Teaching children frugality & finances?

[cymbeline]

My mom didn't teach me much as a kid, but she did stress saving. Any time I made money (allowance, babysitting, etc), she made me put half in a savings account in the bank. That was pretty much it. Allowance was very inconsistent, and I watched her bankrupt the family and sit at the kitchen table crying and cutting up credit cards

I feel like I am just now starting to get to the point where I am ready/willing/able to manage my money, and I don't want to keep passing this down through the generations!

Are there any great resources out there for helping teach parents how to teach kids to manage finances? Or have you found something that worked for you and yours? TIA!!!

[Om Girl]

The book "Living Simply with Children" was a big help for me in learning how to discuss finances with my kids.
DD is only 3 but already we explain decisions that we make in terms she can understand...for example why eating out at a restaurant is a "special thing" and that having lots of toys/dinners out/etc means that mommy and daddy can't spend a lot of time at home because we need to work to earn money to pay for all of that.
We've also started savings accounts for both girls in their names and all gift money gets put into their accounts. They'll gain access to them when they're 10 to learn about saving/spending/finances.

[Maluhia]

We talk about it all the time - and we give "rewards"/allowance in 3 parts - saving/spending/giving.

[nathansmum]

My kids are still young, but we just talk about it and live it (my parents did the same with me and my brother).

If I have found the kids wasteful or neglectful towards their toys, or resources or food I will gently explain that DH goes out to work and earns money that allows us to buy x,y,z and we need to be aware of how we spend our money and treat our things. We sometimes talk about what else our money goes towards - electricity, phone, clothing etc.

The kids come with me when we do groceries, so we talk about which food is better value for money (even if they don't understand atm how to work that out) and this year the kids got to spend their birthday money. DS in particular was able to weight up what he wanted to get with the little money he had.

[mama2ashlynn]

I really like the ideas Dave Ramsey has. He has a kit for kids called Financial Peace Jr. https://www.daveramsey.com/store//cYOUTH-p1.html

[orangekoolaid]

Originally Posted by Om Girl

The book "Living Simply with Children" was a big help for me in learning how to discuss finances with my kids.
DD is only 3 but already we explain decisions that we make in terms she can understand...for example why eating out at a restaurant is a "special thing" and that having lots of toys/dinners out/etc means that mommy and daddy can't spend a lot of time at home because we need to work to earn money to pay for all of that.
We've also started savings accounts for both girls in their names and all gift money gets put into their accounts. They'll gain access to them when they're 10 to learn about saving/spending/finances.

i second this book.

[Kyamo]

The best thing my parents ever did to teach my about money was to give me the money they would have spend on necessities for me (like clothes, school supplies, etc) plus a bit extra for "allowance" and I would be responsible for buying that stuff for myself so that I had to learn to budget not just for fun stuff and saving, but for no-fun necessities too. This started when I was around 13 I think.

[Mulvah]

Originally Posted by Kyamo

The best thing my parents ever did to teach my about money was to give me the money they would have spend on necessities for me (like clothes, school supplies, etc) plus a bit extra for "allowance" and I would be responsible for buying that stuff for myself so that I had to learn to budget not just for fun stuff and saving, but for no-fun necessities too. This started when I was around 13 I think.

Cool concept!
 

Edited by Mulvah - 1/29/11 at 4:00pm

[1babysmom]

My parents must have done very well with me, as I definitely credit them for me being very good with my finances. They just didn't do anything specific, and I also learned a lot from example.

For our kids, they're young (only 1 and 3), but for our 3 year old we're already doing the 10-80-10 system (10% to God, 80% to spending, 10% to savings) in jars. She has a "God's Money" jar that she takes to church and gets to put in the offering plate as her tithe (it's so sweet!), and then we just have one jar for the other 90%. Since she doesn't really use her own money for anything yet (and we haven't reached a point where she really cares to get anything for herself yet), but once she does we'll split that jar so that her savings is separate from her spending.

We do have a jar for my younger DD too (they share the God's Money jar), but we just add to that randomly so far.

[sunnysandiegan]

We talk about finances in kid terms like the PPs have mentioned. DD understands quite a bit about money already.

This calendar year (DD was 7 and is now 8), we started giving her four quarters every week. One quarter goes in her wallet (spending), one quarter goes in a bear bank (savings), one quarter goes in a jar (charity), and the fourth quarter is up to her to decide each week. In the beginning, she put the 4th quarter in her wallet. Then, she traded off between the savings and spending. For three weeks in a row, though, she put her extra quarter in the charity jar. When her school held the first jog-a-thon to raise money for a "real" track, she decided to donate all the money she had collected up until then in her charity jar. We matched her contribution. She was VERY excited and proud of her accomplishment...both on the laps she ran/walked and the money she donated. (Family and friends also sponsored her, but she was most proud of the amount SHE gave.)

Every time her bear bank gets full, we take the coins to the credit union and add them to her savings account. The machine is entertaining and she likes to see her balance grow. She also decides how much to put in her savings account at Christmas and birthday time.

