How do you teach your kids about money?

**zakity** · 01-28-2008, 01:09 PM

We started them out by them never watching anything with commercials. They watched PBS or tapes/DVD's the first 7 or so years. When they started using the computer, they had games (educational) and the only website they had access to was PBSkids.com (it was their homepage). It helped to eliminate the "I want" thing.

When they were really little and they were "helping" me with yard work, I would pay them a quarter an hour. They earned their first swords that way. Those cheap little dollar store swords lasted all summer long because they were so careful with them. They had worked hard for the money and they didn't want to break them. This also brought up an issue because I didn't always have quarters to pay them with.

When they started doing chores regularly, we did a chip system using poker chips. Red are "negachips" and they get those for bad behavoir, not doing chores, if we do one of their chores, etc. White are "nice chips". They are for them to reward each other for someone doing nice things for them like helping each other out with a chore, filling up the other's water bottles when we are going somewhere, going above and beyond to help another one out, etc. The rest of the colors (we have several different sets) are just "chore chips". They get one for each chore except a few (like the bathroom-it is worth four chips-tub, sink/counter, toilet, and the floor). Most of their chores are quick, 5-minute chores.

Each chore chip is worth $0.20. Each white chip is worth $0.05. The red chips negates four white chips or one chore chip. They have the opportunity to make $13 each a month for just the regular daily and weekly chores. That doesn't count the white chips or the "extra" chores that come up throughout the month.

The oldest saves his and the twins spend theirs. If there is something they really want, they will save up their money. The oldest saved so much money up that we had to designate a color as $5 chips because his bucket was full.

Oh yeah... The chip buckets... Their buckets are 24 oz sour cream tubs that I cut slits in the top (so it was easy to put chips in quickly and easy to get into to count). The buckets that hold the "unused" chips are a large plastic Miracle Whip container, an old container that held a specialy rice, and a container that I had bought at the dollar store for another reason and then didn't wind up using it. The poker chips were bought at the dollar store because we thought we would learn how to play poker several times and then lost them each time and had to go buy more. One set was bought to use as "counters" when they were little for homeschooling.

**disneysteve** · 01-28-2008, 03:10 PM

We have done many things. Really, it comes down to leading by example and teaching in the course of daily life. Take her to the supermarket. Explain why we buy one brand over another. Explain why the store brand is cheaper than the national brand. Explain how coupons work. Explain unit pricing.

My daughter has been balancing our family checkbook since she was about 9. She's 12 now. It started as an arithmetic skill practive, but also presented an opportunity to teach her about all the costs involved in running the household and life in general.

A couple of years ago, I sat down with her at the computer and used some online calculators to teach her about savings and interest and how compound interest works in your favor when you are saving and how it works against you when you fail to pay your credit card balance in full each month. We've also had lessons about investments, stocks, bonds, mutual funds, etc.

We have paid her allowance for many years and I set up a "bank of Dad" account that paid very generous interest so she could see how compounding actually worked. I gradually cut back the rate as the balance grew and her understanding grew.

Again, the main thing is involving her in purchase decisions, comparison shopping, etc.

**atomicrc11** · 01-28-2008, 03:22 PM

I remember that when I was in 5th grade, in our social studies class we learned how to fill out checks, balance a check book and whatnot. I'm sure this has been cut from the budget by now with all the teaching for the tests they have, but I feel it was a good way to learn. It was like a mini-economy was started in the class and we had to buy things with a weekly salary we got. It was a game that way played every Friday. From then on I was good with money. I know I didn't learn from my parents because we share very different views on how money should be spend. According to my parents at my age I shouldn't be putting anything away for retirement.

**aida2003** · 01-29-2008, 04:50 AM

Originally posted by disneysteve View Post

We have done many things. Really, it comes down to leading by example and teaching in the course of daily life. Take her to the supermarket. Explain why we buy one brand over another. Explain why the store brand is cheaper than the national brand. Explain how coupons work. Explain unit pricing.

My daughter has been balancing our family checkbook since she was about 9. She's 12 now. It started as an arithmetic skill practive, but also presented an opportunity to teach her about all the costs involved in running the household and life in general.

A couple of years ago, I sat down with her at the computer and used some online calculators to teach her about savings and interest and how compound interest works in your favor when you are saving and how it works against you when you fail to pay your credit card balance in full each month. We've also had lessons about investments, stocks, bonds, mutual funds, etc.

