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Being taught the benefits and dangers of money was not something my husband and I grew up with. Teaching kids money management was not on our radar. Without the opportunity to manage money as children, we had nothing to guide us as adults. But then we found Dave Ramsey.

Through his books and podcasts, we learned that teaching kids money management gives life skills that are desperately needed. We learned how to budget our income, put every dollar in its place, and work towards living debt-free.

We were encouraged to teach our kids how to manage money by giving them an allowance. It’s bizarre to me that we deal with money daily, and yet money management isn’t a class in most public schools.

So let’s get right into what we do and how it works for our family.

 

 

How We Do It

 

We schedule payday twice a month on the 1st and 15th. During our Family Powwows, they grab their wallets and the family money box with their savings and giving envelopes inside. I love this process but it can be a little chaotic. Eventually, you’ll get the hang of it.

The amount paid differs for each child because money is deducted when they receive “marks” for leaving their lights on, etc. or if I have to “retrain” them on a certain job. Starting with the oldest and moving on down the line has worked best for us.

 

 

Managing the Allowance

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1. Giving

My husband and I give 10% of our income to our church and we encourage our children to do the same. However, it’s really important to model for them how to give with a happy heart and not out of obligation. By giving back some of what God gives to us, we prove that we trust Him.

Furthermore, we keep ourselves in a humble, generous state of mind and heart. Aside from giving to the church, we also have found joy in supporting orphans in Africa that the kids have found themselves and raising money to build a water well in Africa.

I’m teaching my kids that real joy is found in giving and not receiving.

2. Savings

Explain to your kiddos that the savings envelope is for saving for something specific that they want; like a scooter, skateboard, toy, watch, etc. At one point or another, we’ve given our kids all these items and if they want a better one or a different version, they can buy it themselves.

Sometimes I contribute to the cost, but we talk about it beforehand and not because they’re whining about it in the toy aisle.

Teach them how to write a ledger on their saving envelopes by noting the date, the amount paid, and the current total. If they take money out, they also need to jot down the date, the amount deducted, and the reason why.

You might have a situation where a child can’t decide what to save for and then one day he spontaneously announces that he’s buying his third sweatshirt.

Don’t allow your children to grow up being “impulse buyers”. Teach them to wait at least a day. They might change their minds and be glad they did.

Concerning online savings, each of my children has savings accounts we opened once they did their first modeling job or received larger amounts of birthday money. This is not to be touched and will continue to grow until they are older.

3. Spending

After giving and saving, what is leftover can be spent on whatever they want. It’s completely up to them. Even if my husband and I feel it’s a “waste”, the rule is that they can buy whatever they want (within our family values).

We don’t have a lot of sugary foods in our home, but I don’t deprive them completely, so I let them buy items like gum, a bag of candy, or a can of juice or caffeine-free soda, etc.

They need to understand that their spending money is for whatever little extras they might want when you go out. I treat my kids to lunch and buy necessities, of course, but if they want a small item beyond a necessity, they have the money to buy it. For example,

• Legos
• gum, candy, drink
• hot wheels, small toys
• my teen is now buying his swim goggles ($10) & sunglasses ($5) because he kept misplacing the ones I bought him.

I’m perfectly fine letting them learn painful lessons in the process too, if necessary. They discover what’s a waste and what is not. You also give them autonomy, which is important for becoming an independent, responsible adult who can think for themselves.

I’ve found it very interesting that since we began this tradition, our two littles actually insist upon buying their own treats. It makes them feel good to carry their own money and pay for what they want.

 

 

Debit Cards

 

Eventually, I began delegating tasks to my kids, for which I have gladly paid them. We have a small family side business building custom furniture. As much I dislike trading dollars for hours, this has been a great opportunity to work from home and teach my kids life skills.

My daughter also started her own business building macrame lanterns where many people Venmo me the payment and I then transfer it to her savings account.

Since online payment methods have become so convenient, I have been paying my kids less cash and instead, transfer money to their accounts. Two resources we use are the Greenlight card, which is an easy way to pay allowance and manage giving and saving. Check it out!

The other resource is a USAA checking account (inside our family account), now that my kids are older and can use a debit card. I’ve learned that the more specific accounts you have, the better you are with your money.

For example, my kids each have their own long-term savings account (for a car, etc.), a mutual account for big investments down the road, a business account where they earn income from their “side hustle” and use the same account to buy supplies with, and another debit card account to use for spending.

 

Delayed Gratification

 

A very important part of teaching kids money management is delayed gratification. This “refers to the ability to put off something mildly fun or pleasurable now, in order to gain something that is more fun, pleasurable, or rewarding later”.

Model for and teach them how to wait now for something better later. Set a rule that they must wait at least one day if they want to buy an item over a certain amount (we do $15-20).

I even scan the item on Amazon and usually find that it’s less expensive. I tell them, “It’s a little pricey so let’s go home, research, and wait a day and if you still want it, you can buy it.” Check out the study on deferred gratification.

 

 

Additional Income

 

My children do not get paid for family contributions (chores). We all maintain and clean our home for free. It’s just part of being a family. If they want to generate extra income each month, I am more than happy to pay them for working for me. Plus, it frees me up to do more important things. For example:

• I pay my 7-year-old $1 to rinse out my paintbrush when I’m done using it.
• My 10-year-old daughter earns $10 painting furniture or sanding wood using the electric sander.
• My teen earns $15 a pop mowing our yard that takes him an hour and a half.
• They also earn $6 washing the car, $5 vacuuming out the truck, $2 vacuuming my bedroom floor, $2 folding a basket of laundry, $2 decluttering a drawer, or $5 cleaning up my workshop, etc.

 

 

Set Yourself Up For Success

 

• Create payday reminders on your phone or in your calendar (it’ll be easy to forget if you’re not in the habit of it yet). 
• Keep a stash of small bills on hand (5’s & 1’s) if you’re going to pay them in cash. It can be so exciting for children to look forward to getting paid only to have a parent drop the ball and crush their little hearts.
• Start with the oldest child first so the littles can watch how you do it.
• Communicate your expectations about why you give them spending money.
• Get on the same page with your husband, otherwise, you might run into the following scenario.

My husband took the kids to the bowling alley and fed them lunch. A short time later our teen was hungry and wanted to use his spending money to buy cheese sticks, but my husband thought it was a waste. This caused my son some frustration because I told him that his spending could be blown on whatever he wanted and this teen was really craving some greasy cheese sticks.

Now my husband and I agree that the “blow money” can be used on anything they want, even greasy cheese sticks.

• When you are out shopping, prepare to respond to their wants by saying, “Sure, you want….? You brought your wallet, right? This is why we pay you, so you have money to blow.” And then continue shopping. Don’t wait for a reaction. Don’t cave in to them.

 

The “Rules”

• Don’t let them get into the habit of constantly changing what they are saving up for.
• Pulling money out of their savings to impulsively buy something is a bad habit.
• Borrowing money from each other or you is not a good idea.
• Don’t control what they want to buy with their spending money (unless it’s bad for them).
• Do remind them to bring their wallets on shopping days.
• Do encourage them to wait on more expensive impulse buys.

One of our favorite resources for teachings kids money management is Dave Ramsey’s Foundations in Personal Finance Curriculum for elementary and high school. My teen son loves the online course and listens to the Dave Ramsey podcast daily. Ramsey Solutions also has games that your kids will enjoy while learning about money.

 

 “A man should have money in his head, but not in his heart”  -Jonathan Swift

 

 

Conclusion

With some effort and intentional time, your can kids can succeed with money instead of getting into debt. Do you think teaching kids money management is important in a world where money is the tool that creates time freedom and financial freedom?