Children and Money: A Basic Plan To Teach Financial Responsibility

Have you been wondering how to start teaching your children about money? If you are counting on the schools to give them anything in the form of financial training, you’re wasting your time. You’re better off doing it yourself. If schools taught solid financial principles, many of us would have never got into the financial trouble we ended up in. To make matters worse not only did we make a mess ourselves, but for most of us–myself included, we continued the stupidity for more than a decade.

I plan to stop that nonsense right now with my children. As Dave Ramsey would call it, I’m changing my family tree. In fact, Dave Ramsey has a great program for kids 3-12 years of age to do the same thing. It’s called Financial Peace Junior. Dave has even put together an excellent series of kids books too.

If any of those interest you I highly recommend you check them out. We found a couple of them at Goodwill for $.35 each and they are pretty good kids books. These resources are great, but if you’re looking to save a buck and need something to get you started, I created something for you.

Now I do not have any nifty books…YET, but I have created something that can help you teach your kids about money. What I have put together for you today is actually what Isaac, who will be four in July, is starting on next week. It’s nothing complex, just a way for us to teach him saving, giving, spending, and work ethic, with a little more structure than before.

As many of you know, he has already been getting small change here and there for behaving, cleaning up, and just helping around the house. There was no system really, we just wanted him to see that if he did something he got a reward. His first time counting up his money, we had a great time, and he really enjoyed the fact that he got some money to go spend at WalMart ($20.69). As young as he was he learned that he could not just buy anything he wanted, but had to have enough money. He gave a small amount to our Church ($8.27), and has a small savings ($12.41) in place as well.

Now it’s time to step it up a notch.

I’d like to introduce you to a free excel spreadsheet I put together called Kid Finance 101. It’s totally free, and it will give you a structured way to introduce your children to the word commission. As Dave Ramsey points out, allowance is the wrong word to use because it’s more like welfare. We all work for a commission, so our kids should learn early on that when you work you get paid, and when you don’t work, you don’t get paid.

Microsoft Excel 2003Kids Finance 101

Microsoft Excel 2007Kids Finance 101

For Isaac, we are only making him do 2 jobs each day. You don’t want to start a slave camp or anything, you just want to teach a lesson while making it fun. Each day Isaac will earn $1.00 if he feeds the dogs, and cleans up his toys. If he doesn’t do them he shouldn’t expect to still get that awesome new Lightning McQueen car he’s been wanting.

Each week when he gets paid, he will put aside 10% in his giving envelope, and 40% in his savings envelope, and 50% in his spending envelope. To give him incentive to save for a “rainy day” we are giving him what I call “Parent-erest”. You’ll notice that on the sheet I am giving him weekly interest and it’s pretty high at that. That percentage will go down as he gets older, but the point of this is to give him extra incentive to save early on. For now, he’s getting 50% interest on every dollar he saves. Weekly that amounts to $1.00 if he does all of his work each day 5 days a week.

For giving, he will be putting aside 10%. I will be focusing on giving in other ways, but for the purpose of this I wanted him to start with the recommended giving percentage. For spending he will be allowed 50%. It’s high enough to get something that a 3 year old might want, but low enough that he might have to consider saving it up in his spending envelope if he wants that special toy he’s been eyeballing.

I’ve also added a Savings Worksheet so that you can keep track of your kids savings each month. It comes with a handy dandy visual aid to show how each month looks. Yes I am a total nerd. For now you will have to manually enter the amount of money saved each month but hopefully one day I can make it easier for all of you.

This worksheet is a trial run for me, but I think it will get the job done. I plan to do what Dave Ramsey suggests and post up a neat little chart on the fridge so Isaac can see his progress for himself.

Just so you are aware, this worksheet was created using Excel 2007, so some of the functionality might be lost if you are running an older version. I hope you are able to use what I have put together to help your children start learning the basics. I’d love to hear your feedback in the comments section below.

Are you teaching your children the basics?

About Brad Chaffee

31 Responses to “Children and Money: A Basic Plan To Teach Financial Responsibility”

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  1. Thanks for the sweet spreadsheet! :)

    This is something we really need to start implementing with our five-year-old son. I totally agree with Dave on the idea of earning “commissions” rather than giving “allowances.”

    • Brad Chaffee says:

      Me too Dustin. Allowances give the wrong impression, while commissions attach work to money. If you go your whole life and think you are entitled to money even if you’ve done nothing to get it, that’s a whole lot of trouble down the road. More like a train wreck waiting to happen.

  2. Neal says:

    Excellent and timely.

    Even though I’m a CFP I haven’t done a great job at this. Having said that my two grown kids are really good w/money. My third is still young and we’ll see.

    I’m going to try to implement these ideas.
    THanks!

    • Brad Chaffee says:

      Your story proves that there are multiple ways to get the job done. Obviously you have taught your children sound money principles, and that is more than some people do. I look forward to reading your newly released book in a few weeks! Congratulations on that btw! That’s exciting stuff! :D

  3. We really need to start teaching our 4 yo about money, spending and saving. I haven’t decided how I want to approach it though. I believe that the whole family does work around the house to make it function properly so I don’t know if I want to attach money to daily tasks.

    I’m going to have to look into Dave’s children’s books. Thanks for the excel sheet.

    • Brad Chaffee says:

      I understand your concerns Kristia, that’s why there are only 2 items on the list for my son to accomplish. There are other things that he does simply because he is a part of the family. I don’t think it’s a good idea to just pass out money for nothing so it has to be attached to something, and work is the best thing to attach it to in my opinion. Dave Ramsey even makes that same point in the FPU lessons.

