Managing money wisely is a life skill and a journey — one that can be challenging even for adults. So how can we teach our kids healthy attitudes around spending and saving? You can build the foundation for lifelong learning through regular conversations and habits that give kids practice handling money. Here are some ideas to consider as your kids grow.
Start Young
Introducing coins and different counting/math exercises can help kids understand money and its value at the youngest of ages. You can also teach the concepts of earning and spending without using actual money. For example, kids can earn poker chips or another token that they can trade in for a reward like screen time or a treat.
Consider an Allowance
A cash allowance might not be right for every family. However, if it’s in your family’s budget, a cash allowance can be a good tool to give kids practice with saving and spending decisions.
Kids are usually ready to start allowance by kindergarten. How much to give per week or month will be up to your family. A good rule of thumb is to tie the amount to your child’s age.
Some common allowance models:
- As payment for chores: You might consider a weekly chore chart and bonuses for special jobs. This can help teach kids important life skills and develop their work ethic. For guidance, read my colleague’s blog post on age-appropriate chores for kids.
- Not tied to chores: Some families prefer to separate chores from allowance. This can help kids realize that everyone is expected to contribute to the household, even as kids get older and find other ways to earn money. It can also keep the focus of allowance on learning money management skills. You can also take a hybrid approach and offer kids the opportunity to earn extra money for special tasks.
Whether you offer payment for weekly chores or just the occasional odd job, it helps to get kids involved. Ask kids to brainstorm ideas for how they can contribute, make sure they understand the process, and be creative and consistent to make it a positive experience. You might need to revisit expectations as kids grow or if something isn’t working.
What should kids do with the money they’ve earned? One popular idea is to split their allowance between three jars labeled “spend,” “save” and “share,” and then allow them to decide how to use their money in each category. This helps children see how money works in the world and can be used as a tool to reach a goal or help others.
As their savings grow, you might want to open your child’s first bank account — another valuable life lesson.
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Practice With a Budget
If you’re going on a vacation or a special family outing, consider giving your child a small budget for souvenirs. Then they can choose whether to splurge on one item or on several smaller items. Not only does this give a child practice living within their means, but it can also reduce whining or begging (always a win for parents!).
Adjust for Adolescence
Allowance in the modern age can be more complicated. While a handful of crumpled dollars and coins can make money feel more “real,” it’s not always easy to spend as more stores move cashless. Also, parents don’t always have cash on hand to fill piggy banks.
That’s why some families have moved to cashless systems. If your teen already has their own bank account, you can set them up with a checking account and debit card. This also makes it easy for parents to transfer money and keep tabs on their spending. Another option is a prepaid card that you can reload as needed.
Tweens and teens are also increasingly interested in investing. You might consider opening an investment account to allow your child to experiment with stocks under your supervision.
If you feel like you’re in new territory with investing or another financial topic, invite your child to learn along with you. That alone is a good lesson in researching things you don’t understand. You might also encourage middle and high school students to take a personal finance or related course at school to deepen their understanding. In fact, Wisconsin recently started requiring high school students to take a personal financial literacy course.
Your Teen’s First Job
When it comes to kids working in Wisconsin, most jobs have an age requirement of least 14 years. However, there are some jobs — agricultural work, caddying, officiating youth sports — where the age minimum is only 12 years. For either type of work, your teen will need a valid work permit. For less formal work experiences, babysitting, pet-sitting, lawn-mowing and shoveling are great ways for middle and high school students to get experience and earn some money on their own.
Your teen’s first real paycheck introduces new money matters, from how to fill out a W-4 form to the reality of taxes. Your teen will need a checking and savings account, if they don’t have them already.
This is an excellent time to reinforce all the money management tips you’ve introduced at earlier ages. Encourage your teen to save part of every check for future education or a shorter-term goal. Talk to them about debt and borrowing for larger purchases. You might consider having them contribute toward some expenses, such as gassing up the car if they’re driving.
With expanded financial independence, your teen might make spending decisions you don’t agree with. But remember that this is their money, and learning how to handle it wisely is an important part of their development.
Keep Learning
Remember that there’s no right or wrong way to approach these topics. What’s most important is to do your research, keep an open mind and decide what works for your family.
