Free-Range and Teaching Kids about Money

Hey fsbifshfda
Readers — The folks at financial T. Rowe Price  asked if they could sponsor a post and I said sure —  provided they write about something Free-Range. Stuart Ritter, a financial planner there, obliged and voila — some basic help with a topic I find hard to talk about with my own kids (not to mention my own soul): How to manage money.  – L

To All Free Range Parents – Teach Kids Financial Literacy or They Won’t Leave the Ranch 

Here is a scary thought: according to a survey released by T. Rowe Price earlier this year, almost a quarter of parents expect they will financially support their children after they are married. In the midst of raising Free Range Kids, one key principle that parents may miss is teaching kids how to be financially independent. This doesn’t have to be as hard as you think. If parents simply lead by example while their children are young, they can better teach them the concepts and terms that will lead them to financial independence at the right age.

With today’s technology in the form of credit cards, shopping apps, and online bill paying, kids might not fully understand where money comes from and how it should be managed. Take advantage of everyday teachable moments, like shopping for new school clothes, to explain how money is earned, spent, saved for things you’ll need later, and the prioritizing you did to decide how much money is used for what. When ordering gifts online, explain how the payment process works to help them connect virtual purchases with real money your family earned. If you notice the cost of a movie ticket went up since the last time you were there, mention it as an example of inflation and help them understand that prices generally rise over time. Taking a few moments to explain financial concepts in everyday situations can help kids develop a greater understanding of smart money management.

Allowance is another opportunity to let kids flex their independence muscle. When parents of kids ages 8-14 were surveyed in T. Rowe Price’s 2013 Parents, Kids and Money survey, 84% said they have some say in how their children spend their allowance. By sharing financial concepts little by little as kids grow, you can build their financial literacy so that when they reach the age of having their own allowance, or earning their own money through babysitting and summer jobs, they can make smarter choices. Here is one way to tackle it:

  • At age five, kids can begin to understand setting goals, visiting the bank, writing checks, and what it means to make trade-offs.
  • At age 10, the conversation can move to earning interest, loans, and paying taxes.
  • And at age 15, more complex concepts can be introduced, such as asset allocation, investing, and diversification.

Throughout the years, demonstrate the value of money through your own actions and make sure kids know their options when it comes to their own money: spend it today or save it for something tomorrow.

Financial literacy is an important part of raising independent kids. By taking the time to bring finances into everyday conversation, parents can be less involved as the children grow. To help parents and kids explore these and other money concepts, T. Rowe Price launched, an online hub providing free games for kids and tips for parents focused on goal setting, spending versus saving, inflation, asset allocation, and diversification. Helping kids look past the piggy bank and begin thinking about money at an early age will prepare them for a financially successful future. – S.R.

Lenore here again: So I went to the site and I found some helpful advice, especially this: When kids are simply told to “save money,” it can come across as an abstract idea. Helping your kids set specific goals not only provides real-life incentives, but also gives them the tools they need to make smarter spending decisions. The site also talks about trying to teach your kids the difference between ‘want” and “need.” It’s a lesson I forget too often myself. – L.

45 Responses to Free-Range and Teaching Kids about Money

  1. K September 13, 2013 at 10:00 am #

    While I like the article and completely agree with teaching kids financial literacy, I wanted to point out that the first sentence of this article is a scare tactic. It even has the word “scary” in it! I might be mistaken, but I thought Free-Range Kids tried to stay away from scare tactics. Just an interesting editorial choice, but it also highlights to me how culturally ingrained the “Scare and sell” marketing strategy is when talking about kids.

    To its credit, the rest of the article is well-written, non-alarmist, and full of good advice.

  2. Linda Wightman September 13, 2013 at 10:11 am #

    They’re right that with today’s technology “kids might not fully understand where money comes from and how it should be managed.” It’s much worse than it was when my kids were little, and even then, in response to a discussion about poverty, my young daughter asked, “Why don’t poor people just get money out of the wall [ATM] like we do?”

    One glaring omission in the article is how to set up and stick to a budget. You would not believe how many people find this a foreign concept! Or maybe you would, knowing the debt loads people are carrying these days.

    One day my husband brought home a bag of quarters and used them to represent (proportionally) his paycheck. Then he piled them into stacks to represent how the money was spent: so many quarters for taxes, so many for food, so many for clothing, etc. It was an eye-opening exercise for all of us, and gave the kids a gut-level understanding of income and expenses.