We have paid her allowance for many years and I set up a "bank of Dad" account that paid very generous interest so she could see how compounding actually worked. I gradually cut back the rate as the balance grew and her understanding grew.

Again, the main thing is involving her in purchase decisions, comparison shopping, etc.

Very good and specific points.
Could you also share the following:
- How do you explain to a child the difference between the generic and nat'l brand? At what age did you do that? I have an idea but it might be a bit too adultish

- How did she grasp the concepts of investments and interest? Did she stay interested or she's happy enough with her allowance thing?

What I'm not sure is letting children see their parents checkbook. My only concern would be if the continue seeing a running balance of above $1,000 (or more), they'll think they can whine for some little splurging now and then

. Maybe it's better to have one checking account for expenses and another for savings/investments, so that kids don't get a wrong idea that their parent are really rich...?

Oh, can you provide more detail about the dad's bank? I thought about this sometime ago, but I'd need to do some more thorough thinking before implementing anything. When did you start this one?

Thanks.

**aida2003** · 01-29-2008, 04:57 AM

Also, do any of you invest in your children name? Like Coca-Cola, Disney, etc. stocks? What about a savings account in a child's name at a bank/CU?

I was just wondering whether it's all worth it with tax changes regarding Kiddie tax

and whether it causes more complications to parents' tax returns down the road. Maybe just invest/save in parents' name, but tell kids that it's really theirs??

**disneysteve** · 01-29-2008, 07:42 AM

Originally posted by aida2003 View Post

How do you explain to a child the difference between the generic and nat'l brand? At what age did you do that?

I'm not sure exactly when we started this, but it probably wasn't a single event. Still today, we have discussions about this. You need to do it in an age appropriate way based on the kid. Explain that several different companies make versions of the same product and they don't all charge the same price. Also, that the national brands spend a lot of money for advertising like the tv ads they see and the generics don't do that. Also explain that sometimes the generic and the brand are made by the exact same company and just marketed differently.

One thing that has helped over the years is that on various trips, we've taken some factory tours and learned how the one factory makes products sold under several brand names, including store brands. Seeing that it all comes off the same assembly line helps reinforce the lesson.

At the same time, we also discuss why we sometimes choose the more costly brand name. For example, Kelloggs Pop-Tarts have no trans fat. Wegman's store brand version does. Sometimes the more expensive brand is more expensive because it is better quality and healthier, so we do a lot of label reading in the supermarket.

How did she grasp the concepts of investments and interest? Did she stay interested or she's happy enough with her allowance thing?

She grasped interest just fine. We haven't really moved along with investments yet, which is probably my fault for not staying on the topic. She has asked a few times when we've listened to the business report or she sees me reading MONEY or some other finance mag.

What I'm not sure is letting children see their parents checkbook.
so that kids don't get a wrong idea that their parent are really rich...?

I think it is important for her to see both sides of the equation. How much money comes in and how much money goes out and where does it go. If she sees that I made a $3,000 deposit, she may think that's a ton of money, but then she sees that we made a $1,400 mortgage payment, a $500 insurance payment, a $200 gas and electric bill payment, a $40 water bill payment, etc. Before you know it, that $3,000 has all been spent.

Oh, can you provide more detail about the dad's bank?

There is actually a book called "The First National Bank of Dad" that you can probably find at your library. What I did was very basic. I printed up a "bank record" on the computer. I paid her the allowance in cash and left it up to her to decide how much to put in the "bank." But the bank paid 5% interest each month (not each year). I did that so that the interest would grow fast enough for her to see the benefit. As the balance built up and paying the interest got a little more costly for Dad, I gradually cut back the rate as the lesson wasn't needed anymore, though it remains higher than a real bank.

**aida2003** · 01-29-2008, 07:55 AM

Originally posted by disneysteve View Post

One thing that has helped over the years is that on various trips, we've taken some factory tours and learned how the one factory makes products sold under several brand names, including store brands. Seeing that it all comes off the same assembly line helps reinforce the lesson.

Thanks, Steve, for sharing your experience.

I got intrigued by factory tours. What factories show all this stuff? When kids are older and up to longer road trips, such excursions would be worth the time spending, IMO.

**disneysteve** · 01-29-2008, 08:03 AM

We love factory tours, both food and other products. We've done tours at Herr's (chips and snacks), Anderson pretzels, Anheuser Busch, Cabot Cheese, maple sugar plant, Crayola, Ben and Jerry's, Mission tortillas, Boudin bakery, Ocean Spray, Hershey, Bacardi and more. It is fun to see how things are made. We also love watching "How It's Made" and "Some Assembly Required" on Discovery.

