Teaching Kids About $$

photo (10) It is a parent's responsibility to teach their kids about money. And what a big responsibility it is! It can have bigger effects than I think we realize sometimes. It will affect how your kids' kids (your grandkids) learn about money. Most Americans will touch $4 million in income over the course of their lives. And if you are going to leave them an inheritance, don't you want them to be smart with how they use it? That's your hard-earned money!

Dave Ramsey's Living a Legacy event (which I recapped a few weeks ago) provided some really great tips on ways we can effectively teach our kids about money. Dave used a rope analogy with his family. There are two ends to a rope. The parents have hold of one end, and the kid the other end. As children make smart decisions, the parents can choose to let out the rope (give them more responsibility). If kids prove they are not mature enough for responsibility or to make decisions on their own, the parents pull the rope in a little. Act like an adult; get treated like an adult. (At high school graduation, he gives a rope to his kids to symbolize that they have to make their own decisions now! I just love that!)


Commission is different from allowance in that when you work, you get paid. When you don't work, you don't get paid. You can decide what is appropriate for your family and each of your children. Perhaps there are some chores that kids do just because they are part of the family (make their bed, take their plates to the sink after meals) and some that they can do to earn money (fold laundry, take the dog for a walk). Anything they want to buy is bought with money they earn on commission.

  • Ages 4-6: Pay your child when they pick up their toys. Use a big clear bucket, so they can see their stash grow. Give them age-appropriate chores and pay them on the spot. Let them buy a toy or something they want with their money, so they realized that the money doesn't come from mom's purse or dad's wallet but from work.
  • Ages 7-12: Similar as before, but now you can switch to using three cash envelopes (or banks) for your child: GIVE, SAVE and SPEND. Instead of the parents giving them money for the offering bucket at church, it comes out of their own GIVE envelope. Or, maybe there is another charity they want to give to!
  • Ages 13-16: When you think they are ready, go with your child to the bank and open a checking account. Dave & Sharon Ramsey put a reasonable set amount of money in their kids' accounts on the first of the month, and the kids were responsible for budgeting. If they wanted more money, they had to get a job. (All of them did.)

Because Rooney is only 14 months old, we obviously haven't used any of these in practice, but I really appreciated how practical they are. We are planning to buy Financial Peace Junior soon to help us teach her how to spend, give and save money appropriately.

Dave also has a study called Generation Change for teens, and The Graduate's Survival Guide for high school graduates (which I purchased for two of my cousins who are graduating this year). If your kids are in high school or college, I think you could take FPU together, too!

How do you teach your kids about money?

P.S. I also love the Money as You Grow website! Sit down with your kids at the computer and use the site to teach them about money. There are also great activity ideas for each age.

P.P.S. Our first memories of money :)