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Clever Ways To Teach Your Kids About Money

Published June 25, 2021

10 minute read

David Ning

By David Ning

These days, many people fret about the kind of education their children are getting. How early should you put your child in preschool? Is a traditional public school going to do the trick? Or is a private or charter school a better option? Do you even have the budget for that? Thinking about your children’s education can be very stressful and consuming. After all, we want our children to grow up and turn into capable adults, right? In all of our concern over curriculum and report card grades, we can easily forget that the lessons learned at home at sometimes the most useful. When it comes to teaching your kids about money, in-school lessons can’t compare to real-world lessons from Mom and Dad.

Having Money Skills is Crucial in Life

One of the best life skills you can teach your kids is proper money management. This is especially true, since our basic education system doesn’t offer very much when it comes to personal finance lessons. Sure, your kid might learn how to identify and add up coins. But they won’t get any practical skills like how debt or taxes work. It’s hardly a surprise that so many adults get into debt quickly, without realizing the financial hole they have dug for themselves until it’s too late.

If you want your kids to grow up financially responsible and live a comfortable life, then start teaching them the value of money early. Here are several clever activities that you can do with your kids to teach them these lessons. It will also help them improve their math skills. Hopefully, they will also remember these moments as enjoyable time spent with their parents.

The Good Ol’ Lemonade Stand

While kids traditionally would just set up a card table and a couple of pitchers on the front yard, there are almost endless possibilities for teaching about money with this tried and true staple. The key here is to get your child involved in the planning (and budgeting) of this summer business venture.

Start by helping your child determine when and where they are most likely to sell her wares. For example, if you live on a quiet side street you probably won’t get much foot traffic. Maybe you can set up on a friend’s lawn near the local community pool to increase sales. You should also teach your kids about business expenses, by asking them to pay for the supplies (juice and cups, for example). You may need to front them the cash, but it’s not being a mean parent to ask them to take some of their proceeds and reimburse you.

Use this conversation to also talk about setting a fair price. You want your child to make enough money to cover the cost of juice and cups, but they also can’t price their lemonade so high that no-one buys it. Finally, help your child decide how they should spend their profits. Suggest that they could reinvest some in their business (maybe add iced tea to the menu next time!), save some in their piggybank, spend a bit on something they want, or even give a percentage away to a good cause.

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Time to Work

Learning about money doesn’t just have to be about opening a business either. It would be just as enlightening to have your child do some work around the house for money. In fact, some regular responsibilities in exchange for a bit of cash of pretty standard. Call it an allowance if you want, but the key it to make it dependent on completing the chores.

You might think that the kids shouldn’t be compensated to fold their own clothes. We can agree with that. But what about folding your clothes? Or washing the bathrooms? Or doing all the dishes? Those things are probably worth a few bucks. Depending on their ages, you could also ask the kids to cut the grass or rake leaves. Ultimately, you want to instill a strong work ethic in them that will carry over into their first part-time jobs and eventually, their careers.

Paying the Bills for Mom or Dad

No one likes paying bills, right? Believe it or not, your kids will be fascinated by how the process of bill paying works. Whether it’s logging onto the website to see the bill, using your online banking to send payments, or writing out a check and sending it off in an envelope, you kids will probably be fascinated. Take the time to explain each step. And don’t be shy about asking questions. For example, if they ask what that really large number is on your online banking page, go ahead and explain that it’s what you still owe on your house or car loan.

You can even have your kids pay the bills for you every month, once they are old enough to remember such things. It’ll give them a sense of how much standard utilities cost. To take it one step further, you may even want to give them a set amount each month and then have them pay utilities with it. Tell them they get to keep what’s left over, but they’ll have to use funds from their own piggy banks if the amount you give them isn’t enough. If you do this, then don’t be surprised that they end up being the ones going around the house nagging everybody to turn off the lights when they leave the room!

Scavenger Hunt Around the House

I love having a clean house. The problem is that it’s so hard to clean up when there’s useless material stuff everywhere. Anyone with kids knows that the amount of useless junk that accumulates can boggle the mind. Seriously, where did all these Happy Meal toys, loose pencil crayons, and half-built Lego creations come from?

Enter your kids. Just have them pick out everything in decent shape that can be sold and host a yard sale. Make sure they know that they will be able to keep part of the profits, in exchange for helping out. That should help you get some motivated workers. Even if you don’t want to sell anything, you can still donate the things that are sitting around the house collecting dust. Since you get can a small tax write off for every donation, there’s plenty of profits to share with your kids.

Setup a Family 401(k)

It’s never too early to teach your children how to save money. If there is something in particular that your child would like to save up for, offer to do a “Family 401(k)” for the them. What does that mean exactly? It’s a simple process.

Just like your employer may offer matching contributions to your retirement fund, you can offer to match your children’s savings. This is especially helpful if they are targeting a big-ticket item, like a new gaming console. Offer to match your child’s savings at whatever level you feel comfortable. It could be dollar for dollar, if you want. That’s nice and simple. You could also offer to contribute 50% of whatever they save, meaning every $100 of birthday money they stash away is actually worth $150.

This system will help your child understand the importance of taking advantage of savings incentives or bonus offers. Now that they understand the beauty of “free” money, they’ll sign up for that 401(k) as soon as its offered. After all, it’s just like what Mom and Dad used to offer!

Ask Your Child Setup a Three Jars System

Not every dollar needs to be in the Family 401k, though. It might work great if your child is saving for a specific item. However, for regular spending money you should consider creating a “three jar system.” Take three jars (or bowls or cups or whatever) and label them Giving, Saving, and Spending. These are the three pillars of solid personal finances. You can even ask your kids to pick out and decorate the containers to their liking.