  3. Richard September 13, 2013 at 10:15 am #

    This is also a grand opportunity to be honest with your kids. Many parents find it difficult to talk to their kids and admit their own failures (I know that I did). This makes it seem as if we’ve always done the right things, never screwed up, never had it “hard”, and in many ways I believe makes it difficult for kids to talk to us when they have problems, because they’re admitting to be “less than” us.

    If you were doing reasonably well when you had kids, but worked hard to get there, make sure that they know that. Maybe then they won’t expect to leave the nest and not take a dip in their living conditions – they may be more willing to take that adventurous low-paying starter job somewhere.

    They may even realize that spending money they don’t have yet to live like their parents do 20-30 years after they left their own nests is just silly.

    Maybe not – but its worth a try.

  4. Linda Wightman September 13, 2013 at 10:18 am #

    Amen, Richard. When and why people lost the idea that you start small and work your way up is beyond me, though I can see well enough that it has happened.

  5. lollipoplover September 13, 2013 at 10:21 am #

    “With today’s technology in the form of credit cards, shopping apps, and online bill paying, kids might not fully understand where money comes from and how it should be managed.”

    One of my personal pet peeves is school cafeterias switching to online payments to make it “easier” to pay for school lunches. Schools discourage kids from using real money and just use their name to look up an account number (which is paid for by credit card). Kids bringing in real money is frowned upon (“they could lose it”) but I still send mine in with real coins and dollars. I want them to see what is actually included in the lunch price (not the flashy extras like fruit roll-ups and ice cream) and practice basic transactions without computerized accounts.

  6. Papilio September 13, 2013 at 10:26 am #

    “almost a quarter of parents expect they will financially support their children after they are married

    And I wondered, how old are Americans when they marry (will they still be in college?), what are house prices like, what are payments to beginning employees like, how much do young people spend on paying off college debts…?
    Here banks offer attractive financial constructions for parents to help their grown-up children buy their first house, so although not ideal, it doesn’t sound THAT weird to me.

    “The site also talks about trying to teach your kids the difference between “want” and “need.” It’s a lesson I forget too often myself.”

    Your dollarstore addiction? 🙂

  7. Captain America September 13, 2013 at 10:43 am #

    This is good.

    I’m on the board of directors of my credit union and we stress financial literacy and run a financial literacy program for kids. It’s good for everybody, but we note that more specific help is difficult to offer our members, since it tends to come with legal liability.

    I’m an old Syliva Porter fan and she, along with my high school economics teacher, had a big impact on making me a Thrifty Captain America.

  8. Captain America September 13, 2013 at 10:44 am #

    One thing worth noting: recently the press noted a BIG economic impact on American life—the huge amount of student debt.

    This immediately impacts normal family-formation, childbearing and childbearing rates, the rate of homeownership, etc. Strong negative impact on the economy.

  9. Mike September 13, 2013 at 11:17 am #

    It’s nice to do this for kids, but given a lot of people’s finances, can we do this sort of education for adults too? I know five-year-olds who handle money better than people in their 40’s.

  10. Christina September 13, 2013 at 11:22 am #

    My six years old boys each get an allowance of $6/week. They put $3 of it into their piggy banks and $3 into their wallets. After about three weeks, they got very savvy about stretching that $3 until the next allowance. Some weeks they even have money left over. They get a huge kick when they realize that adding their allowance to the money they didn’t spend means they have MORE money!

    When the piggy banks are full, we go to our credit union and 1/2 of the money goes into their bank accounts and they can take the other 1/2 to buy themselves the sort of toy or whatever that they would usually have to wait for birthday or xmas to get as a gift.

    If they blow through their allowance or just want more money, I have a list of projects and chores they can do to earn some extra cash.

    So far, this system seems to be working for us. I am pleased to see they are as excited about watching the piggy banks get full as they are about buying popsicles for themselves.

  11. Brooks September 13, 2013 at 11:23 am #

    Just today, I printed out all the Itunes receipts that my 8 year old has racked up (with allowance, mind you). I am going to get an equal amount of one dollar bills and stack them up. Then I’m going to show it to her and ask what else she could have done with that money. And no, she doesn’t get the ones at the end of the lesson.

