If your kids are already in school, it’s definitely time to start teaching them about money if you haven’t already. One study found that money habits in children are formed by the time they’re seven years old.
At Raising Families, we know that parents have greater success when they change their role from being a teacher to a coach to a mentor as their kids get older. As parents move from each role their children will learn not only about money and how to use it but also about the value of money and how to earn it, save it, and invest it.
As a quick reminder from our Role of Parents post, when we think about our roles as teachers, coaches, and mentors for our children, we teach them skills and knowledge, help them improve their skills, and then enable them to make decisions on their own and provide them key insights and perspectives as they get older.
We know that transitioning roles sets them up for success in life as caring and capable adults.
Teaching Kids about Money
Teaching kids about money can start as early as when your kids start school! Once they have a basic understanding of numbers, they’ll be able to grasp the concept of money. Explain to them that things cost money. Every time you buy something when they are with you, share how much it costs in dollars and cents.
Whether you’re paying cash, or using plastic, talk about what you’re buying at the restaurant or at the grocery store or when filling the car with gas.
Next show them what those dollars and cents mean by giving your kids an allowance. While piggy banks are great, my experience is that a mason jar with a hole cut in the lid is far better. That way your kids can see how much money is in the jar.
When your child goes to the store with you and walks down the toy aisle and says, “I want that ball or truck,” show them the price tag. Don’t buy it, but instead ask them how much money they have in their jar. That will immediately prompt them to ask you to help them count the money in their jar when you get home. Now they will begin to know the value of money.
If they have enough money in their jar, let them decide on their own whether or not to buy the ball or truck. Some will want to part with their money quickly, but we guarantee, as your child heads down that same toy aisle, some other toy that looks like fun with start the discussion all over again.
Then they will have to make a choice. We’ve seen this happen over and over again in our own family, particularly with the grandchildren. Whether a parent or grandparent, don’t give in and buy the toys for them! Let the child decide and learn in the process!
Coaching Kids about Money
As your kids reach middle school, it’s time for you to switch from being a teacher to a coach when it comes to money. It begins when you switch from giving your kids an allowance to them beginning to earn money. The concept of earning money is one of the most important lessons that your kids can learn.
Money is not given to them; they have to earn it! New York Times best-selling author Dave Ramsey and his daughter wrote Smart Money Smart Kids to provide parents with great ideas when it comes to money and teens.
When it comes to the things you expect them to do (like take out the trash, cleaning their room, or doing yard work), provide an opportunity to earn some money by doing more. For example, you may set the expectation that taking out the trash is part of their role in maintaining the house, but they can earn money if they wash out the garbage bins once a week or make sure the garbage bins are brought in from the curb by a certain time.
One of my daughters actually took washing out the garbage bins to a new level by going door to door on our street to wash the neighbors garbage bins. It turned out to be a nice way for her to make money.
Another part of coaching is standing firm when that impulse hits your child for a new pair of shoes or item of clothing. Don’t cave and buy it for them. Let them earn money and save up to buy it themselves.
When it comes to school clothes each year, set a budget for your kids, then let them decide what to buy. Make them stay within their budget.
Mentoring Kids about Money
You’ll know when it’s time to shift gears to being a mentor when your child starts lusting after everything they see on the computer and make comments like, “One of my friends at school has a new cell phone (or computer or car or …).”
It’s now time for them to get a bank account (if they don’t already have one), so they have a place to put the money they earn, whether from a summer job or babysitting. Make sure you discuss your expectations for when they drive at this time, too, so they know what they need to have saved up in their account. Make sure to discuss if they’ll be able to use the family car, if they have to buy their own insurance, and who will pay for gas?
This is a great time to mention the importance of having a budget. Use monopoly money to show them how much money you earn as a family and how much money the family spends each month. Not only will their eyes get wide but it will help them understand the importance of enjoying what they do to make money and obtaining the skills needed to do it!
Helping your kids learn about money, by teaching, then coaching, and then mentoring will have a profoundly positive impact on their lives. To do so takes time, effort, and creativity on your part. But by following our roadmap, you’ll be well on your way to teaching your kids about money.
Teach, coach, then mentor … it’s what we do as parents to ensure our children grow to be caring and capable adults.
Rick Stephens is a co-founder of Raising Families. With 33 years of experience as a top-level executive at The Boeing Company and having raised four children of his own, he is able to support parents and grandparents by incorporating his knowledge of business, leadership, and complex systems into the family setting. In his “free time” Rick enjoys road biking, scuba diving, visiting his grandkids, and generally trying to figure out which time zone he’s in this week. Read full bio >>