Children And Money: Are You Helping Your Children Learn The Basics?

Isaac Money1Teaching Your Kids Early On Is The Best Way To Ensure Financial Responsibility

Since approximately February of 2009 we have been adding small amounts of change to Isaac’s piggy bank periodically.  He gets money for doing certain things like cleaning up after himself, helping around the house, etc.  He loves to help and we want him to learn the value of hard work.  If he works he does get paid, and if he doesn’t work then he doesn’t get paid—just like the real world.

We have a pretty loose system as Isaac is only 3, but as he gets older it will become more realistic.  In the beginning we wanted to encourage him to do certain things so we would often help him.  We noticed that he became very excited as he added any new money to his piggy bank, so our plan to encourage him was working.

Last night before Isaac went to bed we took the time to count his money.  He was very excited as we laid out the “monies” as he calls it.  He learned what a penny, dime, nickel, and quarter looks like, as we separated them together—his hard-earned money.  He was proud!

Here Is The Breakdown

Pennies: $5.12
Nickels: $2.85
Dimes: $8.40
Quarters: $17.00
Gold Dollar: $1.00
Dollar Bills: $3.00

TOTAL: $37.37

Parent-erest Paid: $4.00

ADJUSTED TOTAL: $41.37

Now for this next part there really is no right or wrong percentages.  Isaac is only 3 years old, so we just wanted to start early with teaching him the basics of handling money.  We chose to have him give 20%, save 30%, and spend 50%.

Giving – $41.37 X .20 = $8.27
Now most people suggest giving 10%, but we feel that when you do not have expenses you have the ability to give more.  We chose 20% for no other reason.  We will be putting the $8.27 in an envelope so that Isaac can physically hand over the money he worked so hard at earning, so that he feels how great it is to give.

Isaac knows that this is his money that he earned.  We want him to know that he is the one giving/sharing it with others.

Saving – $41.37 X .30 = $12.41
The recommended percentage to save depending on who you get advice from is anywhere from 5-15% of your annual income.  Again, because Isaac does not have any bills we have chosen 30% as a starter percentage.  We just want him to become used to saving money every time he gets paid as a habit.

Once Isaac has enough money to start a savings account, we plan to open one for him.  $12.41 is a lot of money to a 3 year old.  As he continues to get older he will see his money grow, and will know first hand, the benefit that comes with setting some money aside for a rainy day.

Spending – $41.37 X .50 = $20.69
Now we realize 50% is a lot of money, especially for his age.  As he gets older he is going to have to realize that when he wants to buy something for himself or for someone else that it will have to come out of his spending money.  For now we wanted him to enjoy the fruits of his labor, so we are just fine with allowing him to use all of this money to buy himself a toy.  We will be doing so today.  :D

The Tax Talk
NOT for a 3 year old.  One day we will have to have “the talk” about how the Government will steal money from him by force, before he ever sees it.  For the record though, I am not at all against paying some taxes to help with basic infrastructure, however, I believe that it should be more fair across the board.  I do not believe that robbing from those that have worked and giving to those that have not is the way to go about it, which is why I am for the Fair Tax.

Plus, the Government proves every single day why it cannot be trusted to manage money.  Trusting the Government is like giving your broke and in debt relative money and trusting him/her to manage it responsibly.

Teach Your Children…

…because if you don’t, then they will learn from every other broke person around them, including our untrustworthy and inept Government.  Spend the time to teach them how money works.  Teach them about hard work and the value of their labor.  They don’t teach financial matters in school, but even if they did, it is still up to you.  You are the best role model for your children.  Help them avoid debt and learn about saving for things that they want.  Help them avoid bondage and dependency!

About Brad Chaffee

23 Responses to “Children And Money: Are You Helping Your Children Learn The Basics?”

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  1. Sharon says:

    Brad,
    I love this post and have forwarded it to others. One of the things I teach is building a Strong Personal Foundation (as learned from Thomas Leonard, founder of personal coaching). I have been giving thought lately as to how we can go about teaching our children to build a strong personal foundation for their lives and finances is such a big part of that. Thank you for sharing how you are teaching Isaac these important tools!
    Sharon

  2. Paul Norwine says:

    Brad – I think it’s great not only teaching Isaac about money at an early age but doing so interactively. Having him participate in the process will most likely lead to better habits and decisions when he gets old enough to make those decisions on his own. This is something I have always planned on doing with my kids when we start a family!