    Very timely.

  12. Linda Wightman September 13, 2013 at 11:41 am #

    Re: college debt. Whether or not you agree politically with Bill Bennett, he nails the debt problem in Is College Worth It? Students today have been lured by the siren song, “It’s an investment; you’ll easily pay it off once you’re earning a paycheck.” That is patently false for an increasingly worrisome segment of the population. They’re defaulting, they’re mad, and all they can do is Occupy Whatever and whine that the world is unfair. To be fair to them, it is my generation that let them think that college was a time for lavish living, wild parties, and little work — all on someone else’s dime $200,000. Now the bill has come due, and they realize that much of it was on their tab after all.

  13. Gpo September 13, 2013 at 11:53 am #

    My daughter needs a swimsuit for competitive swimming each year that costs $210. We told her last January the one for 2014 would be on her to come up with the money. She is saving every penny she gets her hands on. She has the $210 now through allowance, bday money and others, but she looks at her balance as she can’t spend any money that eats into her $210. No going to the Mall and blowing $60 on something. It has taught her patience and priorities.

  14. Karen September 13, 2013 at 12:04 pm #

    I think the expectation that people will help their kids out throughout their lives stems from two things: 1) the increasing concentration of money in inherited wealth due to the abolition of the estate tax, so parents may have a lot of inherited money that they use to keep their children in the upper class with them, and 2) the continuing decline in real wages since 1970, so that many young people who work aren’t paid enough to live decently on. These are political issues, not moral ones, and (as with so many money issues) presenting them as moral issues just blames the victim instead of the politicians and employers who benefit from the current exploitation of workers. If we give our kids the impression that money is all about personal responsibility, how will they grow up to vote for more equitable policies?

  15. Warren September 13, 2013 at 12:08 pm #

    Taxes, taxes, taxes……..we hate paying them, and they are a pain in the butt when teaching younger kids the cost of purchasing things. They see something tagged at $29.99, and have difficulty understanding that the $30.00 they have just won’t do it.

    One thing I found helped with budgeting, and buying, was to have my kids come grocery shopping with me whenever possible. The helping hands unloading at home was nice to. They would get to see you spend $200.00 on groceries, and then you convert that to video games, clothes, or whatever they had to work at saving to buy. You get to teach them that some things just are not the deal they seem to be. For example, paper towels a 2 roll pack is $0.77 but the six pack is $2.97. Buying in bulk this time costs you money. Little by little they started comparison shopping and understanding they need to think before buying.

  16. Emmy September 13, 2013 at 12:22 pm #

    I remember being very young and wanting a toy. My mother explained there was no money for it. So I asked why she didn’t just write a check. So she explained in very simple terms how checks work. Very simple, and I learned.

    As to that scary statistic… a very good friend of the family is unfortunately a very controlling helicopter mom–and all her kids are married. They are great people, educated, hard-working… yet this mom still does a lot of providing for them as well as telling them what to do. Anywho, she went and bought a house for her married son, a young man in college who is married to a young woman who has no idea how money works. Last week I learned these two young people were divorcing after too many fights after the wife took them thousands upon thousands of dollars into debt (once again, students!) and this young man clearly had no idea what to do about it financially speaking. So now there is a divorce and a house just sitting there.

  17. HarleyPig September 13, 2013 at 12:22 pm #

    For the last few years I have been “paying” my kids for going to school. I have explained to them that this is not an allowance, that their job is to go to school. They get bonuses based on their grades at the end of a term. They get fined for missing assignments and bad grades. They pay most of their school fees from their allowance, even if that means they have to save up for it.

    One child went and blew his paycheck on candy and crap toys every Saturday for two years. When his siblings bought their own things, or paid their own way for something and he was excluded because he had know money he would get upset.

    Finally, at the beginning of this school year he has been saving his money. I asked him what he was saving for and he said “I don’t know, but I don’t want candy that much anymore.”

    Last weekend was the first time he was able to pay for a movie, snacks and lunch all on his own. I’m so proud of him.

    I have no purpose for this post, other than to brag about my son’s improvement. :>

  18. Arlington Mom September 13, 2013 at 12:24 pm #

    Its another ‘letting go’ moment for parents. We need to let kinds spend some of their money to practice. If the allowance is truly theirs, then the kids can make decisions about saving, spending and on what. It took a lot of struggles away when we were in stores and they wanted to buy some junk. I would say, you can buy with your money. Wow all of a sudden the quantity of I ‘need’ this item goes down than when they are spending your money.

