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Kids and Money: 5 Tips for Raising a Smart Spender

Kids and Money: 5 Tips for Raising a Smart Spender

Teaching children the value of money is an important part of parenting. To help jumpstart your financial lesson planning, we’ve rounded up five smart tips from Circle of Moms members about teaching kids money lessons.

1. Needs vs. Wants

The ability to distinguish between “needs” and “wants” is a fundamental money management skill that will help your children throughout life. As Cherrill M. suggested, your child can make a list of all her needs and wants (or together you can create a list for the whole family), and then explain why certain items belongs in the two different categories: “We sat them all down and got them to write a list of their needs, then went through the list with them and explained the differences between needs and wants. They then went through their lists and crossed off any wants and put them on a new list. This lesson helped, in that now when they come to me for something, I ask if it’s a need or want and ask them to explain why they need or want it, and when. Needs we pay for and wants they pay for or they go on the Christmas and Birthday list.”

2. Allowance

Children need to learn first-hand that a finite amount of money is at their disposable. Parents and experts agree that giving a weekly or monthly allowance to children can teach them the value of money and the importance of saving.


Varying opinions exist, however, on the practice of linking allowances to chores. Some moms, like Iva F., advocate tying allowance to the child’s performance of household chores to teach children that money must be earned: “My kids get an allowance equal to their age ... I simply set the kids' chores as well as their rewards (including allowance) and let them loose. I’m no longer the bad guy if they don't get an allowance because them getting one is based completely on their efforts.”

Others, including Kristy H., contend that both allowance and chores should be doled out but not linked: “Chores are done because one is part of a family and everyone works together.” Still other parents suggest striking a middle ground, requiring some daily chores for kids without pay, but giving an allowance for completing extra chores. As Judy H. shares: “I think allowance is an OK thing for chores done beyond the daily chores.”

3. Save, Give, Spend

To teach children the different uses of money, several Circle of Moms members suggest having children divide their allowance into three envelopes: one portion to be saved, a second portion to be donated to charity, and third to be spent that week. Karen W. found this “save, give and spend” method was very successful with her daughter: “She gets $5 a week — $2 to saving, $2 to spending, $1 to donations (she has 3 marked envelopes). I’ve found that the allowance has been huge in teaching her the value of her work, how to delay gratification, and even borrowing/interest.” Karen also suggests paying a child's allowance in singles so they can be more easily parcelled out into the three categories.

4. Monetary Gifts

A child's allowance only teaches delayed gratification if the child knows her money supply is limited. As a result, Circle of Moms members recommend parents be firm in limiting gifts of money to special occasions such as birthday or holidays.

5. Children's Savings Accounts

Delayed gratification isn’t the only thrill children can experience when learning about money. Opening a savings account for your child can help her feel the rewards of saving and investing. Seeing an account balance climb and watching the interest payments add up can be surpisingly exciting for a child! Julie H. recalls: “I got a savings account when I was in elementary school. My mom always encouraged me to make deposits and keep track of it; and I was allowed to make small withdrawals for special things.”

Looking for more money-related parenting tips?

From articles on extreme coupon tactic every mom can use to conversations about money-saving tips and college savings accounts, Circle of Moms has tons of great advice from your fellow moms on the financial challenges of parenting.

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