How many of us when relatives give our kids holiday or birthday money stash it away in a bank account that our children can't get to? Probably most of us! Why? Because "we don't want to them to blow it", right? That money would be "wasted" on stuff that isn't important and we just can't let that happen.
Most of you know about helicopter parents and this money situation is a perfect storm for us. We mean well but... it hurts our kids in the long run. How will they ever learn that if they "waste" their money there won't be any left over for future wants and needs? When our kids are young is the time to allow as many affordable mistakes as possible; money is certainly a prime target for small mistakes now to avoid big mistakes later.
This is a huge topic that I could spend way too much time on but wanted to give you some hints by age of what you can do.
Ages 3 to about 8 or 10
Three Jars Method - this is a classic! You have 3 jars so that your child can visibly see the money go in. One for saving, one for spending and one for giving. Let your child see the money build up. How much? As much as you think is appropriate, could be a quarter or a dollar. It could be per week or per month, doesn't matter. The amounts could even change as they get older. Next, you let them have opportunities to spend-save-give. When you are at the store and they ask for a treat, let them use THEIR "spend" money instead of just using yours. If you go to church, let them take their "give" money for a donation, not yours. Maybe once a year you have them pick a charity they can use their "give" money on. We used Heifer International for years as a "give"-- super fun to sponsor cows and chickens or even beehives in third world countries that help people get out of poverty. Another idea I love is when you travel give them a special amount that they could "spend" on trinkets. When their trinket money is gone, it's gone! So sad... ;)
Here's a cute idea to implement this method:
Moonjar Moneybox Link
Allow them to "save" for something special - a bike, a large LEGO set, an expensive doll, etc. They will learn delayed gratification which is a SUPER helpful indicator of future success in life.
Ages - 10 till 8th grade
Setting Limits Method - During this phase you want your child to really understand that there are limits to what they can spend instead of just opening up your wallet and spending YOUR money. Yep, that's YOU who has to set YOUR limit of what YOU will give them. Ideas for limits:
school lunch money
birthday gifts for friends
movie tickets - one per month
Starbucks or other snacks
activity supplies for sports, music, etc.
activity fees (monthly, quarterly, by season, etc)
To give you an example of how this limit stuff works let's talk about school supplies. In my house I set a limit of $50 per kid per year for things like binders, notebooks, pens, pencils, protractors, etc. They could choose to reuse what they already had or buy all new stuff. If they wanted to spend more than $50, fine, but not with MY money, they could use "spend". (Note: Before I started this I had been spending more than $75 on supplies.)
Here's a great article from NBC News: How To Teach Kids the Value of Money from an Early Age
Ages - High School
Every parent should jump at the chance to really step up budgeting with high schoolers. This is a crucial learning ground that will be backed up by affordable mistakes and really set them up for independence in college and beyond. Here are the basics:
1 - set up a checking account with real check and an ATM card that you can electronically transfer money to
2 - Decide as many things as possible that your kid can pay for with YOUR money, yep, YOUR money. Hey, you pay for all these things anyway so let's leverage that money to work for future independence! Idea list:
- all the items listed in the previous age range
- private lesson fees - academic, sports, music, dance, whatever!
- sports fees - school sports, club teams, travel for sports, etc
- lunches/meals - whether at school or outside
-college applications/testing fees
3 - Calculate the money needed to cover expenses in Step 2 and transfer that electronically to your child once a month. I would have my kids balance their checkbooks by hand before they got their next month's money. In addition, I would deduct charges like car insurance and cell phone from what I transferred. Lastly, I also deducted payments for chores that I did for my kids that they chose not to.
4 - Sit back and watch them use their money. If they forget to pay their tutor or music teacher... GREAT! That teacher will help them learn to pay bills on time. If they bounce a check... GREAT! Nothing like learning how much bouncing a check costs. If they save extra here or there by not spending as much on clothes or supplies so they can get money for a concert ticket.. GREAT!
Whatever your child's age, please take the time to work with money. There are some amazing resources on the web including some from Love and Logic. Try out any of these:
Millionaire Babies or Bankrupt Brats
Parents are Not ATMs