Briefly: Kids and Money

If you were able to look into the future and see your child at age 22, how would you picture them? Could an ideal situation be this?


  • A college graduate
  • Debt free
  • Gainfully employed
  • Saving money
  • A contributing member of their community


Impossible? Probably not. With the right skills and habits, this situation is very possible.


Our habits define us. If someone is in the habit of exercising and eating right, they’re likely a physically fit person. If someone is in the habit of saving money every month, they’re likely in a decent financial position.


Rich and poor families alike produce kids with bad money habits. It’s not the parent’s financial situation that determines this; it’s the parent’s ability and willingness to teach and instill good habits.


When parents make it a point to teach their kids the value of work and saving money, those kids will probably practice good financial behaviors as an adult. The reality is, no one else is going to do it. Fundamentally, this is less about paying your kids for a clean room or cutting the lawn and more about the value of work and managing the money they earn.


Here are some ways you can prepare your family to have these conversations and set your kids up for financial success:


Step one: Ask yourself: Do you have a budget? You can’t transfer what you don’t own, so if you’re not currently budgeting, you can’t expect your kids to, as well. (Contact us for help on starting budgeting).


Step two: Start talking with your kids about money around age four or five about the following concepts.


  • Allowance versus Earned Income. This is a simple but important difference. We know that money doesn’t grow on trees, but kids may not. Don’t give your kids an allowance. Instead, pay them Earned Income for the completion of tasks. For kids at this age, five weekly tasks is Pay them $1 for each. If they don’t complete the task, don’t pay them the money. Pay them on the same day and time every week. Sunday afternoon works well.


Spend/Save/Share: These are the three things you can do with Earned Income. Have three clear jars labeled with these categories and put 40% of the money into “spend,” 40% into “save” and 20% into “share.” If your kid earns $5 for the week, $2 goes into “spend,” $2 goes into “save” and $1 goes into “share.” The money in “spend” can be used for anything at any time. The money in “save” should be used to save for larger purchases. The money in “share” should be used to teach your kids about giving. Keep this program going until they become teenagers.


Step 3: Help your teens understand their financial footprint and ensure they begins working outside of the home.


  • They’ve been earning income and saving money for years. Now, it’s time to teach them about balance sheets: how much do their lives actually cost? Share with them the monthly costs of food, their activities, the mortgage, insurance, and more—essentially your household budget.


  • Make sure the job is outside the home. Having a boss and coworkers teaches valuable lessons. If they start their own business, even better!


  • If they don’t already have a checking account, it’s time to open one. This will introduce them to banking. On a side note, do not allow your kids to have a credit card.


For major purchases or expenses like a car or college, consider matching your kids’ savings. This can make larger sums more attainable and promote increased long term saving. For example, if they want a $5,000 car, they save $2,500 towards it and you contribute the other $2,500.


Why take the time and make the effort to do all of this? Because practical money matters don’t get taught in school and they are fundamentally important. Contact us for more in depth information about talking with kids about money.









Leave a Reply