The Rewarding Journey of Teaching Kids Financial Responsibility at an Early Age

While we send our kids to school every day in order for them to learn how to add, subtract, multiply, and divide numbers, when/how can I teach them to save and invest for their future? 

Earning money and learning how to spend or save it are crucial developmental concepts.  But how do I begin?  How can I ensure that my kids aren’t the ones in college who run up debt on newly issued credit cards?

It starts early. 

Earning money and the feeling of earning something can be a life lesson in itself.  Having your kids help around the house is a start.  But beware not to “pay” your kids to be members of the family.  Running a household takes a lot of work.  It is crucial to have your kids pitch in because they are part of the team.  Giving the kids chores will help them feel a part of the larger collective. 

You can easily start with younger kids.  Have them sort the silverware, put their dirty clothes in the laundry basket, pick up toys before getting more out, and fold dish towels.  There are a lot of ways to get creative with young children that already enjoy helping at that age.

As they get older.

Once they get a little older, getting them to pitch in may be a little harder.  Restricting phone or screen time can motivate them to get their chores done.  Older elementary and middle school-aged kids can sort laundry, fold sheets, roll up socks, set and clear the table, help pack lunches, unload the dishwasher, make their beds, etc. 

The money part.

Paying for your child to contribute to your family can give them the wrong idea, but if they’re working with you as a team, then the team can share some of the wealth brought into the team.  Instead of paying $1 for this or $5 for that chore, give your children an appropriate amount for a weekly allowance. Maybe start with $5.00 per week.  (this takes a well-thought-out trip to the bank each month). 

Explain to your child that they are going to be given $5 each week because they are part of the family and being a part of the family includes sharing in the housework and the income.

With the $5, break it down into $1 to charity or tithe, $1 to savings, and $3 leftover to spend.  Make sure you have separate banks or envelopes for each category.  After a few weeks, your child should have enough to buy themselves something at the toy or candy store, take to church or send to charity (with your help), and deposit their savings into a larger account at the bank. 

The Learning Process

Try not to dissuade your child from buying things you would not waste your money on.

  • If they want to purchase a sugary box of cereal or another tub of Play-doh when you have tons at home, you must let them “waste” their money to feel remorse for spending it on the wrong thing.
  • As kids age, give them a weekly allowance for school lunches. When they run out of money, have them help pack a lunch. 
  • When it comes time to go clothes shopping, talk about a budget. Explain that you have $300 set aside for school clothes this month and talk to your child about what clothes they need and where you may be able to find deals. 
  • Once they are old enough to work, have them find a part-time job. Every time they get a paycheck, have them continue with the pattern of giving, saving, and spending.  Expect that each time they earn money, it will be broken down into each category. 
  • Set an expectation of certain things they need to pay for such as gas or lunches, so they learn how to stretch their dollars.
  • Once they begin going to the mall, make sure you talk about what purchases you may be looking to make and how much each item may cost. Saving up for highlights, new video games, acrylic nails, or some fun merch from their favorite band or show will help them build their confidence and start to feel ownership of their money.

Now let’s talk about college. 

Providing your kids with a college education is a gift, for sure.  But is this the best thing for them?  Many parents dream about paying for their kids’ college only to find out that life gets in the way and college costs keep going up!  I was blessed to have my parents pay for my college and wanted to return the favor to my kids.  But by the time they got to college, their 529 fell short.  This was one of the few times I could say I was glad I was divorced!  What we did was split the college costs in three ways.  My ex paid for a third, we paid for a third, and our daughter paid for a third.  She thanked us later by telling us that it was better for her to have some skin in the game and that being an RA (Resident Hall Advisor) and applying for Pell and other grants helped her feel more ownership over her education.  She learned to find free activities and bonded with the other kids who had to conserve funds as she did. 

Many parents say that having their kids do chores around the house is too much work, and that they’d rather do the chores themselves than have to micro-manage their kids.  I think they are overlooking the big life lesson of delayed gratification. If you can’t watch your favorite show, listen to your favorite music, or text your friends until your work is done, then the chores get done!  Try it, it works like magic.

Investment advisory products and services are made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor.

Next Chapter Wealth Strategies is not affiliated with or endorsed by the U.S. Government or any governmental agency.

The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. 1733795 – 04/23