Teaching Children About Money

Most children can understand the concept of money by age 6. How our families spend money is a direct reflection of our values and standards. Our children observe our every move. What are we teaching them about money? More importantly, how are we teaching them about money?

I vividly remember the day my dad and I made our monthly trip to the Collinsville Coop to buy 50 pounds of rabbit food for my rabbit project. On this particular day, much to my horror, the price had jumped from $2.00 to $2.10. Hey, what’s up with that? That’s my ten cents we’re talking about here! And thus, my first lesson in increased variable costs. Here are a couple of ideas on how to teach children some important lessons about money:Teach your child to allocate money, whether allowance, gifts or earned. Example: one jar for tithing (10%), one for giving/sharing (10%), one for savings (40%), and one for spending (40%).

Provide an allowance or an avenue for the children to earn money. When we do, we teach our children that money is not limitless and that choices have consequences. Provide the child with enough money that he/she is able to make meaningful choices. Some have suggested as a rule of thumb $1 per week for each year of a child’s age. That may be a bit high, depending on what items you are expecting the children to purchase.

Allow your child to make mistakes with their money. When the child spends a month’s worth of money on something that is soon discarded or sold in a garage sale, the child learns the value of money and the consequences of choices. Our children learned several good lessons when we let them “invest” in Beanie Babies and Trading cards. When our youngest son was in the first grade he went from store to store looking for Beanie Babies. Spending his own money, he was sure those hard-to-find Beanies were all headed for higher prices. Likewise, our older son acquired a few trading cards. When the market crashed for both Beanies and cards, both boys learned valuable lessons about supply and demand and intrinsic value.

Open a savings account for younger children (under age 12). Most financial institutions allow children to open a savings account with as little as $25. The child will receive a periodic statement of account and can watch the balance grow and learn about the concept of interest. To help keep a child’s attention focused on saving for a particular item, post a picture on the refrigerator or in the child’s room of the item for which the child is saving.

Open a checking account for older children (age 12 and up). Teach them to record their deposits and checks. A returned check charge or NSF fee of $20 deducted from their money will help them learn to balance their checkbook and keep records. Obtaining a check card (debit card) for an older child is useful for school trips and other times when carrying a lot of cash is not prudent.

Teach your child personal discipline by postponing the satisfaction of present desires (candy) until a future time (after the next meal). I maintain a candy safe in my office for children. I invite them to choose a piece of candy (with mom’s permission, of course) and to put it in their pocket and save it until after dinner that night. I am trying to teach them restraint by inviting them to choose one piece of candy from a large supply of candy, and teach them personal discipline by waiting until later to enjoy the candy. Surprisingly, my efforts to teach them lessons are sometimes negated by the parent, who will cave in to the child’s demand for more than one piece of candy and to consume it immediately. The lessons taught by a parent in those instances effectively told the child that it was fine to challenge what the adult told them the first time and to go ahead with the immediate gratification.

The Apostle Paul, although not speaking specifically about children, provides some excellent counsel that we may use in rearing children:

Instruct them to do good, to be rich in good works, to be generous and ready to share, storing up for themselves the treasurers of a good foundation for the future, so that they may take hold of that which is life indeed.
-1 Timothy 6:18-19

Dee Sokolosky is president of First Bank of Owasso and the father of four little money managers ages 7 to 17