Reader Story: Money Lessons for Kids from Captain America

ING here in Canada was offering a $25 bonus when a new account was opened for a child with a minimum $100 deposit. Might be worth jumptarting an independent savings account for your son, if it applies there.

We give our four year old 80 cents/week. Right now the focus is on figuring out that a quarter is different than a nickel and how much each is worth and so on. He currently has $6.03 saved up. We counted it yesterday. His eyes got wide when I said that could buy about 7 candy bars. Or one Magic Treehouse book (though we just got the two he was missing from the library so the need for that has diminished). Or any number of junky things at Michael’s.

Last time we spent it was at Christmas and we bought him a present for his daddy (Skittles). The time before he had a great time figuring out what he could get at Michael’s for the amount he had.

He can spend it on whatever he wants. Chores are completely separate. We do chores as a family and he gets paid in gratitude and togetherness.

I work at a bank and I can tell you, not enough people are teaching their children how to manage money Kudos to you! It sounds like you have a very well thought out system. The only thing I would consider changing is the online savings account. I have one customer who brings in her grandchild weekly to make his $1 deposit. He LOVES handing over the dollar and his savings book, then putting the receipt in his book. He’s only three, so he’s not old enough yet to really write down his account number, but he fully understands that the money is his and he asks what his balance is every time. I think that, at a young age like from three to ten, it’s a good idea to take them to the bank and make the deposit themselves instead of saying “I’m putting this in your online savings account for you.” Having an account at a brick and mortar bank would make the lesson of saving more tangible and give the child a stronger sense of ownership of their savings.

By the way, do you know what this three year old is saving up for? A Dyson. No joke!

Good luck with the money lessons!

We’re in a similar situation. My older daughter turned five a few months ago and we started her on an ‘allowance’ of $5/week. Our requirements for it are slightly different.

I guess the biggest difference is that she is not required to do chores for her allowance, at this stage at least. She is, however, expected to keep her room tidy, set the table when asked, put her own dishes in the dishwasher after dinner and other things that help keep the household running smoothly. Although she often feels this is unfair it helps her realize everything that her father and I do to keep the house running and that she should be part of that.

As to what we expect her to do with the money, we have three ‘pools’ of money. She has two jars and each gets $1/week out of her money. The first is for giving away. I have really appreciated how this has opened up discussions about how there are a lot of people in the world who don’t have what we have and that we are very lucky. We live in an extremely economically diverse area (kids from subsidized public housing and million dollar homes go to her school)and we’re somewhere in the middle. It’s really important to us that she appreciate what she has. The second jar is for ‘saving’. We haven’t really decided how we’re going to handle this long-term savings jar. It seems like a really far away goal to talk about saving for University. For now at least she seems to just accept that she shouldn’t spend it. Maybe for now it can be her emergency fund.

The remaining $3 goes into her change purse for spending. We don’t actually go shopping much though so this money tends to just accumulate. She did choose to spend some on some books from the Scholastic Book Club flyer that came home from school. I did take her shopping last weekend though and she brought her money with her. She found a butterfly nighlight in Pottery Barn Kids that she fell in love with and wanted to have. She had just enough money in her purse and I made it clear that she wouldn’t have any money for anything else. She bought the night light and is really happy with it. She did see some barettes she liked later and wanted to buy but she seemed to accept that her money was gone.

Overall at this point I’m happy that she’s learning that: 1, she should be grateful for what she has; 2, money should be saved for future unexpected circumstances; 3, money is finite and you need to set priorities for spending.

Also, at this point it’s a really great math lesson. There’s a lot of discussions about whether she has enough money, how much money she would have left etc. My husband is a math teacher and there is so much talk of letter literacy but much less thought is given to number literacy, which is just as important. Too many people think of ‘math’ as a subject in school and not a life skill. Being number-savvy makes a lot of things easier.

