Raise money smart kids

Money is one of those things we just don’t like to talk about, especially with our kids. We say things like: “Do you think money goes on trees?” “Why can’t you take better care of your stuff?” “Why do you always think I’m going to buy you something?” But we tend not to spend a lot of time teaching the lessons that will explain the mysterious world of money to our children. Perhaps it is because we don’t have a good handle and we’re afraid it’ll show. Or perhaps we just don’t think it’s important.

It’s important. Every time you buy, sell, deposit, exchange, do anything with money, you are teaching your kids. The question is, are the lessons you’re teaching the ones you want them to learn? Each time you rush into a store, buy something and rush out again, you’re teaching them stores are for buying stuff. Don’t be surprised when they want to buy something too. And when you make a withdrawal from a bank machine without explaining how the money got there in the first place, it looks like money is as available as one of those plastic cards you’re using.

To learn how money works, kids need to get their hands on some. Children can manage the concept of an allowance and the idea that different amounts go into different “pots”—saving, spending, and sharing—at about age six.  Part of making an allowance system work is setting expectations for how kids will manage their money. No, that doesn’t mean you get to say what they can or can’t buy. It’s their money. But you do get to set some guidelines. In our house, 10% automatically went into the savings container, 5% went to sharing, and the rest went into a wallet to be split between mad money and planned spending.

As the kids get older, and you add more money to their weekly cash flow, you’ll have other expectations. Less of the allowance will go to the “mad money” pot, and more money will go toward “planned spending.” These are the monthly expenses your child has assumed responsibility for, such as bus fare, lunch money and, as she gets older and more responsible, her clothing, school supplies and extracurricular activities.

Having established an allowance routine, keep your hands out of your pocket! If your kid blows his stash or loses his loot, let him wait until his next allowance or find a way to earn the money he needs.

An allowance isn’t an excuse to hand money over to your children. It’s the money you would normally spend on your children put into their hands so they can learn to manage it. Whether you use the dole system or an allowance system, don’t fool yourself, you’re giving them money. You might as well be teaching them how to make it work.