Kids and money. I think it is super important to help your kids learn about money as early as you can. Especially now that the majority of our financials are now digitized.
Not only will this help them be financially responsible, independent, and money-wise, it will also help them be more confident, learn delayed gratification, and to be generous people, too!
Ages listed are suggestions, of course. Your child might be ready for certain steps sooner, or some things they may need more practice with before moving on. The main idea is to start early, and to provide some real-life ideas that will help your kids and YOU!
Practical application for understanding money
2-3 years
Get familiar with basic number sense
- Practice with items around the house, food/snacks, anything really. Working it into everything will just help them understand it that much better.
- Ex: two red blocks, “one, two” and one yellow block “one”. You have three blocks all together “one, two, three”.
3-5 years (Toddler/Preschool age)
Money is used to buy things. Talk about this when you go to the grocery store, retail, etc.
- Plan to have some cash with you sometimes so that they can see you actually count out the money to pay for something.
4-6 years
Learn the different values of money
- Practice with coins and bills at home. Talk about what each one is worth, and you can even practice ‘spending’ money on things at home. Ex: Go to your pantry and ‘shop’. “If you want to buy bread at the store it will cost $2.24. Let’s count out they money to pay for your bread.”
- When they ask for something in the store, like a toy, or candy, you can simply say “I do not have money to pay for that today. I have money to buy bread and milk. You would need one dollar and one quarter to buy the candy.”
- Let them purchase something at a store with their own money (preferably their own, if possible). Help them count out the money to the cashier, and make the transaction themselves. (Something we did for our kids was pay the tax for them until they had the hang of value. Then we moved to explaining tax, and having them include tax when they were ready.)
5-8 years
Start an allowance and teach about budgeting.
- Have three banks – save, give, & spend
- Save: ½ of their allowance – save for something big and/or to start a savings account at the bank for future. The idea is the plan of saving and not to spend all of your money. Make a plan that works for your family and their age.
- Give: ¼ – church, causes, etc.
- Spend: ¼ – this is the money they are to use on things they would like to buy themselves.
- Start them on an allowance* – Start with an amount easy to handle, divides evenly, and is age-appropriate. We started with $1.00 in the form of quarters. This made it easier for them to learn how to separate the amounts for each bank.
*Now, all families have their own systems for how they decide the reason for allowance. My family created an allowance for our kids to teach them how to understand and handle money. We expect each member of our family to contribute to the day-to-day running of the house (i.e. dishes, laundry, taking out the trash, etc.). They can do extra chores or jobs to earn extra money. Decide what works best for your family.
- Can’t spend more than you have/tax. Cash allowance reinforces this concept.
8+
Balancing account
- Savings account at the bank: they save enough to open an account, go with you to the bank to open an account, get own balance book, create savings goal/something to work toward.
- Lunch account debit/credit : When my boys began elementary school we allowed them to eat one school-bought lunch per week, if they wanted. Our school lunch payments are digital, so no actual money is brought to school or exchanged. So, once they got older (8 & 10 years) we updated our system at home to help them keep track of their own lunch budget and have more choice on how they spent their money.
- I created a Debit/Credit chart on Excel for each kid, printed, and framed it for our Wall of Purpose. They use a dry erase marker to update their account through the month, then can wipe away at the end of the month and start again.
How it works: We gave them a certain amount to start each month. They write their starting balance at the top. Each time they eat lunch at school or get a snack they update their balance on the chart. If they run out of money before the end of the month they have to wait until next month to eat at school again, OR they can use their own spending money to add to their lunch account.
- I created a Debit/Credit chart on Excel for each kid, printed, and framed it for our Wall of Purpose. They use a dry erase marker to update their account through the month, then can wipe away at the end of the month and start again.
10-15 years
Increase allowance amount as well as more responsibilities around the house.
- Kids can start paying for gifts for others, buying more expensive items on their own, etc.
- Encourage your kids to start increasing their savings plan for a bigger goals. (i.e. video game they really want, a trip, mp3 player, car, etc.)
- Teach entrepreneurship by having them earn their own money doing jobs for friends, neighbors, other family members, etc.
- My older son really wanted to go on a trip to Washington D.C. with his school friends. We thought that was also a great opportunity for him to help pay his way there by doing jobs to earn ½ of his trip. If he could earn ½ then we would pay the other half.
- My younger son started his own homemade dog treat business with the help of a great company that teaches entrepreneurship in kids, Boss Club Co.
We would love to know what ideas that you have used with your kids and money to help apply concepts, too!