You’re paying him to clean up his toys? To me, that’s part of the usual family chores for a child of any age (you help when they’re 1 and 2 and start to back off after that, of course). We gave our kids a small allowance with no strings attached starting when they were 4 or 5 and always had extra chores they could do to earn extra (wash windows, wash the car, etc.–part of my housework but things I didn’t like doing). They also had basic chores they did all the time with no money attached (keep their rooms tidy, etc.). They’re now both in their 20s and the most responsible kids financially that I know.

I’ve got a question for the parents out there: if you want kids to know the value of money, why not encourage them to work for others? Even at a young age, I think that is definitely doable.

My parents gave an allowance to us just for being part of the family. Chores were expected and not paid for. The way they saw it, in a family, we share work and rewards. But I got paid for lots of other things. I’m pretty sure my brothers and I started doing work for others at an age as young as 6 (probably younger for my little brother, as he got dragged into stuff the older two were doing).

We stuffed envelopes at my dad’s office for a handsome 50 cents, and I think the task usually took an hour — my dad would fold the letters, and we’d stuff and lick. I think my dad got a good deal. We sold stuff at our garage sale, and I always had a lemonade stand that did earn money (we went to 2-3 minor league baseball games a year, and we’d walk around the stands at the end picking up all the reusable plastic souvenir cups people discarded). Then, I’d sell the lemonade in those free cups and let people keep the cup. We did light yardwork for neighbors, cleaned friends’ rooms (yes, some friends’ parents paid us to clean their kids’ rooms!), and organized books at the used book stores we loved to go to. The book organizing was especially awesome. Alphabetizing is something we all liked to do, and the bookstore owner would give me a free baby-sitter’s club book every time I organized a chunk of his kids section.

Due to our knowledge of hard work and thrift, we all got summer jobs somewhere between the age of 14 and 16, and we each saved a substantial amount of money for college while in high school.

There’s lots of ways to teach your kids about the value of money without getting into the issue of which chores at home are and aren’t paid.

I didn’t have an allowance until I was probably 8 or 9. At that time, my parents decided to give me and one sister (we were close in age – 18 months, the other sister is way older) $40 a month.

There was only one condition on this. In order to get the next month’s allowance, we had to present a cheque book that kept track of all purchases.

I’m pretty sure this isn’t possible with a 5 year old, but it taught us to really know how much things costs and where we spent our money.

My parents, my mom in particular, was extremely good at discussing purchases with you. She’d never say you shouldn’t get something, but she’d talk through the pros and cons and how much you’d have left and did you really want that. She helped convince me not to get a bunch of stuff over the years and has made me a much more conscientious spender.

@indio – haha, I was (and am) a messy person and I use to pay my older sister (by 18 months) $1 to clean my room. I still think I got the better deal.

My parents instituted a similar plan with me as a child. Actually, nearly everyone I know had some sort of allowance dependent upon the completion of their regular chores when they were kids. Turns out, we still got in credit card debt, bought more car than we could afford, etc. I know people want to think that they’re teaching their kids good financial habits, but I’m not sure this actually has that effect.

Also, forcing kids to save is more like imposing Social Security taxes on them than it is like encouraging someone to save on their own. My parents did something similar. They made me open a savings account, which I couldn’t withdraw from without their permission, and forced me to make certain deposits in it, which felt like I was throwing money down the toilet, as there was no way to ever get it back, except maybe to turn 18 (which might as well be “forever” when you’re 12). And the marginal value of the small amounts in this account was *much* greater to a 12-year-old than it would have been to an 18-year-old with a part-time job, anyway.

Regardless, I could never make withdrawals, because none of the thing a 10 or 12 year old me wanted were things that they considered appropriate uses for “long term savings”. To be honest, I have no idea what eventually happened to this money, because I had completely lost faith in ever getting money out of the account. When I was 16 I got my first job, and I never let my parents touch my money. I didn’t trust them with it. Besides, an entire year of $20/week allowances could be made up in just a few weeks of a part-time job. The old amounts immediately became trivial after that.