  19. anonymous this time September 13, 2013 at 12:32 pm #

    So. Money. My whole life with my four kids changed when I read “The Entitlement Trap,” and I think we’ve really made some positive strides with teaching delayed gratification, budgeting, work ethic, ownership, and problem-solving since we set up our own “Family Economy” the way the book describes. I can’t recommend it highly enough. Just like drowning your kids in monitoring and “protection” hinders their development, so does drowning them in stuff they didn’t earn.

    Similar to how I felt a bit like a “fish out of the cultural water” when I encouraged my 7-year-old to walk to school or my 9-year-old to go to baseball practice on his own, I am flapping around and gasping for air as I try to bring about some kind of financial literacy and self-responsibility with my kids, surrounded by folks who think it’s charming to buy two of everything for their offspring.

    Let’s start with the preponderance of adults who imagine that the only thing kids should have to “worry” about is being spectacular students, athletes, artists, or whatnot. Kids in high school are more often than not doing f*ck all around the house these days (cooking? cleaning? Naw, only if they are living with a single parent who is alcoholic, perhaps), and being given everything they need, with spending money on top of that, just to keep their “focus” on what’s “important” (grades, trophies, college entrance exams). Tragic strategy for preparing them for a life of “success,” no?

    Never mind the littler ones. Why, it’s become commonplace for kids of 8, 9, or 10 years old to have electronic gee-gaws designed for adult use (iPhone, iPad, iPod Touch anyone?). Besides all of the other addictive qualities of these devices, it’s the MONEY part of the equation that just boggles my mind. When a 12-year-old, say, is given an iPhone and added to their parents’ contract, where is the learning opportunity? The phone and the monthly data plan just come out of nowhere. and often, the kid is told, “If you don’t do what I say, I’ll take away the phone.” Perhaps parents want the upper hand because if they’re providing the device, they can extract certain compliances from the kids.

    But the kids are learning nothing from this exercise except how to manipulate others. They are enjoying the most excessive amounts of privilege humans have ever had, I think, outside of the royal court of Baroque Europe, and their future might not include the kind of “easy access to everything” they’ve been raised on. In fact, they might be called upon to be more resourceful than we ever had to be, and they are woefully under-equipped to solve problems in creative ways, or take responsibility for themselves.

    Personally, I don’t think it’s enough to just have them walk to school, use a knife, or be allowed to fall down out of a tree. I get the sense that we as a culture have decided that it’s too uncomfortable to see a child disappointed in any way, and this includes material disappointment.

    It’s funny how little we’ve discussed entitlement on this site, come to think of it. How many of us argue vociferously for unlocked school doors but are quietly handing over things that we would certainly have had to earn ourselves as children?

  20. Donna September 13, 2013 at 12:37 pm #

    I so need to get better about teaching money. Mine still doesn’t understand that the money in the bank is my money and not just the bank handing out money to whomever wants it.

  21. Ann in L.A. September 13, 2013 at 1:21 pm #

    Sometimes economic lessons can come from unexpected places.

    Our 11 year old recently started playing a trading-card game (Magic) and going to tournaments weekly. Along the way he has learned how to check online for the usual sale-price for his cards, decide which ones he wants to sell back to the store, decide which ones are worth paying for and how much he should pay, and how to trade one or more cards for cards of a similar value. This is actually a darn good way for kids to get the ideas of value, price, and assets.

  22. Rachel September 13, 2013 at 1:52 pm #

    My 4 yo was given gift card for Trader joes from his grandpa. He was so neat watching him learn that he could 4 bags of snacks or juice, not both. Then he got to stand in line by himself and pay by himself. My son was thrilled and the cashier was speechless that a preschooler could stand in line and actually produce currency. For some odd reason I remember cashiers consistent ignoring me when I was in line as a child, and I didn’t have an allowance I worked as a mothers helper for autistic kids from the age of 8

  23. John September 13, 2013 at 1:52 pm #

    This is an excellent article! In MOST cases, both husband and wife are involved with the family finances. In ideal situations, BOTH of them sit down on payday and pay off the bills and whatever is left, they at least roughly plan their financial activities until the next payday. So why not get the kids involved in this too?

