the fish tank, so that they can make the connection between working and earning. The money goes inside a Mason Jar, and the money is theirs to spend whenever they  like. At this stage of the game, our main focus is making  the connection between work and money. We recognize that they are being paid exceptionally well, but we feel that their ability to make a purchase with that money is really important. Our youngest will be starting Kindergarten in the fall, and we will transition her into the next age bracket over the summer.

The Spending Envelope is missing because 

Elementary School - Our middle son has been using the Give, Save, Spend budgeting strategy for several years, and we’ve had lots of challenges and successes along the way. In a nutshell, when he earns money through completing chores, he deposits the cash into his Mason Jar.  After a week or two, he divides the cash into his three envelopes labeled: Give, Save, and Spend. Giving can go towards any organization he wants to support including school charity drives, our church, or something else. We have determined that the Savings envelope must reach at least $30 before he can spend it for  something he wants. The goal is teaching patience and longer investment. Spending is available for his use at anytime, or when he is close to his $30 savings threshold, he can add this amount to the other envelope.

When we began this process, he earned $5 a week if he completed all of his chores, and as parents, we told him how to divide his money: $1 into Giving, $2 into  Spending and  $2 into Savings. As this process has unfolded, we have encouraged him to play with percentages and build a plan that he finds more exciting . The goal at this stage is to understand his various options for using money.

Middle School - Our oldest will be starting Middle School in the fall, so is ready to upgrade  his budgeting process. A few weeks ago he created his first envelope system, and this gave us  a wonderful way to get a sense of  his values. First he wrote down ten categories where he enjoyed spending money. Next, I helped him rank these items in order of their importance in his life. Finally, we assigned a dollar amount that he would feel great about to save towards and then spending when he reaches that goal. Talking with him  about how our spending reflects our values has been an awesome experience, and it’s exciting to see him making these connections. We are early in this process, and there was much resistance the first time he had  to place his money in the envelopes, but I am full of anticipation for the connection he’ll make in the coming year. The goal of this type of budgeting is for him to see that money should follow our values.

High School - We have a few years yet, but we already have a plan for when the kids each reach high school.  We will give   them a chunk of money each month  to appropriately budget clothing, activities, entertainment. and other incidentals. We want them to make budgeting mistakes at home, so we can help them learn to distinguish between wants and needs. This process is outlined in Rachel Cruz’s book Smart Money Smart Kids, and we’re looking forward to seeing how it plays out in our household.

It’s worth noting that our system is far from perfect. I am terrible at chore charts and paying kids on a regular basis, so we usually outline a bunch of stuff that needs to be done on a Saturday morning, and everyone works to finish the tasks, and we pay everyone right away. We’ve had sneaky kids change where there their money’s designation, and even worse, swipe money from their sibling. This has given us the opportunity to talk to them at length about integrity and honesty. We also needed to figure out what to do about birthday and Christmas money because our kids would declare they would no longer do chores and would  just wait for their gifts to arrive. We opted to allow them to spend $25 of holiday money and add the rest to their savings account at the bank. Teaching kids about money can be really frustrating, but in those moments I try to remind myself not to  get caught up in the details. The value of financial literacy is worth the work.

One of the themes in Financial Peace University is that most people wish they understood how money worked before they became adults. Many families shy away from talking about money for a variety of reasons.  When people start looking for financial information as adults, often that information is  supplied by businesses who want to lend money. We want our kids to walk into adulthood with the skills to understand their finances and be empowered to make thoughtful decisions about money throughout their lives.