How To Teach Kids About Money (Part One)

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The other day I was asked how we handle money with our kids and whether we pay our kids an allowance.  So, I thought I would share how this works in our home.  I could explain this in great detail, which would be so much more than I could ever write here, but I will just give a general overview.  In this post, I will give you the overview of the “why” and “how” we handle money with our kids.  In the next post I will cover the nuts and bolts of our system.

First Things First

While we don’t call it an allowance, we do give our kids a set amount of money each month.  We call it a salary or a wage.  It differs from a typical allowance in that our kids are required to do more with it.  With this money they purchase their own gifts for one another and others, and they make purchases when they have specific wants that are not a need.

Why do we do this?

This requires that they budget and have to make choices.  They also have to pay attention to what expenses they have coming up.  If they will have to buy a few gifts for siblings, they won’t have enough money to buy a certain book they may want for instance.  If they want a pair of very expensive shoes that are a want rather than a necessity, they are required to cover the added expense.

Secondly

At times they also have to pay for things they break or lose.  

Why do we do this?

Basically, our goal is that our kids learn the basics of money handling in our home from a young age.  As adults we have to use money to not only pay for the basic necessities (we cover these for our kids and then some), but we also have to pay for our wants as well as the things that come up whether it is gifts for a birthday or paying to have something fixed, a medical expense, or some other expected or unexpected expense.

We feel it is important that our kids learn to be responsible with their money to handle the “what if” expenses that come up.  If they have spent their money on only their wants, they will not be able to cover those unexpected expenses.  For instance, we supply my son with one pair of batting gloves for baseball each season.  He is old enough (12) to be responsible to bring them back home, and we have a checklist that we go over when he gets back to the car from baseball.  In going through the checklist on one occasion, he said he had everything.  Of course we discovered he did not, and since he was irresponsible with them he was required to buy his next pair.  He had his hopes set on buying a lego set, but since he decided the batting gloves were more of a necessity, his money went to those instead.

Our Third Point

One way we handle our kids’ salaries in a way that is different from most, is that we don’t tie them in to their responsibilities, meaning that we don’t withhold their money if they have not completed their work.  We handle a lack of work or inadequate work in different ways, their work is not tied in to their wages.

Why do we do this?

For us, we feel it is important that our kids have money to learn how to handle money, if we were withholding it, this lesson could not be learned.  Just as in most cases an employer would not withhold money if work was not up to par, we do not either.  Of course an employer would have ramifications, just as we do.

Our kids generally start working outside of our home by the time they are 12 or so whether they are doing work for someone in the neighborhood, babysitting, or doing some other odd jobs for someone.  This provides them with the opportunity to learn to be accountable to someone else.

Finally

We do have a job board for work around our house, and if they choose to do one of these jobs, like sweeping the garage, their work has to be done satisfactorily in order to get paid.  This work is different from their regular responsibilities, therefore, it has to be done correctly in order to get paid.

In the next post or posts, I will cover how much our kids get paid, and what they are required to do with it.  As they get older they have more freedom as we hope they choose to delegate it the way we have taught them on their own, but they do have to be given the freedom to make those choices, just as they will when they leave our nest.  While all families handle money differently, this is how we have found it to work best in our home.