    If you pay your bills online, for example, why not sit your kids down at the computer with you and then explain to them that this is the amount of money your dad and/or mom was paid and it has to last 2 weeks until the next payday. Then show them all of the bills and what needs to be paid for and then emphasize to them that after paying each bill and then doing the math, THIS is what we, as a family, have left for food and fun. Emphasize to them that paying the bills is the top priority and that there are consequences to overlooking this. I think they could grasp this concept over time.

    I’ve talked to my neighbors who say their child, who is now in his low 20s, always is getting into financial trouble of being overdrawn on his checking account and that they are now in the position of having to bail him out to keep him from getting thrown out of his apartment complex or at least from establishing a poor credit rating! Because he blew his money on wine, women and song before realizing that he had other and much more important responsibilities to take care of first.

    I think sitting a kid down early in his life and showing him the bill paying process would preclude this from happening when he becomes a young adult. Unfortunately, involving 7-year-old children in the family finances and bill paying process would be very strange to most people. But is it?

  24. Steve Horwitz September 13, 2013 at 3:00 pm #

    As a professional economist, I would just add that most of the financial advice in here is very good and way too many kids are financially ignorant. Mr. Ritter, however, is guilty of some ignorance himself, though economic as distinct from financial, when he writes:

    “If you notice the cost of a movie ticket went up since the last time you were there, mention it as an example of inflation and help them understand that prices generally rise over time.”

    Actually, that’s not necessarily inflation as economists understand it. If movie makers are spending more to make movies, then they are using more scarce resources and the price of the movie should reflect that. That’s not “inflation,” that’s prices doing their job.

    And prices do NOT necessarily “generally rise over time.” In fact, most of the basic goods we buy today are cheaper than ever. Think about an LCD TV today compared to 4 years ago. The one good that is way more expensive is human labor, which is why we can afford all of that stuff!

    Inflation, you should tell your kids, is when central banks create too much money, which causes prices to be higher than they otherwise would have been. Inflation is not “when something costs more.” Things sometimes cost more because they deliver more value or have higher quality materials in them. That’s NOT inflation.

    We’ve seen inflation over the last several decades, but most of US history didn’t. And during the late 19th century, prices tended to fall over time. The inflation we’ve seen is due to poor central bank policies, often resulting from overly indebted governments.

    So Mr. Ritter’s other advice might be excellent, but he needs to go back to school on inflation. Not all price increases are “inflation.”

  25. TaraK September 13, 2013 at 3:26 pm #

    My nine-year-old recently earned $70 helping his aunt and uncle in their place of business. Once he had such a big jump start, he’s begun the long process of saving up enough money to take himself to summer camp next year! His goal? About $300. Thus far? He’s over halfway there. He’s stained his grandfather’s deck, earned extra money helping with extra chores, chopped and stacked wood and helped his brother learn spelling words. (Of course, if he falls short we will pitch in, but he doesn’t know that!)

  26. marie September 13, 2013 at 3:31 pm #

    I like Steve Horwitz’ point.

    As for sitting down and showing kids the bill-paying process and letting them know how much income the family has and “this is how much we have left for fun stuff”… I am not sure that’s always a good idea. Kids are kids and no matter how much we stress our feeling that our income is no one’s business but ours, the news will spill to one of their friends at some point. I hate the idea of kids comparing the size of their parents’ paychecks and talking about what we pay for which bill.

    In an ideal world, kids would never breathe a word of this sensitive information and they would understand why they shouldn’t. (And if your kids would do all of that, congratulations on having some pretty special kids.) But it is not an ideal world. I do not want my kids to realize that hey! my parents are RICH compared to so-and-so, or hey! my parents don’t make SQUAT compared to so-and-so.

    Some kids would see how much money is left over and struggle against the realization that the folks COULD afford the iPhone5 for everyone if they just weren’t so damned cheap. I don’t see that ending well until the kids are 40 and start to worry more about saving for their own retirement. Then they would understand.

    When my kids say that the So-and-so family must be rich because they live in a huge house and because they drive a fancy car, I always say, “They USED to be rich…until they bought that house and that car.”

