I'm looking for advice on how to teach kids about money.

My four-year-old son, Noah, is right at the age where he knows what money is, and he knows that we can buy things with it; but he doesn't really know how it all works. We have a piggy bank for him, but we haven't started giving him an 'allowance' yet -- we just throw all our loose change in his piggy bank.

Last December, we did an Advent Calendar where, everyday, we put a small amount of change into a basket (the amount and reason were specified on the calendar), and then then the total amount was donated to the charity sponsoring the calendar. This exercise was intended for children, so we used change out of his piggy bank, which he did not like. We tried to explain that he still had a lot of money left in the piggy bank, and that sometimes we need to give a little of our money to those who don't have any money in their piggy banks... but I don't know how much really sank in.

So, any tips or experiences with teaching young kids about money would be much appreciated...

How about a piggy bank with three compartments: Saving, Spending, Tithing.
http://www.crown.org/cartproducts/Produ ... LB980&aid=

Crown Financial has good resources for both kids and adults.

Of course, to be more frugal you can take the idea and make your own three compartment piggy bank.

That is an excellent idea... definitely worth considering. Seems like it would teach him exactly what we are wanting him to learn. Thanks for the link!

Since you asked, here are some pieces that I've written on the subject:

http://www.raising4boys.com/2006/10/17/ ... -a-dollar/
http://www.raising4boys.com/2006/09/13/ ... d-to-save/
http://www.raising4boys.com/2006/06/15/ ... he-401kid/
http://www.raising4boys.com/2006/02/17/ ... ce-system/

Also exactly what I was looking for... thank you very much for the links.

Glad to be of service.

I went ahead and ordered the ABC piggy bank from the link that Savvy Steward posted, as I think it is exactly what Noah needs right now. I showed it to my wife and her response was, "Why haven't you ordered it yet?" -- she obviously thought it was a great idea as well.

And nickel, we have your blog bookmarked, and will be coming up with an allowance system in the near future (and we plan to reference several of your posts). For the last few weeks, we've been giving him a dollar if his room is clean by bedtime Saturday night (so he gets one chance a week), and we will likely incorporate this into our allowance system.

Thank you both for your help and I will keep you posted on how things go...

I must be the only one in the PF Blogosphere that doesnt believe in allowances for kids.

While I like the idea behind teaching kids how to save etc,- really the most effective way to teach kids the value of money is to have them earn it themselves.

Not one of the most successful people I know (multimillionaires) received an allowance. They all learned from an early age, if they wanted something, they were going to have to figure out how to earn the money on their own to do it. They believe this one skill has helped them succeed in life more than anything else.

Why? Because it created in them the correct mindset: if I want something in life, how can I achieve it? Instead of being trained to be dependent on someone else to give them money and things and have to constantly live with a mindset of scarcity that says I can't have the soda, if I want the money.

Just my two cents for what its worth. (I think I feel a blog coming on...)

This is all good in theory, but how do you apply it to a 4-year-old? Do you have any practical examples of how he could go out and earn money on his own?

There is nothing theory about it. I have two kids, 4 and 5. They are already grasping the idea of earning money. Maybe it is because they have watched me buy and sell, build my own businesses and invest, and see the example I set for how I earn, create and find money.

My little guys know how to sell their old toys and items to earn money for new ones. The know how to save money they come across. If they want money for something, sometimes they will ask me what they can do extra to earn it (5 year old helped me pick weeds, etc). I have friends whose kids have set lemonade stands, or even gathered neighbors extra fruit (with their permission) and sold it. There are lots of things kids can do.

Kids are very intelligent and very creative- they can figure these things out, with our teaching advice and guidance. And they will learn important life lessons that will help them be far more successful in life. They will always be the ones who see opportunity where others do not, and who do understand the value of a dollar.

If a child purchased that 'old toy' to begin with, then I can see that being a good money lesson. But if they are selling toys they got as gifts, then I don't see how this is really applicable. In order for it to be a real entrepreneurial experience, they need to have some form of capital invested in the initial purchase, and need to turn some kind of profit on the deal. If anything, I would see this as a lesson in depreciation.

How does one 'come across' money?

I would consider this to be allowance, as part of my allowance plan would incorporate 'earning' money by doing certain jobs around the house. Some would say that doing jobs or chores around the house still does not qualify as anything other than 'allowance'.

I think this is a good conversation.

You're getting a little nit picky with the whole entrepreneur thing. As an entrepeneur, I have to disagree with you. The key is in being able to to sell, (and make money on) anything. (and see the opportunity in the first place)

Kids come across money in many different ways: birthdays, find it on the ground, holidays, etc.

I don't feel household chores are something anyone should get paid for. Nobody pays me to do the laundry, dishes, etc, why should kids get paid for contributing as the rest of the family does, and cleaning up after themselves?

However, going above and beyond, that I think should be rewarded; money in exhange for time. Hence the money to help with the weeds. And believe me, that is not an every week occurance. I used that as an opportunity to show my five year old how if I hired him to help with the weeds for two dollars, he could then hire his little brother for one dollar, and have his brother do the work, learning to leverage OPT (he didn't do it, but hopefully the idea will stick).

The reason I'm being a nit-picky is because of these comments...


At some point, a child has to use capital that they did not earn (either in the form of allowance, a monetary gift, or materials purchased by a parent) in order to earn more money. At some point, something has to be given to them (when they are too young to go out and mow lawns, etc).

Maybe the term 'allowance' should be replaced with something more PC like 'Children's Financial Learning Plan'. In my mind, the initial 'allowance', or CFLP (started at a young age) would be used to teach my children the basics about money -- spending, saving, giving. As they got older, the base 'salary' or 'allowance' would become a smaller percentage of the overall CFLP, and more emphasis would be placed on them actually earning the money themselves, either through extra credit chores (like pulling weeds), or though things like selling lemonade on the street. Eventually, I would hope that they could earn money on their own doing things like mowing lawns for neighbors, washing cars, etc.

I also think that there is some value in teaching things like 'you can have a soda pop or a you can have a dollar', as it teaches kids the correlation between wants and needs, and gives them a real world example of what unnecessary spending can do to your cash supply. I had thought of possibly making them use money from their CFLP to purchase unnecessary items (like a soda pop at a restaurant). Of course, since my kids won't touch soda pop anyways, this example is all hypothetical.

Thanks for your input, BTW; you've got me thinking here.

I don't know about age 4, but I started my first business at age 6 - writing, printing, and selling my own newspaper. I continued it up until age 13, when I became more involved in my family's business. I didn't start to receive an allowance until age 16, and that was not an "intentional" allowance, but that's another story.

Well, I've got myself thinking too! I don't know the "right way", who does? I just know that I was a spoiled brat. My dad felt guilty about not being there, so financially I never had to worry about anything. Neither one of my parents really knew about money mangement.

The best thing that happened was my dad after college (that I did work to pay for, while he paid for necessities each month-$75!) told me, "You are on your own- don't ask me for anything else."

From then on I had to figure out how to survive. I have had to learn a lot of things as a grown up that I wished I learned as a kid. I have actively looked for successful business owners and investors and have learned as much as I can from them.

As I mentioned, I can think of five close multi-millionaire friends right now (how they are my friends I don't know- I think they keep me around for entertainment!). None of them had an allowance or money in their family growing up. All of them knew, if they wanted or even needed in some cases, they were the ones who had to make it happen. So they had to try twice as hard, be twice as creative, etc.

Emergence through emergency.

While my first instinct as a mom is to spoil the kids I love so much, perhaps I need to with hold more than I wish, in order to teach my two boys how to survive in this world as men- not only survive but thrive.

These are just my thoughts!