Teaching Kids About Money

Common sense answers to questions on personal finance by Joe Plemon

Q: My husband and I want to teach our children about money to help them avoid the many mistakes we have made. Can you give us some tips?

A: Great question! I suggest you focus on two money concepts: where it comes from and what it should be used for.

Work For It, Appreciate It

Because money comes from work, I don’t recommend giving children allowances. Instead, create age appropriate chores. For very young children, cleaning their room probably involves picking up a few things (with lots of help and “atta-boys” from Mom and Dad). At this age, pay your child immediately so he makes the connection between work and money. As the kids get older, keep a chart of chores and mark them as they get done. Pay them accordingly each week. Can this become tedious for you? Yes, but you are imparting some great work ethics.

Be Their Financial Disciple

Now that they are earning some money, you need to teach them how to use it. I recommend that you label three envelopes as SAVE, SPEND and GIVE AWAY and show them how to divide their earnings. You can create great teachable moments when you take your child to buy something she has saved for. As she pays the cashier with her money from that SPEND envelope, she realizes how much work it takes to buy a certain item. She even learns about taxes. At an appropriate age (12-15), help them open their own checking account and take responsibility for it. (NEVER give them a credit card!). Put money you would have spent on their clothing into the checking account and let them purchase their own clothing. My kids learned all about thrift stores in their high school years. Your children will thank you some day, and you will enjoy watching them handle money responsibly as they grow through their teen years into adulthood. I wish you the best as you implement these ideas into your children’s lives.

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