Teaching Kids About Money

Times are tough right now for a lot of people. My first grader recently asked me about the state of our economy. He remembers studying the Great Depression last year, and he was worried! This is a perfect time to talk to our kids about money.

Kids and Tithing

When a child is old enough to understand that money is not a toy or a food, it’s time to start teaching them how to handle it. My husband and I want our kids to learn to give ten percent of their money to the Lord first. Our children earn spending money and tithe money through their chores. We have always paid ten cents a chore, because it is easy for the kids to figure the tithe.

It is helpful for our young children to physically see what ten percent looks like. As their tithe money accumulates, each child is allowed to choose where it will go: either to the church, to the poor, or to missions. We explain to them some of the ways that their money might be used….to pay our pastor’s salary, to buy food for the poor or perhaps to send children’s Bibles to Africa. My heart to give increases when I have a vision for how my money will be used, and the same is true for my kids.

Kids and Investing

We also encourage our kids to save some of their money for the future. Each of them invested $25 last year in mutual funds. We even let them choose how much risk they wanted to take. We were surprised to find out that they were more conservative than we expected! When our children started investing, it was exciting to talk about the companies they recognized in their funds. Our oldest loves to say, “When I drive by Chevron and see someone in a Toyota drinking a Pepsi I say ‘Ka-ching!’”

Those are 3 of his companies!

Our middle boys both own shares of Walmart through their mutual funds. When we shop there, they like to think it is like paying themselves! Of course, we explain to them that their share of ownership in these companies is very tiny, but they are motivated to learn about the companies they “own”. They like to watch the stock ticker on CNBC, and our oldest son is zealous to read the annual reports for his funds.

After one year we offered to provide a full match if our children would double their investment and add another $25. They all agreed. This helps them begin a habit of investing and teaches the principle of investing as much as you can when there is a match provided. We plan to continue matching their investments. They are each encouraged to set a long term goal such as college savings or their first car, and to continue adding to their investment as they are able.

Kids and Saving

Saving is different than investing. Investing is done for long term goals which won’t be realized for several years. Saving is more short-term. Kids should be taught to do both. It is important for kids to make specific savings goals. Children aren’t motivated to save “for a rainy day”. They need to plan what they are saving for so that they can stick to their goals.

Kids and Spending

Our children are also allowed to spend their money, of course. Sometimes they don’t have enough to buy what they want. We have always taught them to save for the things they want to buy, but our 6 and 8 year old boys have found an innovative way to apply our teaching.

They realized they can reach their financial goals faster by pooling their money. This has worked so well for them that they frequently make purchases together. They are learning to budget, to share and to make compromises.
It is hard when our children choose to spend all their money long before they are due to get more. I don’t like to see them waste money, and I hate knowing that they might regret their purchases. Nevertheless, it is important to allow them to fail when the stakes are low so that they won’t fall on their face as adults when the damage can be more than mere disappointment.

From time to time our children want to spend their money on each other. For some reason, something inside me wants to say, “No! Save your money or you won’t have it later when you see something YOU want!” I fight the urge to say those words, though. It is godly and biblical for them to want to bless others with their money. It feels good to give gifts, and I don’t want to rob them of that blessing. In fact, the Lord is working a greater spirit of generosity in me through their example.

These two boys both collect stuffed birds. The six year old wanted to add to his collection recently, but he is out of money. Our three year old offered, “Mommy, I’ll buy a bird for Knox if Knox will buy a bird for Colin!” Everyone thought this was a wonderful plan, and two boys enjoyed giving and two enjoyed receiving.

We have used the Money Savvy Pig in teaching our kids these four goals. It has four slots on the top, for tithing, investing, spending and saving. Each chamber exits through a different foot, so kids can empty one part of the bank without dumping it all.