When they receive any money (birthday, Christmas, lemonade stand, allowance, etc), have them separate it equally into the jars. The visual will help them realize that only some money can be spent freely, while the rest needs to be saved or set aside for charitable causes. If you’re splitting the money into 33% chunks, what happens to the remaining 1%? Good question. You can let your child put the extra percentage into whatever jar they prefer. Or you can reclaim it in the form of taxes — might as well teach them about that inevitability early in their lives!

Play Monopoly

Believe it or not, the classic Parker Brothers board game can be an excellent financial teaching tool. It’s particularly great on days when you have quite a few hours to kill. Playing a couple of games of Monopoly with your kids will give them an opportunity to learn about budgeting, the importance of an emergency fund, how to gauge risks, and how to negotiate.

even better, give your child an opportunity to be the banker. They may need some guidance the first few times, but soon they’ll be dishing out mortgage proceeds and selling hotels like a pro. As an added bonus, it will also teach them to be patient. Your fortunes can change in an instant in Monopoly (and in real life). Let them learn to never give up, even when they’re broke and miles away from passing GO again.

Plan the Next Vacation Together

Invite your kids to help you figure out where to go on your next next vacation. Whether you have already picked out your destination or are still shopping for the perfect spot, let your kids in on the decision-making process. You can start by telling them the vacation budget and then allowing them to help research fun things to do on your trip.

For example, if they love amusement parks, they can help look up the costs for a day at the local park. Maybe they can find ways to stretch the money through discounts or special deals. Giving your kids more ownership of the vacation will help them to be conscious of the money the family is spending. The act will also give them the excitement of anticipation.

Be a More Realistic Bank of Mom and Dad

My daughter recently learned a rather painful lesson. She asked if she could borrow money from me to buy something. She simply didn’t want to wait until she had saved for it. I explained that she would be charged interest if she borrowed from me and that she would have to pay me back before she could buy anything else. The interest was about one week’s worth of allowance. She happily agreed — at first.

Three weeks into the payment plan (and with two more weeks to go) she wanted something else. It sunk in that she was missing out on a week of allowance. That missed week was doing nothing for her, other than already providing a toy for her (that she was already tired of playing with). Instead, she was informed that the Bank of Mom and Dad would not allow her to go further into allowance debt.

She hasn’t asked to borrow any money since. Instead, she saves up for the things she wants. Next time your kids want something they don’t really need, give them a chance to realistically borrow money from you. The experience will prove to be worth the hassle.

Give Them a Chance to Spend Money

My son has a different story. He wanted to spend money on a digital outfit for his Roblox character once. I knew it was going to be a complete waste of money, since he jumps from game to game really quickly. I warned him, but ultimately let him spend the $20 on what he wanted.

As expected, he moved on from that game two weeks later. I won’t say it was a complete waste. He did get some fun out of it for a few days (although he could have had just as much fun playing the game without spending the $20.) I talked to him afterwards and explained how he didn’t really need to spend that money at all. Now he’s $20 poorer and has nothing to show for it except a useless digital item with no real value. He really seemed to understand it. After all, that $20 was almost half of his entire life savings.

Don’t always stop your children when they want to buy something. Just take the time to explain why you think it’s probably not a good idea ahead of time. Then use it as a teaching moment if it plays out exactly like you thought it would. Sure, letting them blow their birthday money on a Fortnite skin probably pains the responsible adult part of you. But when you say no to the next thing they want (because their money is gone), it’s an important lesson for them to learn. You have to let them fail sometimes — even if it’s supervised failure.

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Vegetable Eating Contest

I once offered $2 to my son to see if he was willing to eat a black peppercorn as a challenge. He did it. Amazingly, he realized the same day “that pepper in food wasn’t all that bad.” It’s probably one of the easiest $2 he’s ever made.

That gave me this idea. Why not extend the idea to foods your kids hate? If they don’t like their greens, then bring out a plate of greens and then have a competition to see who can eat their plate of vegetables the quickest. You can setup the rules to be as elaborate as possible, but whoever wins get the prize! This will give them a little bit of money of their own to experiment with, but hopefully also helps them expand their food choices. Win-win!

The Bottom Line

The best thing you can do is help your child learn good financial habits at a young age. Help your child understand the basics of living within their means and the virtues of saving up for big purchases. You can reinforce these lessons by setting a good example yourself. Then, start giving them chances to make their own financial decisions — and mistakes.

Children are like sponges. They will absorb your lessons with ease. Now is as good a time as any to start helping them soak up good money habits (along with improve math skills). An education in how money works is one of the most valuable pieces of knowledge you can pass on. When your kids truly know how money works, and how they can make it work for them, they are more likely to be successful in the long-term.

An understanding of how to earn more money, how to put that money to work on your behalf, and how to spend wisely according to your priorities, is more important than any amount of book learning (although book learning can help). So while you might be concerned about how to give your child the best possible educational start, don’t forget about financial lessons. A firm grasp of money management principles can go a long way toward helping your child live a happier, more fulfilling life — rather than one that is bound by bad financial decisions and mountains of debt.

David Ning

Experienced Finance Writer

David is a published author, entrepreneur and a proud dad. He firmly believes that anyone can build a solid financial foundation as long as they are willing to learn. He runs MoneyNing.com, where he discusses every day money issues to encourage the masses to think about their finances more often.

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