Finance Q&A: What Should We Teach Our Kids about Money?

Dear Deborah,

When should my husband and I start teaching our children about money? We want them to learn the value of money and to have good money management skills. -- Tammy

Believe it or not, you and others are already teaching your children about money.  Their meaning of money starts before they begin handling it. From their early experiences, children slowly build their attitudes and knowledge about money. Children's influences - family members, friends, neighbors, television - all factor in to what they learn about money. But the most powerful influence is the family.

A marketing professor at Texas A&M, Dr. J. McNeal, studied how children under the age of twelve learn to use money. His research showed that how well children spend their money has little to do with the amount of allowance they receive. It has more to do with their parents' behaviors. "There is a very clear relationship," McNeal said. "If the parents are wise consumers, the children become wise consumers."

Children can learn about managing money at different ages. Their early years provide the foundation for learning. Before children enter school, their concepts of numbers and time are limited. Yet they are curious about the process of buying and selling. Some activities they like are: setting up a play store at home with play money and empty food containers, helping to make purchasing choices at the grocery store, and saving coins in a piggy bank.

School-age children can: buy grocery items for the family such as milk and bread, open a savings account, and receive a regular allowance. An allowance is an important way kids can learn basic money management skills. It helps them learn to budget and make good spending decisions. Be consistent with the allowance. Children can also do small jobs for family and friends to earn extra money.

The allowance amount varies by children's ages. The timetable for receiving allowance expands as children get older. For small children, once or twice a week works best. Older school-age children can receive their allowance once a week; teens can receive it twice-monthly. If your children overspend, don't hand over more money. Parents who consistently give their children money are doing them a disservice. Kids who squander their allowance can learn from their small mistakes.

Teenagers are capable of longer term planning, such as saving for a future trip. They should become informed on the effective use of banking services, investments, and insurance. Although earning money will become more important to teens, it should not interfere with their schoolwork and education.

October 14, 2010

Copyright 2010 Deborah Nayrocker. All rights reserved. Permission to reprint required.  

Deborah Nayrocker writes on personal money management topics, showing others how to take control of their financial future. An award-winning writer, she is a guest contributor with www.CBN.com and a finance columnist with www.Crosswalk.com.  Deborah is the author of The Art of Debt-Free Living and the Bible study Living a Balanced Financial Life.