There needs to be some sort of plan for eventually accessing long-term savings that the person doing the savings has agreed to, even if it comes with the restriction that you can’t access it for a certain period of time after making the agreement. This makes it more like a 401k or IRA. If the contributor doesn’t get to make the agreement in the first place, then it’s more like a social security tax, and we all know how much people feel like that’s a good investment.

I knew families who paid for chores and other families who gave an allowance for being part of the family. Either method can work well or poorly if the parents don’t follow through. If you are not going to give an allowance because they are part of the family,( and your main goal is to teach money management) but need to earn their spending money, then how do you handle them being invited to activities by their friends? You can end up sending a mixed message if you just shell out for birthday parties, and movies without them having to earn that money too. We gave our kids a monthly amount outside of allowances that was for birthday parties, clothes, school supplies, sports, and church activities. Each category had it’s own ledger account. We deliberately gave an amount smaller than we estimated they would need each month. It forced them to prioritize their choices about whose birthday party they went to, which activities at church they participated in, what clothing and where they shopped, and if the activities they wanted to do exceeded the money they had, then they earned the money from us or had small businesses. They had businesses selling valentines day cards, homemade stationary, bread bears and bunnies at Easter, sodas at the pool, and shaped crayons (made from broken crayons melted and poured into candy molds) as stocking stuffers at Christmas. All money was recorded in ledger pages that kept track of earnings and spendings. They were required at random to produce their ledger books to prove they were not borrowing from Peter to pay a Paul activity and that all monies were accounted for. Today, they are all debt free with no school loans or credit card debt. They have 401Ks and Roth IRAs. One has his own business. Another is a landlord with rental property. We never got flack from our children when they said no to an activity. Most of the time it was because it was not important enough to them to spend their money on. Twice we got flack from other parents when our child would decline to go on the school field trip (usually because they had already been there or another activity they were saving for was more appealing). Then I would have to explain that we were teaching our children to make choices about what was important to them. My husband and I have to make choices every day about what is important to us. As a parent, I did not want to turn down a lunch with my friends or a movie out with my husband, to pay for an activity that it turns out my child would only want to do because I paid for it.

I don’t have kids yet, but it wasn’t so long ago that I was one….My parents had a few really great ideas for teaching us money management:

1. When we were quite young, we were paid a token amount for chores, like Dustin’s son. In order to encourage saving, our parents matched our savings account contributions (and money in that account was basically untouchable, so it grew to the point that I was able to pay cash for a car when I was 16).

2. When I started high school, my parents helped me open a checking account and deposited $100 every month. With that money, I had to pay for literally everything I wanted or needed, other than food I ate at home. I prioritized oboe lessons over eating out, so I learned quickly how to budget (and how painful it was to run out of money before I ran out of month….). I made mistakes with that account, but it was good to learn about overdraft fees and other horrible things before I left home for college.

I’d pay my sister to not have to share a hotel bed with her on family vacations (she kicks). Best $20/night ever.

I’m totally into Laissez Faire. (So long as the choices are legal ones.) What better way to learn, and what better time to make mistakes? Money really does pay for goods and services.

I really like the idea of pay for work lesson. In real life you do work and get paid, and I think that a reasonable system for earning money by completing tasks will help at least to understand what money is for and how to get it later in life. My family never received a free allowance, certain chores were expected and that was what our allowance is for, I think a more equitable system would have been to be paid by job, because that brings in a more motivational aspect.

I’m with some of the earlier posters. Allowance is about money management, chores are part of being a member of the household.

I think it is so important for people to learn that there are a lot of things in life that need to be done, ways that everyone needs to contribute, without any expectation of monetary compensation (ie – laundry, dishes, cleaning up, cooking). I wish my husband learned that as a child!

