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Mar 04

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How to Teach Kids about Money ~ Part 4

how to teach kids about money

How to Teach Kids about Money.

 

Welcome back! It’s Monday and we’re picking our series back up! If you missed the posts last week, here are links for you to visit: How to Teach Kids about Money ~ Getting Started and How to Teach Kids about Money ~ Part 1 and How to Teach Kids about Money ~ Part 2 and How to Teach Kids about Money ~ Part 3. Now let’s get started for today!

 

How to Teach Kids about Money: Setting up the “Kid” Budget.

 

  • First, I would highly encourage you to check out Dave Ramsey’s Junior Discovers Series. The stories are funny and engaging and teach VERY practical lessons along the way. Jorryn loves them and we read them over and over.
  • Second, I also recommend Dave Ramsey’s Financial Peace Jr. which has great tools to make it very easy to get your kids started on a lifelong journey of financial freedom. Plus kids think it’s cool! 🙂
  • Decide your kids “income”. How much will it be? Will it be paid weekly or monthly? I chose monthly because it was easier to remember. What will they do to earn this income? Will you have any type of bonus system?
  • Decide how to determine what your kids have earned. Will you use a chore chart? How often will you check in? Daily or weekly?
  • Start your envelopes!! You should have a Share, Spend and Save! For young kids, it’s easy to say they earn $3 a week and put a $1 in each envelope. If you choose not to use envelopes, use three piggy banks or canisters. There is also this Money Savvy Pig that could work!
  • Make the Save goal. Discuss what this goal will be and how long it will take them to obtain it. We print out a picture and write down the amount and then put that picture in Jorryn’s Save envelope. If the Save goal changes mid-way through saving for it, get together and discuss. I feel it’s important for them to stick their goal so they learn the value of saving and working towards something. If the Save goal changes, I think they need to have a really good reason!
  • Determine what items will go in their budget. What will they be responsible for and what will you pay for? Put it in writing just like an adult budget! We all sign ours!
  • Confirm what they will do with birthday and Christmas money. Can they choose what to do with it or will you require a set percentage to go to Save or Share? Make a plan ahead of time!
  • Some parents like to match the amount their kids put into savings. Some requirements on this would be that they leave it in the savings account or do specific extra tasks to earn the savings matching. This could be a real motivator if they have a big Save goal they’re working towards!
  • Gift cards can be a great management tool. Some families ask for gift cards for Christmas or birthday so that kids can learn they can choose whatever they want up to that set amount.
  • Teach your kids that little things add up! Not only does every penny saved count to their goal, the price of small items adds up. For awhile we had a hard time with Jorryn not finishing a treat that was purchased. For example, he’d want a smoothie when we went to the coffee shop but he would only take a few sips and the rest would be thrown away. If this is a problem in your family, consider explaing how much the treat costs and tell your child that they will be responsible to pay you back for any “leftovers”. So if the smoothie costs $4 and 3/4 of it is left, charge them $3. Harsh? I bet you won’t have many leftovers after very long! It will make them stop to consider if they really want it or if they’ll really finish it.
  • For kids that are a little older, the Bank of Mom & Dad can be a great way to teach some real world skills! This pretend checkbook could be great to get started or you could create your own. Work on how to write a check, make out deposit slips, balance your checkbook register, use a debit card, and how interest on a savings account or loan works. You would be AMAZED how many adults don’t know this. When I worked for a bank, I was dumbfounded by people who actually called and said they still had checks left in their book, how come there was no money in their account. Prevent this! Some families have also set up pretend budgets for their kids and had them work off that budget like an adult would. For example, you would give them $2,000 a month to work with and have them “pay” for the mortgage, groceries, and other bills.
  • Teach your older kids about taxes. In Michigan, the sales tax is 6% so Jorryn has been learning lately that when we got to the store, he must also factor in tax for his purchases.
  • Open a savings account at the bank for your child and teach them about interest.

 

What method do you use in your family? What tips have you found work best with your kids?

 

Join me again tomorrow for the last post in the How to Teach Kids about Money series!

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