      Thanks for sharing your thoughts. :D

  4. ctreit says:

    Our little guys are still young. They get excited when they get coins or “tickets” which is their name for money. They know that you can buy stuff with these coins and tickets, but they have not figure out yet what to use the money for. So, they are happy as can be to put it all into their piggy bank. We hope that by saving all their money for now we lay the foundation so that they equate money with savings.

  5. Alice says:

    This was awesome! I have featured this for April 9 as my Financial Friday post by the Financial Nanny on Regarding Nannies! Thanks Brad!

    http://www.regardingnannies.com

  6. Tim says:

    It might be a little advanced for the child to comprehend time value of money and the concept of interest. I think that if a child learns that he or she can’t spend money that isn’t there, they will be better off than most children.

    I can remember when I was little, my brother and I wanted a Nintendo system. My parents gave us a notebook where we would log our chores. Once we each got to a certain number of chores, we were able to get the Nintendo. It was a great lesson, and we REALLY appreciated the new toy.

  7. Kristy says:

    Hi Brad – I love the spreadsheet you put together for Commissions. Unfortunately, I can’t get it to unzip. Not sure what I’m doing wrong, but I haven’t seen any other spreadsheets out there that even come close to what you put together. Any ideas how I can get this to open?

    • Brad Chaffee says:

      First thank you Kristy! Second, I am not sure what the problem could be but I would love to try and help you figure it out.

      Do you have Microsoft Office or Open Office?

      I used Microsoft Office 2007 to create this spreadsheet, but you should be still able to access it with 2003. However, some of the features may not be compatible.

      I just tried to click the link myself and had an error myself. I just renewed the link and was successful opening the file the second time. At the top you will notice it says READ-ONLY, ignore that and click save as and you will be able to customize the worksheet.

      I hope this helps, let me know if I can be of anymore assistance. :D

      • Kristy says:

        Hi Brad – I have Microsoft Office 2007. When I unzip, I just get a few folders and then I’m stuck. I guess I’m looking for an excel spreadsheet that I can just click on, but I’m not finding it.

        • Brad Chaffee says:

          hi kristy, I'm not sure how to solve that for you. It's not a zip file
          though it's just an excel file. When you click the link a box should
          pop up asking you if you want to open the file. Once you click open MS
          Office Excel should then open and the spreadsheet should be right in
          front of you. You can then save it to your computer to modify it.

          Do you have a mac or a pc? I've never seen an option
          to \”unzip\” when I left click the link. I have a pc.

        • Brad Chaffee says:

          hi kristy, I'm not sure how to solve that for you. It's not a zip file
          though it's just an excel file. When you click the link a box should
          pop up asking you if you want to open the file. Once you click open MS
          Office Excel should then open and the spreadsheet should be right in
          front of you. You can then save it to your computer to modify it.

          Do you have a mac or a pc? I've never seen an option
          to \”unzip\” when I left click the link. I have a pc.

  8. Fantastic Spreadsheet! We’re getting our 9 and 10 year old started with the financial peace junior. Unfortunately, I only bought ONE set so was looking for an extra spreadsheet for the commission chart when I came across your blog post. I’ll give it a try!

    Thanks! :-D

  9. Brad, just stumbled upon your cool spreadsheet from a reference in this recent post:
    http://woodridge.patch.com/articles/how-to-teach-your-children-the-value-of-money

    I used a spreadsheet as well, but then got tired of pulling it up to show each of the 5 kids, so, being an even nerdier nerd, I built a website for them that ultimately, after adding lots of bells and whistles, turned into FamZoo.

    Folks who don’t want to use an online service like FamZoo might consider implementing your spreadsheet in Google docs for shared access amongst the family. I just uploaded your spreadsheet into my Google Docs account to test it out, and seems to work fine (no graph though).

    Cheers,
    Bill

  10. Marvin says:

    Hi. I too am having an issue downloading and opening this Zip file. Obviously I can download it, but there is not one file that will open through excel, and or anything else. I tried winzip and winrar. I thought it just may open up into excel, however, its a zip file….Any remedies? I am excited to see the working version of your comission sheet. We are implementing this, mostly in part to Dave Ramsey, but glad to see you have this. Hopefully, we can get this to work.

    C.Stewart

  11. John says:

    I take my kids to the bank, show them where I work and how much money I make and where all the money goes. I show them how long I need to work to pay for whatever they want. They actually ask for less things now.

    • Brad Chaffee says:

      I feel the same way and it bothers me that talking about money is sometimes considered taboo. I’m the same way with my my 5 year old. No wonder so many people in so many places can’t manage money. Kids certainly don’t learn it in schools. Personally I say it’s right up there with Language, Science, & Mathematics. :)

      I guess the schools aren’t looking for well-rounded. Great comment thanks for stropping by! :D

  12. Jennifer says:

    Thanks so much for this awesome spreadsheet! My husband and I just watched a few of the Dave Ramsey videos and I was anxious to re-do our kid’s chore charts. I really love that I can incorporate your worksheet into my save-spend-give lesson for them. Thank you so much!!!!!!!!!!!

  13. Mark says:

    Thanks for the most excellent spreadsheet! A long time ago, I heard it best to give your children $1/wk x their age. A 10 yrs old would earn $10/wk while a 13 yrs old would earn $13/wk. Sounds like a lot at first glance; however, $10/wk would yield only $5/wk in discretionary spending. I used your spreadsheets to create values on six (6) main areas of responsibility and weighted them accordingly. We’ll check in later to report our progress.

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