Five Ways to Teach Your Kids About Money

Occasionally a client that I work with will introduce me to their kids.  I welcome these meetings, and find joy in being part of helping these kids to get started down the right path.

Often times these kids are actually young adults, earning their own money, and preparing for the years ahead when they leave the nest.  But you can start conversations with your kids about money much earlier in their life. The best time to begin teaching kids about money is as soon as they are old enough to understand what it is.  The following ideas can help you start the conversation around handling money (before your kids decide they know more than you do!):

Pay your kids per job instead of giving them an “allowance”.  

Paying your kids per job, or chore, allows you to differentiate how much a child earns per job.  Paying your kids this way teaches your child the two ways they can move the economic needle in their favor; they can do more work, or they can do the work that earns them more money.  Consider having a list of chores to do with varying pay based on how helpful the chore is to you, the parent. Then allow the kids to have some choice in which chores they will do.

Divide their income into three “buckets”.

As soon as kids are able to earn money for simple chores, they should learn not to spend everything they earn.  When our kids receive their pay, we make them divide their income into three buckets (Ziplock bags, actually): spend, save, and give.  They are empowered to spend the “spend bucket” on anything they would like, but a portion of their income is saved for the future, and a portion goes towards being generous to others.  


Help your kids make and sell something.

This could be as simple as the old fashioned lemonade stand, but it could also be vegetables from a garden, or home made crafts.  Entrepreneurship can be a rewarding career choice, and a path to financial well-being. It’s good for kids to learn that it’s possible to create their own income.  It's also good for them to see that it doesn’t always work. Days when lemonade sales are low are good opportunities to solve problems and learn persistence. You can help them brainstorm ways to get better results, and try again.

Borrow money from your kids and pay them interest.  Have them borrow money from you and pay you interest.

Some might find this idea a little odd, but there aren't many opportunities for kids to start learning about the consequences of debt.  Realistically, this simple math lesson will be more useful than much of the complicated math they will learn in school.

There was a day when we ordered pizza to be delivered to our house, only to realize we didn’t have many small bills by which to give the driver a tip.  I used the opportunity to teach our kids about borrowing and lending money. I told them we would borrow a few dollars from their save buckets, but would return the money the next day.  We would add an additional quarter as payment for using their money. They thought this was a pretty good deal, and I was happy to spend 75 cents to give teach them a lesson about money.

Share some of your financial decisions with your kids.

Many parents view financial matters as private conversations.  There’s definitely some financial information that kids don’t need to know, but there are also opportunities to share some of your decisions with them so they can learn.  If you’re delaying a purchase so you can save money and avoid debt, that’s an excellent opportunity to help kids see good financial decisions in action.

This could be as simple as explaining why you chose the $1 bottle of water at the gas station instead of the $2 bottle.  Or better yet, why you filled a water bottle at home so you didn’t need to spend extra money on water at the gas station.

Most of us would have benefited from a more hands on approach to learning about money when we were young.  Teaching kids about money can be fun, and offer opportunities to spend quality time together. When your kids are able to be financially independent as adults someday, the extra effort you put forth in their youth will be well worth it.

An Alternative to Self-control

“I count him braver who overcomes his desires than who conquers his enemies; for the hardest victory is over self.”

Aristotle

In the book Essentialism, author Greg McKeown observed that people who appear to be very disciplined often times are not.  Rather than having the willpower to consistently make the right decisions, they have the humility to realize that they don’t.  Armed with this self-awareness, they organize their world in such a way that they are no longer in a position to make the wrong decision.  What looks to others like willpower or discipline is actually the absence of an alternative choice.

Reading about this was incredibly freeing for me.  While I thought of myself as a disciplined person, I had been losing the weight loss battle for the better part of five years.  Undoing the consequences of poor nutrition wasn’t difficult in the past. However, my body has become less forgiving in this area than it was when I was younger.  I asked myself, “What if this is true of me? What if I’m not as disciplined as I think I am? Is this the strategy I need to pursue?”

This was a difficult thought process for me to digest.  I tend to be optimistic, so admitting that I don’t have the capacity to do something is against my nature.  But the results don’t lie, and the results were telling me I didn’t have the ability to manufacture the will power necessary to win this battle.  Admitting this felt wrong at first, but once I acknowledged it as truth I was able to ask myself what I should do in response. As Greg suggested, I needed to eliminate the choice of making the wrong decision.  

On the nutrition front, I decided on a few good options that I made available for breakfast and lunch.  While there isn’t much variety in my diet, making good decisions becomes far easier when you’ve greatly narrowed the options in advance.  Our family dinners are usually pretty healthy, so it’s easy to stay on course for that meal. On the exercise front, I decided that the best way for me to simplify the decision making was for me to exercise every single day.  I tried exercising four days a week in the past, but is was easy to miss a day with the intention of making up the workout later in the week. When your plan is to exercise every day, there is no more choosing. When the alarm goes off, I go to the gym.  I mix in light days so I don’t burn out, but I keep the routine the same. If something truly out of the ordinary causes me to miss a day, I don’t feel bad about it. I go so often that a rare day off won’t disrupt my progress. But then it’s back to the gym the next morning, and every morning after that.

While my experience with this concept has worked great in the health arena, it can be applied to any area of your life where discipline or self-control is required.  For example, if you’ve routinely failed to stick to a financial budget, you could use this same process. Ask yourself, “How can I eliminate the decision to spend less money?”.  Cutting up credit cards may be a necessary start, or setting up an automatic savings plan to an account that is less accessible than the account you normally spend out of. Some people benefit from using physical cash as a means to create a finite amount of money to spend.  Whatever the strategy, the concept is the same. Create a system that eliminates the ability to make the wrong decision.

The best news of all it that you don’t need to trick yourself forever.  Our lives are largely made up of habits and routines. Once you’ve tricked yourself into discipline for long enough, the decision you initially forced upon yourself will soon be your normal mode of operation.  When you arrive at this new existence, it requires far less discipline or will power to continue the habit. We begin to operate the way we desire automatically, simply because we are used to it.

If this idea sounds interesting to you, spend some time reflecting on a part of your life where you would like more self-control.  Ask yourself if a system that eliminates the bad decision would work better than trying to be disciplined. What would it look like for the scenario you’ve thought of?  I hope this concept brings the same amount of value to you as it has to me. For a deeper dive on this topic, I highly recommend reading Essentialism by Greg McKeown.



To your well-being,

Brian