How soon should we start teaching kids about money? How young is too young? When and where is the right time? This was the hot topic of the day in the playground, of all places, as I and two of my friends watched our pre-schoolers accumulate dirt and grime while thoroughly enjoying themselves. One thing that we all agreed on: you take after your parents. Each family has a finance micro-culture. Kids derive their attitudes on money and practices in handling it from the tone set by the parents. In the socialization process of a child, this is one area where the family has the greatest influence and one opportunity we would all do well to make the most of.

This is our story, and these are our rules on money. We don’t agree on everything, but we do realize that when implemented properly, all of these rules can contribute to your kids’ financial literacy.

Nancy’s Story

In our group, the most vocal about money was Nancy. She’s African-American and grew up in a household that can be described as left out by society. These are households that have little but want much and have strong in faith in money and its importance as a measure of a successful life. She recounts how constantly unhappy they were with their financial status and were highly pessimistic about the future. She attributed low levels of income to lack of education and the fact that opportunities available to minorities (of any educational level) were not as good as those belonging to a more mainstream demographic. Nancy fought her way out of poverty by working through community college, sometimes taking on three jobs at a time. She married her college sweetheart whose life story had a similar arc as hers. Their older children are teens and tweens and they’ve been through many money battles.

Nancy’s Rules

Stop paying for things. Kids shouldn’t feel entitled to the latest smartphone, $300-dollar sneakers, or $200-dollar jeans. You may get rid of the constant whining by giving them what they want, but that’s only until the next object of desire comes along. Then the whining and crying start all over again. Even if you have the money to give them what they want, resist the urge. Instead, work out a plan for them to work for the things they desire. Babysitting duty, yard work, household chores, or even volunteer work at the church or your favourite charity. They’ll attach greater value to the things they acquire, having worked hard for it. They may also scale back on the things they want when they realize the effort needed to acquire them. When they do get what they want, it’s not because you paid for these things but because they worked for it. The supermarket is a school for money management. Shopping for groceries is often a child’s first spending experience. About a third of the average take-home pay is spent on grocery and household items. This rule only works if you’ve planned the trips properly and stick to the spending budget absolutely. You’ll need to demonstrate how to plan meals properly, avoid waste, and use leftovers efficiently. Explain how to plan purchases in advance and make unit-price comparisons. Show them how to check for value, quality, warranty, and other consumer concerns. Spending money can be fun and very productive when spending is well-planned. Unplanned spending, on the other hand, can result in 20-30%of our money being wasted. Kids will want to add unplanned items into the cart. This is the best time to engage them in a discussion on their spending decisions. Saying “no” to a child in a public place can be difficult, but resisting the parental urge to give in and buy the impulse of the moment is important in teaching children about family finances and how to manage money.

My Story

I was raised in a household where the American Dream was sacred. My father is of Irish descent, my mother a 3rd generation Italian American. Only my father worked full time, because there were five children in the family and a full-time parent was needed. We had enough to get by, but our parents wanted us to have more than they did and were willing to make the hard decisions needed to send us all through college so we could find higher-paying jobs. We were pushed to take this path and all of us ended up with huge student loans after graduation and spent the first ten years of our careers paying them back. Because of my upbringing, I developed a different set of priorities from Nancy’s.

My Rules



Don’t encourage unattainable goals. While “aiming for the stars” may make for good pep talk, overly optimistic parental aspirations might not be aligned with reality. It might also set up your child for disappointment later in life. If your child wants a big-ticket item, for example, know when to step in and say “think again.” This rule kicks in when children voice out the kind of life they want to lead when they grow up and the material things that go with the lifestyle. You’ll have to walk the fine line here, because the last thing you want to do is nip ambition in the bud. Perform due diligence and do the math before you bring the topic up again. At that point you have enough information to explain the investment it will take to realize the dream. This might even work with items like a video game console or a tablet with a data plan. How many lawns need to mowed, trash bins emptied, or dishes washed to come up with the amount needed to buy the items desired? The point is to always keep your child grounded in financial reality. Don’t fight human nature. Instead, use it to your advantage. Reward and punishment are the cornerstones of civil order, and society has built rules based on this “carrot and stick” paradigm because it works. In our household, we realized early on that while hugs, kisses and lots of praise for good behaviour were greatly appreciated, material reinforcements were most effective for accomplishing difficult tasks such as good grades. We took every request for new shoes and shirts as an opportunity to incentivize schoolwork. We also matched amounts they saved from their allowances, penny for penny, to help them meet the requirements for a targeted purchase (a skateboard or an electric guitar, for example).

