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Most Powerful Tool for Teaching Kids About Money is a Pencil

Kids manage money with a pencil
Easy to use for young kids

Forget the cute piggy banks, computer programs, games and books that simulate money management. Let the kids manage money with pencil and paper.

You already have everything you need to get started because the most powerful tool for teaching kids to manage money is a pencil. Require your kids to track their allowance on paper. The one rule is this: every money transaction is recorded as a number. If the numbers aren’t written down the money doesn’t exist. Period.

What can kids learn by keeping track of their money as a number?

  1. Numbers show how much money one has (balance).
  2. Depositing (earning) money makes the number get larger (addition).
  3. Withdrawing (spending) money makes the number get smaller (subtraction).
  4. Money can be spent as cash or check or credit card or debit card.
  5. Each spending transaction is subtracted from the total.

Here’s an example of the no-cash allowance in action in our home.

One daughter adds her weekly allowance and records the new balance. She announces that there’s enough to buy a new game. Her sister updates her own balance and asks me if we could stop at the bookstore.

I take the girls shopping and pay for their purchases using my credit card. When we get home they subtract their shopping expenses and update the balances in their accounts.

Throughout this experience no cash has exchanged hands yet everyone knows exactly what happened. Deposits were made, account balances got bigger, purchases were made and account balances got smaller.

Start by downloading allowance logs.

Grab a pencil and start using these logs to give your kids a real-world money management experience at home. Transform allowance into numbers instead of cash.

The basic account log works well with younger kids and the checkbook format helps older kids understand a standard checkbook register. Both blank forms can be downloaded and printed. The spreadsheet format is for use with computer programs that read .xls files.

Basic Account Log.  This log is easy to use with younger children. (download PDF)

Checkbook Format Account Log. The checkbook format is for older kids and uses TransType, Date, Transaction Description, Debit, Credit and Balance columns. (download PDF)

Computer Spreadsheet. Older kids can use a computer to update their logs. (download file)

Kids manage money with a pencil? Easy!

Money is all about the numbers! You don’t manage their money entirely with cash and your kids shouldn’t either. Start teaching your kids now that money is a number. It’s the best lesson you can give them before they become adults.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children to manage money as a number starting with kids as young as pre-school and continuing through high school.