Teaching Children to Manage Money

Learning to spend and save wisely is so difficult. It is a skill children badly need to develop, yet it is a skill many adults have not mastered. So it was with me when I started teaching my own youngsters. Fortunately, an older, wiser woman taught me how to teach my kids about money management.

My girls were given four clean glass jars. One jar was for giving to others. One was for spending, anytime the child wanted. Another was for something they wanted to save up for, a big thing, like a bicycle or spending money for Disneyworld or, later, a Coach purse. On this jar we put a picture of the desired item. One was for long-term savings.

When the children were little they did not receive an allowance. I believe young children need to see rewards given and withheld quickly to learn. If the child did her homework without fussing (she could ask for help, just not fuss), then I would put a nickel at her place at the table. When she practiced her instrument, again without fussing, she got another nickel. If she cleaned her room (not perfection, just straight was enough), then she got another nickel. The fourth nickel was earned for bringing all of the required books and papers home from school. She had to remember to bring everything, which is hard for a little kid.

Please do not think my children were allowed to choose not to do homework. They simply were rewarded if they did it without fussing. If they fussed or refused to do it, their mother employed the tactics that mothers all over the world use to get the homework done anyway.

The last thing before bed we gathered at the table, had a glass of juice or milk, said our prayers together, then put the money in the jars before brushing teeth before bed. The first nickel, which was almost always earned, went into the Giving Jar. The second nickel, also almost always earned, went to Long-Term Savings. The third nickel, usually, but not always earned, went to the Big Thing Jar. To earn money to spend whenever they wanted, they had to earn four nickels.

This was twenty-five years ago. Now I would use quarters, which would add up to about a dollar a day per child. Certainly this is within the budget of most young families, particularly when we realize that the cost is also going towards educating our youngsters about money. All snacks or candy had to be bought from their own money, so I believe I spent LESS then many mothers do, and my children ate less candy then many children do. Which is not a bad thing at all.

From the start, and throughout their growing up, extra money from odd jobs and gifts was divided by four and put into the jars. Once a month I would take the children to the bank where they would put their long-term savings money into the bank. When they were young we made this into a really big deal event to which they could each invite one friend.

I had to shop around a bit to find a bank open on Saturdays where the tellers and manager were really nice to children, but that shopping around was well worth the effort. The manager at the bank would sometimes take the kids (not me, just the kids) into the vault to see the money, and always gave them candy, and sometimes balloons and calendars and other gifts.

On the first Saturday of every month, after the girl's practicing and room cleaning was done, we would pick up their friends, and then go to the bank where the girls would make their own bank deposits. We followed that up with going out to eat, alternating who got to choose the restaurant amongst the girls. Finally, we finished the celebration with either skating, or a movie, or bowling. The girls, now professional adults, still talk about "Banking Saturdays".

When the girls were old enough to start asking about getting more money, we made a chart of jobs and what they could earn for doing them. The basic tasks still had to be done, but extra money could be earned for doing extra tasks.I also doubled the payments when each child reached sixth grade. I was able to justify the increased payments because homework for a 6th grader is harder, practicing for an advancing music student takes longer, and, frankly, sixth graders can make a room much harder to straighten up then their younger selves did.

The extra tasks were available, but not required. However, a child who didn't do the extra work sometimes found themselves whining about other children having more money. Just like adults.

What were the extra tasks? There was a reading list of books from the school for which my children could earn extra credit. If the child read one of the extra books and did well on the test, a dollar was awarded. Cleaning the bathroom was also worth a whole dollar. It didn't take as long as reading a whole book, but wasn't as pleasant a task. Writing a thank-you note without being asked or reminded was worth a quarter. Before certain birthday parties I would suddenly find thank-you notes sitting by place at the table waiting for payment. They would be written to the minister at the church, the religious school teacher, the lady at the bank, and all manner of people. My children must have seemed inordinately thoughtful to the outside world, though they seemed a little mercenary to me. Still, they did learn to write nice thank you notes, and they learned how much people appreciate being remembered.

We all took turns at kitchen duty. A few times one child would pay another to do their duty. One daughter arranged for her sister to clean her room daily, and receive her payment for it. That didn't last long when the employing child realized she had no money going into her own "Spend Anytime" jar. I was thrilled she learned the lesson, the high cost of paying someone else to do your own basic work.

When the girls reached adolescence we kept some of the routine intact. Many things changed, too. I let them help with the overall household budget, so they could see how much it cost just to maintain our home. They also got to see what the consequences of failing to turn off air-conditioning and lights was. This really helped them understand that I was not just arbitrarily making rules. It really was important not to leave the lights on.

They got weekly allowances instead of daily payments. Allowances could be docked for non-performance, just as salaries can be in the real world. I still put jobs on the refrigerator with proposed payment for those jobs. If they complained about not having enough money, I could always remind them that I had done the jobs listed instead of paying the complaining child, who could have earned the money.

We no longer went to the bank every first Saturday. Like most teenagers, they didn't have enough time to spend a whole Saturday with their mom once a month. Instead, I would just drive them by the bank when we had time. I wanted them to hear and see their growing balances, so I wanted them to make their own deposits.

When teenager-dom hit hard, the Spend Anytime Money went directly into wallets instead of into a jar. We still kept pictures of desired Long-term items on a jar for each child, to help keep focus.

When they got real jobs outside the home as teenagers, money still had to be allocated in the same way, with one exception. Only ten percent of the money earned outside the home went into the Tithe Jar instead of the twenty five percent from money earned inside the home or given to them as gifts. The other fifteen percent was put into the Big Thing Jar, so a full forty percent of money from outside jobs was put into the Big Thing jar. There were two reasons for this. First, because they were now making regular money at regular jobs, the ten percent rule as proscribed in most churches was appropriate. Secondly, teenagers have many Big Thing desires: fashion items, telephones, travel expenses, event wishes, cars... the list is long.I found my children voluntarily moving money from their Spend Anytime funds into the Big Things items jar. I heard them tell friends that they would rather wait and eat at home rather than spend money at fast-food places. They would just get a small drink and have that so they could sit in the restaurant with their friends. This pleased me twice because I flatter myself that our food was not only less expensive but also more nutritious.

I was also pleased that they were truly grateful when I would make up short-falls on items for which they had been saving. This was very unlike the attitudes of many of their friends, who were often self-righteously indignant when parents or grandparents didn't buy them things while barely noticing how much had purchased for them. My children were aware, because we talked about it their entire growing up, that my money came from working for it, and that I would not have any if I didn't save, just like them.

In turn, I am very grateful to many older adults who crossed my path when I was a young adult in great need of much guidance. The woman who taught me these methods of money management for children is nameless in my memory. She was a secretary at an office where I worked for a short time. If she reads this and recognizes herself, I hope she hears my gratitude.