Our kids are now teens and tweens (yes, we feel old). It seems like every time my wife and I turn around, they’re needing money for something. If you have kids then you know what I’m talking about. Teaching kids to save money is one of the most important jobs we have as parents. For advice on this subject, I consulted with the money guru himself…Dave Ramsey.
Dave wrote the book Smart Money Smart Kids with his daughter, Rachel Cruze. I started reading it for one reason (teaching our kids about money) but got much more out of it.
Here’s a breakdown on what I learned so that you too can teach your kids (or grandkids) about money…
Work – The Dreaded 4-Letter Word
Many people these days think that “work” is a bad word. I learned early on that money didn’t grow on trees (Dang it!) If I wanted to buy something, then the only place I could get it was from work. Work helps to create discipline and structure in life.
For the Debt Free Dr, I can’t imagine ever completely retiring. My personality wouldn’t tolerate it too well. Busy is my middle name. Whenever I’ve taken a week off from work, my routine and discipline starts to slack off which means it’s time to go back to work! Just ask Mrs. Debt Free.
Too many parents allow their kids to sit in front of a computer, pad or X-Box all day. I’m not sure if they think a little work is going to kill them or not. There’s nothing wrong with getting kids to perform good old fashion work. Watering plants, mowing the yard or raking leaves creates a sense of accomplishment.
Parents, it’s our job to not focus on so much of what our kids want, but more on what they NEED. If our kids graduate from high school only knowing how to be a gamer, complain and have a sense of entitlement, then we’ve set them up to FAIL. It’s on us to NOT let that happen.
It’s essential to teach our kids how to budget and save at an early age.
Proverbs 22:6 “Train up a child in the way he should go, and when he is old he will not depart from it. “
A study by the American Institute of CPAs in 2012 found that more than 60% of American parents gave their kids an allowance.
Unfortunately, they also found that only 1% of kids save any of it.
Giving kids an allowance is an area that Dave Ramsey really helped opened my eyes to. Up until this point, we thought about giving our kids weekly allowances until I viewed it from his perspective.
Dave doesn’t believe in giving kids an allowance because it doesn’t teach them how life really works. There’s an entire generation growing up thinking that money is free.
“Handing out money and not teaching strong work habits create people who whine, who feel entitled, and who become perpetual victims.” – Dave Ramsey
What Should We Do Instead?
Per Dave’s recommendation, the word “allowance” should NOT be in your child’s vocabulary. Instead, they should get to know and use the word “commission“.
Explain to them that money comes from work. The younger they learn this, the better understanding they will have regarding the relationship between work and money.
By doing this, you can avoid what all parents fear – becoming a Human ATM!
How To Teach 3 to 5 Year Olds About Money
1. Use a jar or piggy bank to save.
Once kids are put on a commission, they need a place to put it. Start with using a jar or piggy bank.
Not sure how to talk about how this $$ can grow and benefit them?
Take a look at how Shark Tank’s Kevin O’Leary used a piggy bank to explain compound interest to his kids:
2. Give them small chores.
For smaller kids, try limiting the amount of chores they perform to three. Also, keep them short and sweet. We’re not operating a sweat shop!
- Picking up toys
- Putting their dirty clothes in a laundry basket
- Making their bed
- Collecting indoor trash from cans
3. Show them how to spend money.
Remember, getting these younger kiddos to do a couple of chores and paying them is huge.
One of the best ways to reward your little one for doing work is to go shopping with some of their earnings. That’s right. By doing this, you’re teaching them that stuff ain’t free.
How To Teach 6 to 13 Year Olds About Money
4. Stress the importance of giving.
Once kids start making money, they’ll understand that it only comes from working. But, you don’t want them to end up thinking they should get paid for every single chore they do around the house.
We had that issue with our boys. A chore chart was implemented and each were responsible for five chores a week.
When kids are 6-13, it’s time to upgrade their chores.
- Making beds
- Feeding pets
- Folding laundry
- Mowing/raking yard
The non-paid chores (chores they do because you put clothes on their back and a roof over their head) help teach kids how to be good citizens of their community or church which hopefully leads to them volunteering and giving in the future.
5. Teach the envelope system.
This age is a perfect time to start teaching kids about what to do with the money they earn. Dave recommends you have your kids divide their income across three key areas:
The Save envelope, at this age, should be used as a long-term Spend envelope. The excess savings could be used for something like a toy or video game to purchase in the future.
These purchases could take weeks or months to save for. The cool thing about this method is it teaches kids:
- Delayed gratification (something most adults need to be taught too!)
