How to Teach Kids About Money
I teach using pocket money. The kids have an opportunity every Saturday to clean the house. Each child can earn $5 per week for doing jobs (except little Elijah). The first step was teaching how to save. I helped each child to come up with a goal of something that would take them about three weeks to save for. Kale wanted to save for a DVD. I drew a bar graph of how much the DVD cost ($13) and divided the bar graph in to $1 amounts, and each week he coloured in the amount of dollars he had earned toward his DVD and put the money in a jar. After three weeks he happily bought his DVD and I explained if he spent his money on lollies, he would have nothing to show for his hard earned money. This was a lesson in delayed gratification.
Next, we moved on to VERY delayed gratification. My kids desperately wanted iPods, so they needed to save for them. I also taught them that tithing was compulsory (giving 10% away). I made up a ‘finance folder’ for each child with the following pages: income, tithe, spending, and school banking (iPod money). They wrote in how much money they wanted to allocate to each page. Kale allocated as much money as possible toward his iPod. Friday was school banking day and this is where the iPod money would go. Also, if a child was irresponsible with a library book, they had to pay for it with their pocket money. If they lost a drink bottle, they had to buy themselves a new one. I also mentioned they would have to pay for any lost school jumpers. Amazingly, no one lost a jumper! They added in birthday money. The iPods cost $250 and took two years to save for. I bet you can imagine how careful they are with them, because they paid for them!
The next goal was to save for the Royal Show. The kids started saving six months before and had to pay for their own entry. They ended up with two show bags each, went on two rides each and didn’t pester me to pay for anything! I also said they could buy themselves food there but they opted to eat the sandwiches I had brought so they could spend more on fun stuff. They made the most of as many free activities as they could. It was a pleasant day!
The next goal the kids are saving for is a business. Ash wants a natural lip balm business, and Kale and Jewel want to invest in chickens and sell the eggs to make a profit. So the kids know when they get paid: 10% is to give away, a minimum of 20% goes to school banking to save for their business, and they can spend 70%. I find that they end up wanting to save as much as possible when they have a goal they are aiming towards.
I’ve also explained to my kids that one day there might not be a pension, so it is their responsibility to ensure they set themselves up when they are young so they can have a passive income by the time they are old. They know that they should give away 10%, invest 20%, and spend the rest on living. I’ve also explained that they need to use the money from their businesses to buy themselves a car, then a house, and then perhaps invest in more property/shares to create a passive income when they are old. So they have a basic financial map for life. Imagine if we all learned how to manage our finances wisely and taught our kids to do the same! We’d have so much money left over for helping people and fixing the problems in our society!