  27. Warren September 13, 2013 at 3:32 pm #

    Anyone else in here ever get jealous because their kid has saved bday, xmas and whatever money, to the point where they look at you after saying no getting chinese takeout isn’t in this weeks budget, and they inform you they could “lend” it to you? LOL

  28. Warren September 13, 2013 at 3:40 pm #

    Alot of times it is the costs that kids do not see, that they have a hard time understanding. They see you putting out money for groceries, clothes, and such, and can understand that. It is much harder for them to understand where mom and dad’s cash goes when it comes to mortgages, rent, hydro, phone, cable/sat, internet, gas, and on and on.

    I started with explaining the gas first. That even though they do not see it, everytime we cut the lawn it costs $25, a day on the snowmobiles around $40, a week in mom’s suv about $60 and so on. Explaining that even though you don’t see money change hands, there is still a cost involved.

    They eventually extended that themselves by asking such questions as does it cost more to cook on the gas grill than the electric stove…….something I never really worked out as on a per meal basis, I never thougt to calculate it. Tried, and wow I got a headache.

  29. BL September 13, 2013 at 3:45 pm #

    I’ve never had to budget. Apparently I’m just a born cheapskate.

    I had the following conversation, many times, with my mother from a very early age.

    Mom: Why don’t you buy yourself a new X?

    Me: I already have an X.

    Mom: But it’s falling apart!

    Me: It’s still usable …

  30. Goody September 13, 2013 at 4:29 pm #

    When my son started school, we’d do a weekly grocery run where he’d keep a journal recording the weekly price of certain staples (gal. milk, doz eggs, 3 lb. onions, etc.) At the end of the year, we’d crunch the numbers to see where they had gone. We’ve continued doing this (He’s in 3rd grade now) but we’ve added a twist. Each week he gets $20.00 to plan our Friday supper (that’s quite a bit, I know). We’re keeping a ledger so he can carry over some weeks, or borrow against the following week. At the end of the semester, whatever is left, he gets to keep.

    I expected to be eating rice and beans each Friday, but he’s really taken to the marketing, budgeting, recipe research, and cooking. He looks for sales, buys ahead for future meals, and has really done better than I feared.

    I admit to a bit of proud, “That’s my boy” when he spots a “sale” in the weekly circular and points out that it is just the regular price. He knows what eggs and butter cost.

  31. Melanie Jones September 13, 2013 at 4:35 pm #

    I just wanted to say that I do think that parents do sometimes support adult children with a motive of manipulation, and adult children sometimes manipulate parents to give them funds out of a sense of entitlement. Somehow my parents managed to keep love and money in distinct categories and I am appreciative of that. My parents have given me lavish gifts as a married adult (three times they have given us a used car, my mom often sends clothing for the kids), and I recognize that as being exceedingly generous. In the same breath, I will say I don’t feel entitled to that kind of stuff. In the vein of ‘more is caught than taught’, one thing I admired about my parents was how they modeled their relationship with their parents to me. My parents explained how they went to school, and who paid for it, and how they paid them back with interest and the jobs they worked through school to facilitate that. They explained moments when their parents had offered to pay for things and why they had said no, or yes. They explained moments where other family members had gotten upset because their parents hadn’t loaned them money and how that wasn’t right because it was the parents money that they had worked hard to earn and they were the only ones that had a rightful claim to it and were the best ones to manage it and decide how to use it. As they worked through the emotions and relationships around money in real life situations, I came to understand the true value of doing things for yourself in adult life, even when you actually are in the kind of situation where you could call on a family member if you needed, or even simply wanted, to. I don’t know if I put that well, but I guess basically what I am saying is I am fortunate to have the kind of parents who can, and who enjoy, spending their money on my family. But they are always sure to do so without strings attached, which makes the gift much easier to receive. And because of the way they raised me I realize that they are basically free to spend their money however they like, which seems to preserve a healthy relationship as I don’t have to be resentful that, you know my selfish/dumb/heartless parents don’t love me any more because they won’t buy me wood floors for my house or finish my basement or whatever. And truth be told I don’t really ask for that kind of assistance because I remember examples where even making those requests made for tense family relations.

