Take Back Your Finances #49: Help Your Kids Understand Money and Budgeting

One thing that Cassie and I often wish is that we would have been taught from our youth the importance of understanding all the ins-and-outs of finances.  And its with that wish that we have turned around to instill this knowing into our own children with the goal that they will be more faithful stewards than ourselves with their finances.

So your challenge this week is to get started on sharing healthy money habits and concepts with your children.

We do understand that children at different ages will be able to handle different levels of information with even some themes being too mature for young children (e.g., life insurance and financially preparing for a family member’s death).  So with that we have tried to divide some recommended lessons you can start teaching your children at different ages.  But since you’re the parent you obviously have final say over what you teach them.

Let’s get started!

Basic concepts to teach all children:

• Teach your children where money comes from – that it’s earned. It’s not a right and they are not entitled to it. If money is given for no reason (like a gift), they need to learn that it is a blessing and to be thankful for those gifting opportunities, but never view it as a right.
• Being a part of a family means contributing your part. This is part of the household economy and learning how to work from the beginning.
• In addition to the family’s basic work needs and contribution, provide opportunities to earn money with extra chores and tasks.
• Include children in the family budgeting and goal planning meetings.
• Involve children in the budget and goal planning by having them offer ideas, suggestions, their desires, etc. into the vacation planning, goal savings, long-term goals, short-term goals, etc. Really listen to their thoughts and gently give guidance where needed and implement their ideas where appropriate.
• Teach them to take care of the family’s property and belongings and their own. Teaching them to take care of the things we have teaches sustainability and that things in life are not so disposable in a disposable world.
• Teach them to respect each other’s property and if they ruin or destroy something of someone else’s, they need to work to earn and replace it. This teaches respect and responsibility of the world around us.
• Give them a healthy view of money. Don’t teach them the phrase “we can’t afford it” or introduce the “we’re poor” concept. Read this article on a healthier approach to money and spending with children.
• Have a piggy bank that they can physically add money to. The visual aspect has a strong impact and encourages children.
• Teach and model contentment.
• Find opportunities to provide insight and encouragement in everyday life. Making many moments “teaching moments.”
• Lead these thoughts, concepts and principles by example.

Basic financial concepts to teach older kids:

• Set-up savings accounts for them at this age (or earlier).
• Teach them how to set a goal for something they want and to earn money towards it.
• Consider an easy pet that they earn for, take care of and provide for. We started with Beta Fish when our kids turn 8 years old and move up from there. Our 11 and 12 year olds have currently moved up to gerbils and earn money to pay for their food, supplies and toys for their pet. This teaches responsibility, working to live/eat, especially as the pets become more costly and require more work and money.
• Help them to set up jobs with neighbors, family, friends that they can do and to learn to work for others and the concept of a hard-earned dollar.
• Teach them the Give, Save, Spend rules from the beginning and establish the importance of each. We personally teach our children to give 10% of the total, save half and the remaining can be used for spending. We keep track of their spending amounts for them and withdraw the money for/with them when they do want to wisely spend it.
• Guide them in their spending choices by helping them to decide if they should or should not use their spending money on certain items, emphasizing that buying this means not being able to buy that!
• Teach them that it is actually a good thing to live without something. They don’t need everything!
• Lead these thoughts, concepts and principles by example.

Basic financial concepts to teach teenagers:

• Start a checking/debit account with them that they can manage, spend from and learn to be responsible with.  This is a carryover from the savings account started earlier, still sticking with the Give/Save/Spend rule, except that they now have more control over the spend aspect themselves, instead of you.
• Help them to find more solid, part-time real jobs where they learn structure, accountability and have a schedule. Walk them through the steps to finding, applying and committing themselves to the job.
• Nurture, encourage and generate ideas for them to make money themselves…basically become their first business owners in some fashion. Our children have many coins in the coffer while they decide their gifts and talents. But many of their “jobs” are self-made businesses.
• Schedule a time weekly or monthly (start with weekly and move into monthly) where they do their own budget check-in with you.  Make sure to play an active role in listening, giving advice, correcting where necessary and encouraging them during each meeting.
• Teach them about saving for bigger goals and really encourage and work with them through this process – like saving for a car that they can afford or even for college expenses. Perhaps begin saving for a down payment on a house one-day.
• Teach them about the dangers and risks of getting credit and why they should not (share our story…it has helped many young singles and many young marrieds to NOT do what we did!).
• Be an example to not overspend, spend on a whim, become and stay debt-free, buy with cash/debit, work hard, not make excuses, not have the “poor” mentality and to appreciate what you have.
• Involve them in an active role on balancing the family’s budget (let them take the driver’s seat at times as well), involve them in your investment decisions, savings goals and all aspects of the family’s money.
• Teach contentment.
• Teach about the consequences of poor money management. Again, feel free to use our previous “un-thrifty” days as an example. This is one big reason why we started this site.
• Lead these thoughts, concepts and principles by example.

There are so many great resources that teach children about money. We have appreciated the resources that Dave Ramsey has for children. There are many resources out there, but we have personally used his and they have been really great for our children.

The following book is written by Dave Ramsey and Rachel Cruz (his daughter) and is a New York Times #1 Best Seller. It is called Smart Money, Smart Kids: Raising the Next Generation To Win With Money It is a great book regarding kids and money and more than worth the investment to read and share with your children. We highly recommend it!

Get this book for a great deal HERE

And then additionally, there are many more great resources for children by Dave Ramsey. He has a whole “financial peace” for children with Junior series. We also have most of these and they are all highly recommended, especially for younger children and great ways to start with younger children.

Find these resources for a great price HERE

We would love to hear ways that you have found to encourage and teach children about healthy money habits.

Need to catch up?  Come join us on this challenge from the very beginning by clicking on the 52-Week Take Back Your Finances Challenge and sign up to start receiving your automated challenge from the very beginning!

One final thing…we also have a Facebook Group where you can engage in discussions, receive encouragement and talk to others that are participating in the challenges too for more ideas! Head to the Be Intentional with The Thrifty Couple Facebook Page HERE and ask to join us there! You can also invite friends and spouses too!

Disclaimer: We are not licensed financial planners. We are only a couple that have been just a hair-breadth away from bankruptcy and found our way out of debt with a goal to now help others. Please make sure to consider any advice given on our site and in this challenge as tips we have used ourselves; they may not work for everyone. If you have questions please make sure to contact a licensed professional.