Teaching Your Children Money Management Skills

Teaching Money Management Skills

Money management and budgeting can be a difficult concept to teach to kids, especially if money management is not your forte.  (Don’t be offended by that statement if you’re a poor money manager.  I only know it’s hard because both Eric and I have a hard time being as responsible with money as we should be.)

However, money management is an important home ec/life skill, and the earlier that people can learn how to handle money appropriately, the better it is for their future.

Ways That You Can Help Teach Children About Money Management

Give, Save, Spend10 days of Home Ec Skills

Many families have a rule where children need to take money they earn and break it into three portions.  One is for giving to church or charity, one is for putting into savings, and one is for their own personal spending.

I will admit that we don’t currently force the kids to put any money into savings, per se.  We do encourage them to save for larger purchases, but they don’t currently put money into savings.  I know, however, that this needs to change at some point.  Our children do give close to 10% of their allowance into the offering plate at church.

Allowance

I’m a big fan of giving children allowance.  (This is an old post I wrote about it, but we’re still handling things in a very similar way.)  We don’t tie it into chores or anything else.  It is simply money we give them once a month and it is mostly theirs for spending how they wish (other than making sure they can have enough to donate each week at church).

While this sounds like a funny way to teach money management, we’ve actually found so many benefits from this method:

  • The kids buy their own games, toys, and whatever else.  So, since they have been wanting more expensive things as they get older, they have to save if they want those things.
  • It has given them some concrete experience for the value of money.  (They rarely say something like, “Oh…it only costs $20.”  They know that $20 isn’t small change.)
  • They have now all had an experience of spending money on something dumb only to regret it later.  While we do try to talk to them when we think they are making a poor purchase, we won’t always step in to actually stop them, just to guide them instead.  As much as it has pained me when they made a purchase they have regretted, I know that’s an important money management skill.

Earning Money with Chores

On the flip side, if you want children to have money to work on managing, but you don’t want to give a set allowance, you might consider going the route of having your kids earn money through chores (or maybe require some chores and then allow them to earn through extra chores)

Since we don’t do this personally, I put together a Pinterest board called Kids Earn with Chores with some chore chart ideas that all involve earning money.

Either way, I think the best way for children to learn how to manage money is for them to actually have some of their own money to be able to manage, even if it means making mistakes.  If your children don’t currently have some way to earn money, prayerfully consider it.

Play Money and a Budget

People my age will probably remember the episode of The Cosby Show when Dr. Huxtable teaches Theo a lesson by giving him board game money and then telling him all the bills that would need to be paid each month with that money.  Even with Theo trying to tell his Dad about a cheaper option that he would do in each circumstance, he still found his money gone at the end of the month.

Each time that my children find out how much something in our budget costs, they are shocked.  For kids that are used to $20 being a ton of money, the thought of spending $1200 on something like a water softener (like we had to do recently) was mind boggling.

Likewise, to actually see what a real salary may look like (in play money), and then how quickly that play money can go with normal expenses, it can give them a new found view of money and household budgets.  This exercise is better suited to older children.

Plan a Meal, a Party, or a Trip on a Budget

This is another fabulous activity for older children.  (For this activity, I would say that “older children” would be at least upper elementary age, though you are the best judge of your own children’s abilities and comprehension.)

Set out a budget for your child to plan something — a meal, a party, a trip, or something else that would work well for your family.  Have a meeting with them to start to give them tips about ways that you, personally, might go about keeping the planned event within budget.  Then, step back and help when they ask for assistance.

This will be a great opportunity to not only budget, but also to help them to see that you sometimes have to make priorities with your money or be creative to make money go farther.

For instance, if your child wanted to go to dinner and the movies with friends as a birthday party, they may find that their choice ends up being dinner out and movie with only one friend or take out pizza and a DVD at home with a group of friends.  It’s all about choices with money, and they need to learn how to make them.  (Instead of growing up thinking that it’s okay to just charge the money you don’t have on a credit card and take the big group of friends out to dinner and the theater.)

Money Management Themed Products for Kids

Moneywise KidsMoneywise Kids (game)

Melissa and Doug Play MoneyMelissa & Doug Play Money

Money Bags gameMoney Bags (game) from Learning Resources

buy it right gameBuy It Right (game)

Allowance GameAllowance Game

There are so many things that can be done to help teach your children about money.  What other methods have you used to take your children money management skills?

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Comments

  1. says

    GREAT ideas – we have elected (for now) not to give an allowance or pay for chores.. but, we are helping our children learn to save and budget through money they receive for gifts, etc. And..we are encouraging our children to become entrepreneurs…our son has been successful in launching a little business that has become quite lucrative for him…and our middle child is quite a ‘banker’… Thanks for this list and the board games, I love those!

  2. says

    I found that allowances were hard for me to keep track of and find the right change. I moved my kids into babysitting, collecting cans, and selling chocolate suckers as soon as they could work. Using real money that they earned was the best teacher for us.

  3. says

    These are such important skills. I’m glad to see you teaching this to your children. I’m impressed that your children understand the once-a-month “paycheck” concept. That must be an eternity for them.

    I have a related money management story from a friend. Her son gathered up the unused video games around the house and asked his parents to take him to the game store. He was very proud of himself to have found some “extra money” to buy games. But his face fell when told that he’d have to give the money to his parents, since they were the ones who purchased the games in the first place.

  4. says

    I totally forgot about that episode of The Cosby Show. That’s a good idea. Dave and I can’t figure out how to do allowance with Abby. I like how you give them an allowance not based on chores.