  32. nancey September 13, 2013 at 8:08 pm #

    At age 15, my daughter got her first job at a supermarket. When we went to the bank, she was given a debit card in error (you are only allowed an ATM card until you are 16). She uses her card everywhere and checks her account online religiously. We live in an electronic world, so I want her to learn how to navigate. She has a paypal account for selling merchandise on ebay and buys her own clothing online.
    My son at the same age was given an ATM card, his first lesson was that it cost him a total of $4.50 to take $20 out of the machine at the mall. He also bought a “mastercard gift card” to use online- it cost him $25! He was able to figure out how to get it back though, through an online search. He will probably make more mistakes along the way, but better now than when he has a car, apt, school loans. . .

  33. Allie September 13, 2013 at 9:24 pm #

    Thank you for a sponsored post that actually has some useful content!! What a great topic. While my mom was good with money, she never passed on alot of her knowledge, and I had to learn alot on my own as an adult. Nothing like spending your first years of marriage paying off debt!

  34. Ashley Yakeley September 13, 2013 at 11:39 pm #

    I think one mistake parents make is forcing their kids to put “their” money into some kind of savings account, thereby taking it out of their control and essentially holding it in trust for them. This is supposed to teach them to save, but instead teaches them the opposite: to spend as quickly as possible before more of their spending money is confiscated for “savings”.

    A much better approach, and more Free-Range, is to let your child have control of all the money that is theirs, so they can spend or save as much of it as they want. As a rule, if it’s OK for them to own something, it should be OK for them to waste all their money to buy it.

    Sooner or later they’ll want something that’s more than they can afford, and that’s when they’ll learn to save, because they’ll have a clear purpose for doing so.

  35. anonymous this time September 14, 2013 at 2:19 am #

    Ashley, you’re echoing a lot of what we have come to at our house. My husband still wants to micromanage his son’s spending, trying to “teach and advise him” about the “best strategies” and trying to talk him out of his “stupid purchases,” but I keep insisting that experience is the best teacher, and better to learn these things when you are in grade school…

    Insisting that kids follow a “correct” protocol is a lot different than allowing kids to arrive at an innate wisdom about how much effort it takes to earn money, how quickly one can burn through it, and how much value there is in delaying gratification.

    All I can say is, set up the structure in which they can earn, save, and spend, and then let them play within it. There isn’t a right or a wrong way to play, there is only learning. We set some limits, of course: you can’t buy drugs, you can’t buy porn, you can’t buy $30 worth of candy bars (unless you’re treating your whole class at school). But that fifth wallet, just because you’re in a store and the money is burning a hole in your pocket? Go for it! That pair of shoes that doesn’t quite fit but looks cool and is on sale? Have at it. Oh yes, and that bike that you insist on purchasing retail, but could get slightly used online for $250 less? Well, I’m thrilled for you! You are going to learn so much! Enjoy the journey, kid!

  36. Tracie S September 14, 2013 at 9:15 am #

    Great tips in this article. Two really stood out for me:

    Kids as young as five can start understanding and taking responsibility for their own money. All too often parents make the mistaken assumption that there is plenty of time to teach kids about money but then they never do. If money doesn’t mean much to a kid of that age, start with something else that does, like Goldfish crackers or stickers. Any kid will quickly figure out that saving up a weekly allowance of 10 Goldfish crackers so they can trade them in for a treat at the store is a pretty sweet deal.

    The other idea I love is that parents need to talk more about money with their kids. When I go into the store I don’t buy everything I want or see. But I often don’t mention out loud to the kids why I’m not buying or what my thought process is. Often I know the item will go on sale, and I try to make sure to point that out. If I’ve seen it cheaper somewhere else, I point that out as well. Kids model our behavior, we miss out on a built in learning opportunity if we don’t clue them in to why we are making certain decisions.

  37. Katie September 14, 2013 at 11:01 am #

    Amen to that! Our 7 year old daughter is learning a lot about earning and saving money, as we’ve been teaching her since she was about 4-1/2.
    On the other hand my very foolish sister in law can’t keep money in her pocket to save her life. She never has managed to live on her own, at 34; now that she has some serious health problems, she’s on government assistance and never will be able to live on her own. sigh.

    (and for the record, my DH has somehow learnt how to be quite wise with our money.)

  38. LadyTL September 14, 2013 at 2:25 pm #

    @Linda Wightman – Not all of us Occupy protesters were partying through college. There just is not enough jobs for everyone anymore for everyone who goes to college and comes out with any kind of degree. Not everyone can afford to move across the country for a job and unemployment is high almost everywhere.

