When to Start Teaching Kids Money Management

Parents often ask me, “When should I start teaching my kids about money?” The answer is, “The sooner the better.” Your kids know what money does before they even know what money is.

Here are some things that show your kids are interested in money. As you read through the list you’ll see that money plays a big role in childhood.

Do your kids:

1       Ask to buy things at a store?

2       Play pretend store?

3       Talk with other kids about money?

4       Ask you for money so he can go shopping?

5       Play games like Monopoly and Life?

6        Suggest you go to an ATM to get more money?

7       Want to go shopping as soon as she gets money?

8       Talk about being rich as an adult?

If your child is doing any of the above it’s time to start giving them money to manage. My plan was to start allowances for our children at age five. Our first activity would be learning about cash. As I got out my cash box filled with pennies, I announced this was a game for kids who could count to 100.

As I explained that 100 pennies was the same as a dollar, I gave the five-year-old some pennies to count. Her three-year-old sister said, “I can count to 100. Can I play too?”  She took some pennies and counted out 100. With that one skill she too was ready to learn about money.

This was the beginning of The No-Cash Allowance. Let me explain that we did not “pay” our kids with cash, but wrote their allowance and other deposits in an account book, like a check register. We used cash to practice sorting money and exchanging pennies for nickels and so on.

These pre-schoolers could not could add or subtract or even write the numbers in the account book. What they could do was make decisions. When they wanted to buy something what they needed to know was if they had enough money or not.

When we went shopping I’d pay for our purchases. We’d then subtract their purchase amount from the balance in their accounts, just like your bank subtracts when you use your debit card.

What surprised me was that they were not interested in taking cash to the store. They could “withdraw” cash but rarely did. Knowing how much spending power was all they really wanted to know.

Because money was a number instead a pile of cash, it was easy to remember. I was amazed to realize that these young kids could tell me at any time how much their balance was.

When they first got allowances they could spend the money any way they wanted. For them it was all about making decisions such as, “Do I want a book or a game?

As they got older the amount of money they managed increased to include required spending, such as school supplies. By the time they were in high school, they were managing a sizeable amount through their checking accounts for both fun and required spending.

To help kids learn to manage money, start giving an allowance as early as possible. Continue to increase the money and responsibility. More information about setting up an allowance system for kids from age 3 through 18 is in my book, The No-Cash Allowance.

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