Mary’s Story

In our opinion, Mary had the most challenging experience growing up. Her parents were high achievers. Both had graduate degrees and their combined earnings placed them way above the average American household. What made things difficult for Mary was that her parents considered conversations about money vulgar. They shielded their children from having to worry about money and tried to give them everything they could ever want. Worse, kids weren’t allowed to handle money. Anything they asked would be bought for them, their meals at the school cafeteria were paid for in advance, and they weren’t allowed to join activities (such as weekends at the mall with friends) where they’d need to have cash. Mary couldn’t quite understand why. She only remembers her mother’s constant admonition that money was the “root of all evil.” They were obviously richer than most of her schoolmates, but she never handled money until she was in college. By then it was too late. Her generous monthly stipend was often gone in a week, and she had to ask her parents to replenish her account. She got over that difficult period in her life and vowed that when she got married, her kids will be smart about money from the get go.

Mary’s Rules



As soon as they can count, introduce children to money. In fact, money is a good way to teach children addition and subtraction. Don’t wait for them to learn this in school. Set up activities that will teach them how to “buy” things such as cookies, and make sure that the amounts exchanged are as close as possible to real life prices. Give kids an allowance. It helps them manage money on their own. Keep the amounts appropriate to their age. You’ll also have keep yourself updated on how they’re spending the money. Calibrate the amounts properly so that they’ll have enough left to save. Encourage saving over spending. Make sure to give them their allowance in denominations that will encourage them to set aside a portion of the money. Instead of a 5-dollar bill, for example, give them five 1-dollar bills. Use this opportunity to teach them the value of saving over spending. For example, saving $5 a week at 6 percent interest compounded quarterly will total about $266 after a year, $1,503 after 5 years, and $3,527 after 10 years. Allow young people to make spending decisions. Wise or wasteful, they will learn from their spending choices. You can then initiate an open discussion of spending pros and cons before more spending takes place. Encourage them to use common sense when buying. This means doing research before making major purchases, waiting for the right time to buy, and using the “spending-by-choice” technique. This technique involves selecting at least three other things the money could be spent on setting aside money for one of the items, and then making a choice of which item to purchase.

As a group, there are four rules that we all agreed on, things that we felt are necessary to equip young people with the financial savvy necessary to survive in the real world.

Common Rules

Introduce children to financial institutions at the earliest possible time. Help them open and manage a savings account with a bank or a credit union as soon as they’re old enough. They’ll need to understand the role that banks play in their personal lives. You’ll also want to educate them on the concepts of credit, interest, mortgage and insurance. Bump up the complexity of discussions as they get older, but it’s never too early to start. Make record-keeping a habit. Records of money saved, invested, or spent is another important skill young people must learn. You can use 12 envelopes, for example, 1 for each month with a larger envelope to hold all the envelopes for the year. Encourage children to place receipts from all purchases or bank deposit slips in the envelopes and keep notes on what they do with their money. Spreadsheets are a good way of keeping notes. As soon as the child is literate enough to handle a PC (that age is getting younger these days) introduce them to templates that will help them keep track of budgets, expenses, and savings. Schedule regular family finance meetings. This will allow the children to present their financial records and explain their decisions. Make these meetings as democratic as possible so that everyone feels free to comment or ask questions about each other’s finances. This is also the perfect opportunity for you to give them a picture of your family’s finances. Some parents feel uncomfortable sharing this information with their children but we feel that it is important for children to be in the loop so they can adjust expectations accordingly. Be a good role model. Children pay attention to what you say or do. You’re the first authority in a child’s life and parental activities provide guidelines that offspring tend instinctively to emulate. Repetition and oral reinforcement can make good financial behaviour an ingrained habit, but parents must be careful to never send mixed messages. Walk the talk. If, for example, you keep repeating the mantra that people should live within their means but indebt yourself through purchases you can’t afford, this won’t go undetected by your children.

There a hundred other stories out there, and possibly a hundred other rules for teaching children about money. What’s yours?

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