**aida2003** · 01-29-2008, 08:04 AM

Zakity: your pay/reward system reminds me of the cheapest American family (the Economides) who described their system in their book (can't recall it's name). I liked theirs so I made copies and putting in my file "Financial smarts for kids".

I'm going to copy this thread also, so I don't forget some good points people made here.

**PrincessPerky** · 01-29-2008, 08:30 AM

there was an earlier post on this (much earlier) I wrote:

my rules of thumb

I just have a couple general rules of thumb...mostly ones I have formulated after being on Saving advice for 2 years...some from my childhood.

1.Start talking now and never stop (Yes if you have a one day old, or even just pregnant, I DO mean you)

2. Admit your mistakes, and try to talk about how to avoid them with your kids. Buyers remorse, share with the kid, discuss return options or donations. Cutting cable to pay off debt, talk about how you got in it (medical, stupidity, job loss, whatever, TALK!)

3. Enforce certain habits just as you would brushing teeth, from saving 20%(10 long term, 10 retirement) to donations, to always checking for a sale or coupon...if you want a habit to stick help them practice (and lots of that practice)

4. let em try out those wings...once you have reduced the available income by 30% (give or take, saving donation ect)..let em buy the junky trinket or name brand shoes..it is their money, not yours. Mention how soon you think it will break, or how much cheaper the same shoe with no swoosh is, but let them fall, and be there to pick em up. Much better to do it now than after college when the available fall is soooo much greater (there is a reason we learn to walk when short and in diapers! cushioned, and not far to fall, money isn't so different)

I do not give an allowance currently....but my kids are swimming in money, every holiday from Easter to valentines to Christmas comes with a gift of cash from my husbands family!

I believe after they are older I will consider extra out of norm chores for extra cash..but not when all they are capable of is the basics. (take care of your own room and clean up after yourself) Or I may just do the clothing type allowance.... letting them use extras for other desires if they can make it..the only trouble is I would have to wait till grandma stops buying them all their clothes!

I also often have conversations while at the store, the most recent was over a playground. (the kind you buy for your backyard) My son said "I don't have enough money for that"...
Me- no prolly not....
him-"Daddy doesn't even have enough money for that"...
Me- well.....
him"Daddy does have the money, but Daddy has to buy food and pay bills instead of buying that."
me "Exactly, the actual amount availible to splurge is what matters, and no we don't have that much to splurge."

Obviously this was not the first conversation regarding splurging....

**disneysteve** · 01-29-2008, 08:32 AM

"Admit your mistakes, and try to talk about how to avoid them with your kids. Buyers remorse, share with the kid, discuss return options or donations. Cutting cable to pay off debt, talk about how you got in it (medical, stupidity, job loss, whatever, TALK!)"

That's a great point. Don't just show what you do now. Show what you've done wrong in the past, why it was wrong, how you fixed it and the end result. If you bought something that looked great on tv and was lousy when you actually got it home, that's an important lesson.

**moneybags** · 01-29-2008, 09:29 AM

My only concern would be if the continue seeing a running balance of above $1,000 (or more), they'll think they can whine for some little splurging now and then . Maybe it's better to have one checking account for expenses and another for savings/investments, so that kids don't get a wrong idea that their parent are really rich...?

I don't believe in hiding the income part of our equation. We have discussed it with our kids. With that comes the conversation that, yes, we could afford to buy you a North Face jacket every year, but that is not what we choose to do with our money. We stress saving for the future - retirement & college specifically. They have never whined for us to buy them anything.

**aida2003** · 01-29-2008, 11:26 AM

thanks so much for sharing your knowledge!!

PrincessPerky: thank you for the link to more advice about money and kids. Which reminds me, when I have a bit more time on my hands (at work

), I should browse a bit more and see what people talked about in the past.

**PrincessPerky** · 07-29-2008, 10:22 AM

This past year we discovered a new skill/lesson. my son joined scouts and he has to pay dues of 50 cents a week (or 1.50 a month) since he doesn't have a steady income, last year I taught him to calculate all he would need till summer and set it aside.

This year I am torn between an extra chore and a loan. (he is low on money and the next holiday is not till Halloween)

He is old enough to do more around the house, but I still prefer the open do all you can when needed. a loan on the other hand might teach him how much better it is to have money than borrow.....

How do you teach your kids about money?