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Kids absorb all kinds of things without us noticing. One of the most embarrassing is when they pop out a curse we let slip weeks before during a particularly stressful day. One of the most frustrating is that they realize, quite quickly, that stores have things they want and that we "trade" money for those things. They don't realize what exactly money is, how we get it, or why it's important to save it. As our children grow, unless we work hard to teach them proper financial common sense and intricate saving, they will absorb our bad habits and repeat our mistakes (every parent's nightmare!). So I put together a short guide on how to teach our kids financial common sense.
0–4: Money is security.
They will learn quite easily that you trade money for toys and candy, or whatever you want. Also teach them that you must trade money for food, utilities, etc, and you must save for emergencies. For example, when buying groceries, just mention, “Wow! Our food was $25 today. That means we must save/earn $25 for food next week.” When you tell them they can’t have something they want, say, “I know you really want x, but I must make sure we have money in case we need it, like if you get sick, I must have money to buy medicine."
4–8: Spend Some, Save Some
These ages are wanting to buy their own stuff with their own money. I personally think paid chores vs allowance is a detail that doesn’t matter in the long run. A better lesson is that while it’s perfectly fine to spend money on things you want, you must also save part of the money. At my house we do nonpaid chores, but the kids have the option to do extra for money. When I pay them, they know they can spend bills, but must deposit coins in their piggy bank to take to the real bank for saving.
We do use some board games to teach money skills like counting, making change, saving, and spending wisely.
8–10: Want vs Need
This is something kids and adults struggle with. It’s a need to eat. It’s not a need to go get fast food because you don’t want to cook.
10–14: Make Your Money Work for You
Introduce the idea of passive vs active income. Let them play The Stock Market game and see appreciation in real time. Show them your retirement accounts. Talk about how you can work or your money can work for you! We play an amazing game called Cash Flow for Kids (my Amazon link). This is by the same author that wrote Rich Dad, Poor Dad. And I love this game. Your token, a rat, goes around the board and you get to draw cards that represent assets and debts. On one roll, you may get the option to start a home business and the next, to buy a home. This perfectly illustrates how you must invest money to earn money, how life flows while making and having to spend money, and reinforces that you can use money to make new money. The winner is the first whose passive income is greater than their liabilities. I really cannot recommend this game enough. I feel like it really changed how my oldest views money and even taught me some things about entrepreneurship. Click here to watch us play!
14–18: How to Chase Money
Get your kid working. Some states allow 14 years olds to get a job with written parental permission. Most states allow it at 16 without permission. If your child doesn’t want a job, help them start a small business. My 10 year old is going to sell popsicles at local parks using his bike, a wagon, and an ice chest this summer. Let them start a Shopify store. Write a blog. Monetize a hobby like sewing or knitting. This reinforces how hard it is to earn money, teaches about budgeting/profits/losses/assets vs liability/seed money and reinvestments.
My goal for my kids is for them to have a thriving small business by the time they graduate high school. Homeschooling makes the time management aspect of this easier, but traditionally schooled kids can do this too with ecommerce.
Last, I include money and financially literacy in our homeschool from the very beginning. We teach money skills from kindergarten, use coins to help learn skip counting and place value/borrowing/carrying. My kids make their own purchases at the store. My oldest has his own savings account at the bank (my younger sons will too). As they get older we use board games to reinforce skills like counting money and active vs passive income. At 10, they do curricula that teaches the basics of banking, stocks, retirement accounts, credit and credit cards, loans and interest, etc.