In a blog I wrote—10 Life Lessons for My Three-Year-Old Son—one was to learn how to control money or it will control you. Some things easily get stashed into the “I will get to that later when he is a little older” category. Then we wake up one day and they are about to leave our home for good. Handling money is one of those. Besides, what can you teach a three or four year old about money? Well quite a bit actually.
Like everything else our children will learn more by what we model than what we talk about. So be warned—if you are not good at managing your money, it will be hard for your child to learn how. But, hey, why not begin now? Doing so will provide a great role model for your child.
Here are 5 ways that I am teaching my young son now about handling money wisely:
Give, Save, Spend
Teach your child to give away 1/3 of the money they get or earn, save 1/3, and spend 1/3. We began with these numbers because they don’t need a lot of money for spending, and it’s an easier concept for a young child to put equal amounts into three categories.
Danielle and our son took three mason jars, decorated them, labeling one for giving, one for saving, and one for spending. We keep these in our breakfast area on a shelf in plain view for him to see.
The other day my son was talking to me while I was sitting at my desk. He noticed a change jar on my desk, and he told me it was “good to give money away, so I should give him some!” My first reaction was, “well you clever little guy…” Then I decided to give him three coins. What do you think we did next? You got it! We walked right into the kitchen and took down the jars. One coin to give away, one to save, and one to spend.
Pay for things
Many young dads tell me that their children don’t understand how money works because they think all you need is a plastic card. Yep, that is the world we live in today. I began thinking about how I can help overcome that with my son. Simple answer—pay cash sometimes. Hard, green bills.
We stopped at 7-11 the other day to get a Slurpee. He picked out his flavor, helped me fill his cup, and then we walked up to the counter to pay for them. I pulled out a $10 bill and handed it to my son. “Tell the kind gentlemen that we want to pay for these two Slurpees.” He and the guy working the cash register continued the transaction. On the way out of the store, my son asked me why he gave us money back. Great teaching opportunity.
Talk about money as we go
Which leads me to this way I teach my son. We talk about money. I talk about how we pay for things. How we own things. How we steward or take care of our possessions.
Make it fun
I haven’t started this one, but will soon as I get this game from Dave Ramsey—Financial Peace Junior. The Financial Peace Junior Kit was created to teach kids ages 3-12 the value of money and hard work. The updated kit includes all new tools, activities and games to make learning about money fun for kids. It features an easy-to-follow parent guide and a 35-page kids’ activity book with four lessons.
Why does it matter?
Two reasons for me:
- I plan on passing on some wealth to my son, so I want him to understand how money works. I want him to be a good steward of money and use it for good. I know enough that if he doesn’t understand how to handle money, he can hurt himself and others by misusing it.
- I have a little more urgency since I am 50 years older than my son. I don’t want to wait until he is in his 20s or 30s because odds are that I will not be around to teach and guide him then.
Take a look at these statistics from I read on Dave Ramsey’s site:
- 54% of parents rated their teenager’s knowledge of money management as either “good” or “excellent,” but 78% percent of the children of those respondents rated their own knowledge of money management as merely average or even poor. (Capital One and Consumer Action, 2003)
- Only 26% of 13-21 year olds surveyed said that their parents taught them how to manage money. (JumpStart Coalition for Financial Literacy)
- The fastest growing group declaring bankruptcy is young adults, ages 20 to 24. (Alejandro Cabezut, 2004)