Teaching kids about money

I’m so fortunate that my mom taught me about managing money from a very early age. When I was a kid, I got an allowance, and that was it: if I wanted to buy something, I had to save up for it. There was no asking Mom to buy it for me. I could make suggestions for presents, and sometimes my mom surprised me with a gift she knew I wanted, but I could never ever ask her to buy me something and expect that to happen.

Why was that so important? Because when you’re an adult, you can’t expect your boss or your teachers or your roommate to buy stuff for you, can you? And yet I’ve known people who seemed to think, “Someone’s always paid my way. I assume this will continue somehow wherever I go.” That’s a terrible message to give kids.

Nickel, guest authoring at GetRichSlowly, wrote a wonderful article on using an allowance to teach kids about money. It discusses such things as giving the kids their allowance monthly instead of weekly so the kids learn to make the money last four weeks. Nickel also talks about something my mother did: I was very strongly encouraged to put 10% of my allowance into savings. Nickel’s kids put 30% into savings and 10% toward charity. The percentages are up to you, but it’s very important to teach kids that savings can be cool because it can enable them to buy stuff your friends will never get by nagging their parents to buy it for them. That’s pretty sweet, right there.

Another tip: my mother never told me how to spend the 90% of my allowance that didn’t go into savings. I could buy anything I wanted, however frivolous. That enabled me to learn early on how spending money on something I wasn’t really going to enjoy prevented me from saving for something I really would love having.

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Posted in Parenting on August 20, 2008