6 Ways to Teach Your Kids About Money (So They Don’t Make Our Mistakes)

Kids and money. If you’ve got the first, you need a lot of the second. But how do we help our kids avoid the mistakes we’ve made? How do we teach them what we’ve learned – the hard way – about money?

Our suburb is filled with kids (and adults) that get what they want, when they want it. There’s definitely pressure to spend money and keep up with the Joneses. It’s not easy to choose the opposite – save money for things we want, live simply and find happiness outside of spending.

I don’t know if my kids will end up in debt someday, but I do have some advice. I’ve learned about money the hard way – and I’ve searched for tips to help my kids avoid my mistakes.

If you have kids – even young kids – here are some guidelines to help them develop a realistic sense of how money works:

1. Tell them the truth, repeatedly, even if they don’t understand or believe it yet.

A few phrases I’d recommend you wear out:

  • Money can’t buy happiness.
  • Don’t spend more money than you have. (via credit cards!)
  • Save up for the things you want.
  • Work hard so you can afford it.

Even though my 13 year old daughter doesn’t believe money can’t buy happiness, I still say it. Often. While we’re shopping. If she says, “It makes me happy,” I reply with something like, “Hmm. Then why aren’t the rich happy all the time?”

Help your kids think about their perceptions. They may not change for many years, but its important to say these things. They are getting so many other bad money messages. You have to offset them with good ones.

2. Abolish allowance.

We used to give our kids an allowance. We called this, “Sharing in the family wealth.” I realized recently our system was flawed. Life doesn’t work that way – no one gives me money just because I exist.

Now we have a new system: The kids can earn money by doing extra work around the house. NOTE: Daily chores don’t count. Things like cleaning their room and dishes are part of living in society.

We pay for extra chores – things like sweep the garage, vacuum and wash laundry. I explain the job, name my price and they can accept the work or not.

So far, I’m surprised. This is a wonderful system and no one is complaining. I get help with the chores and they feel proud when the work is done.

3. Teach them that expensive taste has a price.

My kids are 12 and 13. They care about brand name clothes and shoes. I used to go halvsies for expensive items, but now, they have to earn the money.

They can earn it very reasonably and quickly with the right attitude. Of course, I will always clothe them, but when it comes to specifics – like brand names – now they work to earn that money.

With our old way, they stopped caring about sale prices because they knew I’d front half the money. The kinks aren’t worked out yet, but I really believe slowing down their “I want it, give me the money” impulse will help them in the long run.

4. Gifts.

I love buying stuff for the kids when we can afford it. It’s nice to reward them for things, too. Now that they earn money for wants, I make a clear distinction between that system and when I buy them gifts. 

Be very specific. Say: “Here is a gift for you,” or “I want to use the clothing budget to buy that for you.” This helps them understand the difference between earned money and gifts.

5. Consider paying for good grades.

Rewards are motivating. In our house, the kids can earn money by working hard in school. Your family might be different. Consider each child’s motivators – it might be money, one on one time or a special event – and give them something positive to work toward. Don’t spend more than you can afford.

6. Handling “I want.”

My kids want a lot of things. They are passionate about a lot of things. Those feelings are okay, and I acknowledge them by saying something like: “That would be a good thing to add to your Christmas/birthday list.” Or, “Let’s start saving.”

As hard as some of the changes above have been, my main goal is this: I don’t want my kids to do what I did. I don’t want them to spend more than they have and go into debt. I want them to know those days were not easy or fun. I was tricked into thinking I needed things and so were millions of Americans. We suffered because of it.

They don’t have to repeat history. Instead, they can experience the freedom – yes, freedom – of being on a budget, living within their means and saving for the things they really want.

How do you teach your kids about money?

Learn how we eliminated debt in my book, The Hybrid Homemaker. Click here to buy.

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1 michelle bross October 11, 2011 at 6:41 am

I don’t believe it is necessary for children to have their own money to learn to manage money. They are learning by everything we do – how we hide it, how we spend it, if we share it, and if we waste it. http://www.pickthebrain.com/blog/be-a-peaceful-cfo-of-your-home/

2 Melissa October 11, 2011 at 9:40 am

Hi Michelle,
I definitely agree that teaching through example is the best way to do it – though for those who have faltered, a little backtracking may be needed. I thought your post was well-written and thoughtful.

As kids get older, there are things they want that I would never spend money on, like having all brand name clothes or multiple plastic bracelets. At the same time, I don’t try to force my feelings about those things on them. They can want things that I don’t want. This is when allowing them to earn money works very well. Or they can add those things to a gift list.

Thanks for sharing your post! Take care,

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