Here’s an example from Smart Kids Launchpad:
How To Teach Teens About Money
When I was 13 years old, I realized that if I wanted to buy something other than food or small items (which were provided by my parents), I had to work.
As a 13 year old, I was already mowing our yard which led me to start a lawn service. Initially, I’d mow a yard then my dad would help with the edging and weed-eating until I became comfortable with the equipment.
By the time I graduated high school, my lawn service had:
- A 6′ x 12′ trailer full of equipment including 2 John Deere tractors
- Over 30 satisfied customers 🙂
- Allowed me to hire friends and my brother on a part-time basis (learned about managing employees and payroll)
- Provided me enough income to buy what I wanted and begin the process of saving for the future
- Taught me how to run a business (#1 key)
Which leads me into our next tip:
6. Help them develop ways to make money.
It seems like every time I turn around my teen is out of school for something whether it be:
- fall break
- summer break
- Christmas break
- spring break
- Mardi Gras (we’re from Louisiana remember?)
If you don’t want your teen to constantly hound you for money then do them and yourself a favor – help them find a job.
You never know, they may realize that they don’t want to work for someone else which could help them become an entrepreneur.
7. Teach them contentment.
(I want to take a little more time discussing this one because I feel it’s an extremely important concept to grasp. I contemplated writing an entire post on contentment and I still may do so in the future.)
Fact: If you’re reading this and currently raising kids today then you’re at war – with contemporary culture.
Unfortunately, this war is raging for the hearts of your children. Once you realize what you’re up against, then you can put together a battle plan of defense.
The heart of your child is under attack by:
- constant marketing
- tremendous peer pressure
In the US, we live in one of the MOST discontented cultures in history.
Studies show, the more advertising you are exposed to, the more debt you are in. Read that line again until it sinks in.
Which tells us that there is a correlation between the amount of TV you watch and the amount of debt you have. We are constantly being sold more and more stuff!
As adults, we get this. But when it begins to affect our children, things can get really bad. Your child is assaulted with marketing from the time they learn to process information.
Don’t believe me? Take a look at some of the advertisements on any of the kid’s channels. The toy industry is out to make their profits which can lead to a deadly disease of contentment for our kids.
Here’s the deal. Companies know if they can plant the need or desire in a child’s mind early on, then they have employed the world’s best salesman to sell their product to Mom and Dad. Your kid!!
This makes our children relentless at always wanting “the next latest & greatest thing.”
For teens, it’s extremely important to teach them that if they think the next best thing is going to make them happy, then they’re going to be on the hedonic treadmill the rest of their lives.
Why? Because there’s ALWAYS an upgrade!
What can we do to win the discontentment war?
If you want to raise kids that are smart with money, teaching them to be content with what they have is crucial.
A content person can:
- avoid debt
- give more than someone that struggles with discontentment
1 Timothy 6:6 “Godliness with contentment is great gain.”
Contentment isn’t based on an amount or how nice your stuff is. It happens on the inside.
I told my wife recently that it’s amazing how content I am now in life. I don’t have a “doctor” house or large office building, but I have all that I need. Health and family.
Content people may not have the best of everything, but they make the best of everything.
What’s the point of wealth without health?
Steps to win the battle
1. Act fast
At the first sign of discontentment, immediately address it with your child. Remember, the motive is to save the heart of your child. Remind your kids that owning stuff is fine and dandy, but when your stuff owns you, it’s not cool.
2. Practice what you preach
Dave’s daughter, Rachel Cruze says, “More is caught than taught.” If you are part of the materialistic culture, then defeating the discontent enemy is going to be impossible. Your child is going to define what makes them happy based on the way you do.
3. Look for teachable moments
Identify & discuss with your kids discontentment in:
- One of your child’s friends
- One of your friends
- Family members
Ask your child their thoughts when they notice this type of behavior. You’ll be amazed at what your child can perceive no matter how young they are.
4. Show them blessings
Never forgo the opportunity to show your child how blessed they are no matter what they have or don’t have.
I’ll never forget the look of astonishment on my kids’ faces a few years ago when we provided a family in need a Thanksgiving meal.
As we got back in the car to leave, they said: “Dad, we looked in their house and they didn’t have any furniture & their mattresses were on the floor. They didn’t even have a front door!”
Words can’t express something like that. They have to see it to believe it.
Change Your Family Tree
Taking the time to teach your kids about money is going to take time and won’t be easy. Is anything in life easy?
If you want your children to know how to manage money and be content with what they have, taking the time now will be well worth it.