    The economy also shifted on a near dime while most of us were in college and so what seemed like a good prospect now has us in debt for the rest of our lives while we try to pay off hundreds of thousands of dollars in college debt on minimum wage part time jobs while trying to pay for the basics.

    I wish my parents had bothered to teach me about money but given they have run themselves into a hole now that the economy is bad, I guess they couldn’t teach what they didn’t know.

    It’s just easier to try and teach children then adult who think they already know what they are doing.

  39. marie September 14, 2013 at 5:35 pm #

    Something we should consider teaching our kids: to be willing to sacrifice to attain a goal. When they come out of college with a huge debt, these stories could inspire them.

    This young woman paid off $90,000 in college debt in three years.

    This young man paid off $26,500 in two years.

    And here’s a guy who paid off $90,000 in seven months.

  40. Richard September 14, 2013 at 5:44 pm #

    We don’t go over the entire budget with the kids (7 and 5), but we do have a family “extras” budget that they are involved with in detail. This is the eat out, movie, vacation, toy, party budget. After dinner on Thursdays (before the weekend temptations)we sit down to figure out how much was spent/saved from that fund and on what, and how much is left in the fund. Last year, the big goal was adding two days at a fun park on the way to spend a week at grandma’s. Together we figured out what the cost would be, and then each week talked about the choices made (a sandwich and banana on the run rather than stopping for fast food, a movie and popcorn at home rather than going out, etc.)and the effect of that choice on the extras account.

  41. JP Merzetti September 15, 2013 at 5:54 pm #

    Well, the value of a dollar to a kid is always a good notion to cutivate.
    Now, if we can only bring in mandatory personal economic structure and consequences to each and every high school senior class….BEFORE they head off to platinum-fed universities to sign their lives away into debt servitude (way beyond a trillion now, nationally.)
    That class – would be worth all the gold in the world.

  42. Katie September 15, 2013 at 6:00 pm #

    @Linda and Lady

    I think the truth about college lies somewhere in between your 2 opinion. For many, yes college is a ripe off. I have a friend who went to an Ivy League graduate school, yet lives at home with her parents and hasn’t had a paid job since graduating, although she is now over 30.

    The problem though is that the Ivy League and other schools in selling their product (aka education) hype people up and make them believe that there education alone will be enough and they will never have to do grunt work. I see the reason my friend can’t get a job as a lack of flexibility. She doesn’t want to do basic things that almost all jobs, even great professional jobs require (such as answering the phone). If kids don’t learn practical skills before adulthood and have their ego’s over-inflated than all the schooling in the world isn’t going to help them.

  43. Puzzled September 15, 2013 at 11:01 pm #

    I really like the suggestion to take advantage of everyday observations and events to tie into larger trends – just so long as you don’t do it all the time. I’m not sure of the age guidelines – my 15 year olds are not generally ready for the more abstract ideas mentioned for age 15 (I mean, they can learn them, and do problems on them, but they don’t seem ready to connect to them as meaningful and to learn life lessons from them yet.) I’d like to see some intermediate steps offered there, and the 15 year old guidelines moved to “before finishing HS.”

  44. David September 17, 2013 at 9:46 am #

    Really good article – thanks for posting. It reminds me to practice what I preach with my daughter. She is watching when I go to the store I should communicate more on the decisions I make when we are shopping.

    I need to not say “we can’t afford” something and reframe the comment back as a decision for her. She is currently saving for a bike so saying “you can buy the Barbie today and wait two more months to save enought to get the bike or you can put the money you want to spend on Barbie toward the bike and get it sooner.”

    I really like the concept in the article of looking past the piggy bank and make kids understand how money works in every day situations and how you can use interest to earn more rather than pay more.

    Definately making me think of more ways to talk about money with my daughter.

  45. baby-paramedic September 17, 2013 at 10:08 pm #

    My siblings and I all were given control of pocket money from a very young age. We did have to tithe it when we were very young, but after that it was whatever we wanted. We are all pretty good with money (some better than others).
    My lovely other half, on the other hand, was never given the opportunity to learn about money. He is getting better, but he thnks it has crippled him a little, not being able to learn about money as a kid, and instead waiting until adulthood, when suddenly the sums of money become much larger, and there is always another bill and another price rise lurking around the corner.