As for spending, we pay half and she pays half for many activities. Field trips at school and Girl Scouting events are two easy examples. If she wants something beyond our normal buying habits, she can choose to buy it herself with her own money. She exercised that right more often when she was younger (before the quarter thing started, she has always gotten to choose how to spend/save/give her birthday and Christmas money). She rarely exercises that right anymore. She has figured out that she likes more shoes than we are willing to buy her, so she asked for shoes (or gift cards to shoe stores) for her birthday this year. One gift card was enough for one pair of shoes and had extra money on it, but not enough for a second pair. She asked grandpa to take her shopping for shoes as her gift from him and he obliged. She convinced him to buy her one pair from him and to get a second pair partially from him and partially from the gift card. LOL He was impressed she understood so much about gift cards and cash.

[velochic]

I agree that learning by example is the most important lesson. Whether you are good or bad with money, your children will learn how to manage money by how you manage money. The best lesson is to get your kids involved with the household finances. I think this business of keeping the household finances secret from kids is a bunch of bunk. They'll see how well you manage money and follow your lead no matter what you do. As with anything else with parenting, there is no such thing as "do as I say, not as I do".

I have read a few books, but in this case, the best teacher is the parent, IMHO.

[Kyamo]

Originally Posted by velochic

I agree that learning by example is the most important lesson. Whether you are good or bad with money, your children will learn how to manage money by how you manage money. The best lesson is to get your kids involved with the household finances. I think this business of keeping the household finances secret from kids is a bunch of bunk. They'll see how well you manage money and follow your lead no matter what you do. As with anything else with parenting, there is no such thing as "do as I say, not as I do".

I agree. My parents did a weird sort of half and half on that. They were open with the bills, with what they did to save money and what was worth spending money on, basically everything to do with outgoing money. But it was a big secret how much they earned. I do know they were saving quite a bit, but that's the only clue. I still don't know what they make/made lol.

[cymbeline]

Originally Posted by Kyamo

The best thing my parents ever did to teach my about money was to give me the money they would have spend on necessities for me (like clothes, school supplies, etc) plus a bit extra for "allowance" and I would be responsible for buying that stuff for myself so that I had to learn to budget not just for fun stuff and saving, but for no-fun necessities too. This started when I was around 13 I think.

Wow, this is great!

I checked out Dave Ramsey's Jr. Kit... I liked parts but not others. The "commission" thing I found to be something we have tried before, like a chores chart... meh

One blog suggested using pencil holders, the plastic pouch ones with three holes, for keeping the money, labeling one "Spend," one "Save" and one "Give." I liked that a bunch. The pouches easily fit into a three-ring binder and can be kept with a spending/savings log.

Jury is still out on allowances. I hesitate to give money for chores. In our family, taking care of the house is just a part of life. Mom and Dad don't get paid for it, and neither do the kids.

There is "extra" stuff, though, like scooping the dog poo in the yard. I seriously hate that job and am willing to pay someone to do it -- so our oldest DS gets $5 a week to scoop the poop

[sunnysandiegan]

We give DD her four quarters every week. It is not tied to behavior or chores or anything. It is simply because she is in the family. We also believe keeping our home nice and all the work that comes with that is done by everyone in the family.

[cymbeline]

Originally Posted by sunnysandiegan

We give DD her four quarters every week. It is not tied to behavior or chores or anything. It is simply because she is in the family. We also believe keeping our home nice and all the work that comes with that is done by everyone in the family.

For those of you who give an allowance -- will this increase in amount as the child grows older? Will it stop at some point?

I read "The Millionaire Next Door" a long time ago, and they refer to "economic outpatient care," when the child is grown and gone yet still expects an allowance Most people I know give their kids an allowance for nothing in particular, just a weekly amount... but I'm not sure how to relate this to the "real world" where we all work for money?? Or at what point to give a "raise" or to stop giving allowance at all?

[moss]

i really like this book: The Money Tree Myth: A Parents' Guide to Helping Kids Unravel the Mysteries of Money by Gail Vaz-Oxlade

She has tons of practical ideas for teaching kids about money.

[LilyGrace]

Originally Posted by cymbeline

For those of you who give an allowance -- will this increase in amount as the child grows older? Will it stop at some point?

Ours increases and changes as the need changes.

We started out giving The Kid a Money Savvy Pig and a small amount of money. The only rule we gave was SOME had to go in each section. It didn't matter percent or what we felt should be in each, just some.

After a while we gave him a few dollars, not changing the rule.

When he said he needed more, we upped it to $5, but tied the responsibility of chores in. (Not the chores themselves, but the initiative and willingness to do them without being told.)

Now he's 10 and up to almost $7 a week, and the rules changed again. We stopped using the Money Savvy Pig and gave him "accounts" at the Bank of Mom and Dad. Using glass jars for the three accounts -save, invest, donate - and a bank book he's learning about interest, keeping written logs, and still learning budgeting. He has goals for each of his long term accounts written at the top of the pages so he knows how much he needs to do each.

Sometime in the teens he'll start to be given more responsibility with the household money set aside for him - he'll be given a checking account at our bank that we can deposit money into, but he'll also need to buy school supplies, clothes, shoes, and pay for his sports out of it. I want him to get used to seeing a large (well, large for a kid) sum in his hands but thinking through about all the places that money needs to go instead of blowing it.

We keep an open book on our budget, too. The kid can walk up to the computer anytime and see what is going in, what is going out, and how much is going where. I think he already has a much better idea about money than I did at his age. He doesn't see the point in begging mom and dad for junk at the store or all the toys his friends have.