I think your plan is great, I’ve seen those piggy banks that are divided up into spend, save, give, invest, another good idea. I’ve seen advice that says an allowance based on age is normal and some people tie the allowance to chores and some do not.

I think the main focus should be on having a child learn that it takes effort to acquire money and therefore one should be careful with it when it comes to spending it. I know years ago, my nephew saved up for a particular skate board and by the time he had the money for it he didn’t want it anymore because he realized that it was too expensive.

This approach sounds like the right one for this child. It’s an approach we’ve taken with our daughter and it works well for her too.

Our sons are a different story. They don’t want things. They play ball, they run around outside, inside, they play videogames (that they get for Christmas or their birthdays), they read, wrestle, or watch TV. They work only by the threat as there’s never really a carrot that’s worth the effort for them. Maybe things will change when they start liking girls or start getting the itch for a car.

We pay for chores in our house, but the reason the chores get done is because of threats (e.g. “You’re not eating until you take out the trash”). Money is no incentive. Our oldest son is 12 so maybe things will change soon for him. I hope so, because it’s difficult to teach responsiblity of any kind when your kids are the sort that will make do with what they’ve got rather than working hard or extra to get more.

I was FIRMLY in the camp of allowance not being tied to chores because that is what you do when you are part of a family. Then I heard my 6 year old tell my mother that he doesn’t do anything to earn his allowance…we just give it to him. While technically true, I suppose, that bothered me to hear it put that way. Now we have sort of a hybrid system. You don’t earn your allowance by doing chores, per se, however you can lose some of your allowance as a consequence of not doing your chores as you are supposed to. Honestly, it could use some tweaking probably but it works for us now.

We don’t force savings or giving. Our 14 y.o. daughter is a natural tightwad and earns about a hundred a week (from outside jobs, not from us). She saves almost all of it and will only occasionally throw a dollar or two into a special charitable collection that touches her. Any money she does spend is spent on outings with her friends.

Our 12 y.o. son lets money slip through his fingers. Just last week I made him shovel the old lady neighbor’s driveway and she gave him a 20 which he’s already spent on a new videogame. However, he regularly contributes money toward charitable causes.

Our other boys are too young yet to figure out their money personalities. We’re thinking about forcing our spendy 12 y.o. into some sort of savings – maybe towards a car – but I can’t see where we would force our kids to give charitably. Feels too much like a tax to me, which I detest, but maybe that’s the point – you never really get to keep all the money you earn.

I got my 10 y.o. one of those digital piggy banks and a bank account for Xmas – he was running in to the ATM every day to deposit money like a madman and now, just a month after Xmas, the piggy bank has somehow accumulated $170 in change. Hmmm…

The bank card is set up so that he can’t use it as a debit card, so he has to think about what he wants before he buys anything. He hasn’t wanted to buy anything yet. He makes me check the account every day online to see if any interest has been deposited.

I find the biggest deterrent to spending for him (and me) is just not to SEE anything TO buy (ie. don’t go shopping for entertainment).

We don’t do an allowance, he gets paid through working “above and beyond” and can easily separate me from $20 on a weekend for a few hours of work spent cleaning, yard work and organizing (he’s good at organizing and I am not). He also gets the money from any bottle recycling we do and is constantly asking when he’ll be old enough to get a real job.

My experience growing up was like Tyler K’s where the money I earned was just taken away and put in the bank. I blew it all in my first year away from home.

Awesome idea. Really enjoyed the post. When I was a kid, all the money I got was quickly spent. Saving wasn’t a consideration, which is why it took me my first few adult years, and several costly financial mistakes, before I started saving and investing for the future. Good job getting your kids off on the right foot.

Dustin,
Thanks for sharing what you are doing in your family. I think as an earlier poster said, that consistency is the key to success and you can be successful with the allowance for chores or for being a part of the family (with chores a responsibility for being part of the family).

