Basic Financial Education for Your Children
You can start the financial education of your children early. And the earlier the better. It doesn’t have to be elaborate.
Some parents make things so complicated that they get intimidated by their own plans. They can’t keep up with their own ambitions.
But doing a little is better than pretending to do a lot. Sometimes shooting for the moon means you shoot yourself in the foot.
How do you begin to teach your kids the value of money?
The Jar Method
Or the box method. Any containers will do. Label them with:
Or whatever else you feel is important. We added a church/tithing jar. Each week, or each month, give them their allowance and help them split it up. 10% to savings, 10% to giving, and the rest in spending. Change the percentages however you like.
If they get any extra money, do the same thing. It helps to have easy denominations. Dimes and quarters work well. If you are rolling in excess cash, dollar bills work well.
Whenever you go out, and you are going to a store where they will constantly be asking “Can I have that?” make sure you count with them how much is in their spending jar. Have them remember that amount. This knowledge will help them make an informed decision.
If they buy something, take that money out when you get back home. Once they get older, they lose this convenience and have to carry the money around themselves.
The Checks Method
I’d recommend a physical medium when first getting started. That makes things concrete and real.
Once they are old enough, you can do a fake bank account and get some pretend checks. They keep a running tally of how much they have in their check register.
If they don’t have their checks, they can’t buy anything. They learn this real fast. When they do buy something, they write the check to you and update the amount in their register.
No money changes hands. You simply update your internal.
An Entrepreneurial Spirit
You want them to know more than how to count and save money. You want them to know more than the value of a dollar.
You want them to start learning about risk and reward. How do you turn $1.00 into $1.50?
And I’m not talking about something passive like collecting interest. That can come later. It’s not that important right now.
How do you teach them to take risks? To evaluate risks versus rewards? And to seek out opportunities? You don’t want them waiting for stuff to happen while sitting on the couch.
I’m still working on this myself, but here are some thoughts.
John D. Rockefeller, when a young boy, bought a bag of candy, divided it all up, then sold each group to his siblings for a small profit. At one point, he staked out a turkey nest and raided it for the eggs. Soon he had turkeys of his own.
All before he was 10 years old.
If you have a side hustle, let your children help out in some capacity. If you flip items, take them with you while shopping, have them box up the item, etc. Explain how you make money.
Be ready to give them seed funding if they ask for it. Reward initiative, even if the initiative is asking you for money to do something productive.
If they try something and it fails, praise the effort. You might have to help clean up a big mess, but don’t grumble. Don’t create an atmosphere where they have to ask for permission to do everything. That type of attitude will stay with them throughout their entire life if you are not careful.
Doing any of these things will give your children more financial education than most high school students.