I’ve heard of some families offering a match on long-term savings. It might not be right for a 5 year old, but as your son gets older and needs to start saving for cars and college I think this can help teach about the benefits of long term savings and some 401k account.

Keep up the good work!

No kids here, but I am always fascinated (perhaps oddly) by what other people choose to do in this arena.

When I was growing up, my parents flirted briefly (maybe 6 mos?) with giving us an allowance. My mom was also a stay at home mom, so she did most of the chores around the house too. They weren’t poor, maybe lower to middle middle class, so we just sort of understood that money was often tight. We were far from deprived – Christmas and birthdays netted several presents each, but not much stuff outside of those times. All of my grandparents were in the same boat, so we’d usually get $2-5 in a card for our birthday. Not a lot of cash floating around in our hot little hands.

Not a lot of overt financial management lessons either. Which is funny since my parents are very frugal and great with their money. NOw that we’re all adults my Dad is almost eager to talk about retirement accounts or best terms for loans, etc but not so much as we were growing up. I guess their process was to be an example even though they didn’t necessarily talk about it a lot. One lesson they talked about was to keep putting your car loan payment into a savings account after paying off the loan so you’ll have cash for your next car.

Personally, I wish they’d done something more but I also know myself. I’m very stubborn and a bit of a know it all – I may not have made precisely the same financial mistakes but I probably just would have made others. LOL. Only regret I really have is that I didn’t start long-term savings sooner. I envy people who were able to buy houses or buy new(ish) cars with cash who were in their early 20s. But, at 33, I’m doing alright and just getting better at making the right moves for me.

I like the overall structure. I agree with others that “savings” needs a better definition. While I don’t have the bitterness of Tyler K regarding that, I do remember quite well that once I got a p/t job my allowance amounts ceased to matter… so any lesson for long-term savings was pretty much lost. I made as much in a month as I’d made in several years of allowance.

@ El Nerdo – It may not be part of your upbringing, but it’s a part of many people’s lives. I was “forced” to give part of my allowance as a child – but my sisters and I often went above that amount of our own volition when we realized what our money could do in certain cases.
My wife and I still give a portion of our income to others. I can’t imagine that we wouldn’t teach our children to do the same. I also can’t imagine that we wouldn’t explain what that money is doing – helping build houses in Haiti, buying food so people in our area who have lost their jobs can give their children nutritious meals, or giving a young girl in Africa a bicycle so she can get to a school that otherwise would be too far away. Hardly patronizing… if I was in any of those situations, I’d want someone to help me out!

“First National Bank of Dad: The Best Way to Teach Kids About Money” by David Owen.

Here’s how a 5-year-old invests. He saves his money with the Bank of Dad, who at the end of each month pays him 5% of the balance, just before he gets his allowance for the next month.

You may not be considering an allowance yet, but the book suggests reasons that you probably will at some point. The reason for 5%/month is that even a kid will see the point of saving at that rate. You chose to “make” your child save, but Owen would let your child learn that lesson by experience.

Great post! I think you’ve started off with a great strategy – just be sure to maintain your resolve! Consistency is the key!

I never expected to be old enough to talk about “the good old days” but, the money management lessons I learned from delivering newspapers, mowing lawns, washing dishes, etc. just aren’t available to children today.

You’ve hit on a great plan to provide those lessons. Thank you for sharing.

consider adding another saving category to your child’s savings-”Giving other family members gifts for birthdays, Mother’s day, Father’s day, and Christmas”. So many people go into debt at Christmas time because they don’t have a budget or haven’t saved all year. Even if you believe that at 5, he should make or bake his gifts, there is no reason that he shouldn’t save for the materials or ingredients. Setting aside a small amount each week from his allowance means that he can be taught to take advantage of sales as they happen throughout the year. My mom and I laugh over all the years she got bath oil beads for every occasion because for us children they were colorful and like jewels and she always oohed and aahed over them so she must have liked them, right? Never occurred to us that she oohed and aahed just because they were from us.