    Paul

  3. Jesse says:

    I have been thinking about this a lot lately. My daughter is 2 and I have trying to figure out a way to help her learn about money but I can’t really judge if she is quite old enough yet.

    I think I will give it another shot, maybe get her a piggy bank and have her start paying for her own things at the store. Great post Brad.

  4. KelsaLynn says:

    Oh my gosh, your post brought tears to my eyes! You’re doing such a wonderful thing and I have the utmost respect for you. Please tell us how the giving experience plays out for him and also let us know what toy he decides to buy for himself!

    I’m glad you didn’t focus too much on the %’s…after all, he is only 3! But you had to know that SOMEONE was going to ask you where you came up with the %’s so I think it’s funny you explained yourself! : )

    Kudos to you friend.
    (I, too, will be sharing this post with friends and family)
    KelsaLynn

    • Brad Chaffee says:

      Sharon – I am so glad you enjoyed this post. One of the best tools for teaching kids about money for me has been something called Financial Peace Jr. by Dave Ramsey. It’s a kit that has everything you need to cover the basics of money management. We love it.

      Paul Norwine – I agree. Having Isaac participate actively in the process will help him better understand what he is learning. He was so excited last night as he realized he had earned so much money. It seriously brought tears to my eyes. As you can see from his picture, he was extremely excited to pose next to his hard work.

      Jesse – Everything I have read about teaching children about money suggests that 3 years old is a good time to start. We started a little earlier than that with the paying him money, really before he understood that he was earning money, but we knew that as time went by he would understand a little more each time. I think 2 1/2 years old is just fine to start with a very loose system.

      Kelsalynn – Thank you so much for the kind words and I am so glad you enjoyed it. We had fun last night counting and learning. It was a teachable moment for sure. Yeah the percentages were used as just a way to divide the money, but you’re right I knew people would want to know where we came up with them.

      The funny thing is that Isaac has been so used to being excited about filling his piggy bank that he has been trying to take the money we counted and put it back in the piggy bank. LOL We are about to go let him pick out a toy. This should be fun!

  5. Great post Brad, I plan to do the same with my kids however my oldest child is just turning 2 and not quit ready for that yet, but hopefully within the next year.

    I am also a big believer in the fair tax. I am a small business owner and have seen first hand how bad the government treats small businesses with paying taxes. It sucks!

    Last, I just have to say that if are country wants to turn around from this slump people will need to take control of their situations and start teaching their kids the value of a dollar, instead of learning on the Monopoly board otherwise the situation with overspending will only continue to get worse.

  6. bromoney says:

    Teaching children about money and how to manage it is very important. I know I was taught at a young age how to protect my money and some of the principals I learned I use even to this very day.

  7. Brad Chaffee says:

    Chris – Yeah 2 is kind of early but we did start a little earlier than 3. We put more emphasis on letting him add his money to his piggy bank. We would basically help him clean up and then give him some loot to throw in his bank. He eventually (before turning 3) started to associate cleaning up (work) with getting money. At this point I am not sure if he can understand it completely but the groundwork has been laid.

    I like the fact that there are some out there trying to audit the fed. Printing money from nothing and then taxing us into oblivion is the OPPOSITE of incentive, which is why BIG Government can benefit from getting even bigger. I’d like to see a consumption tax and a much smaller Government, and that way, the people can prosper. The Government can’t seem to understand that we have close to or more than 50% of what we earn taxed if you add it all up, and cannot seem to understand that if we had more of our own money then we wouldn’t need all of the bull crap programs out there. There would be more incentive for EVERYONE to work. LOL…sorry about the rant, I get pretty passionate about politics too. :D

    bromoney – We surely need more parents like yours my friend. If we did people would be more financially literate, more independent, and more capable of building real wealth. Thanks for stopping by and sharing your thoughts!

  8. Good job Brad! Just wondering, have you done a post on figuring out how much kids cost per annum from your perspective? I think that would be a fascinating topic to share.

    • Brad Chaffee says:

      Financial Samurai – I have not done a post like that FS, but that is a great idea! Thanks for stopping by! :D

      Tine Fortune – That is awesome Tina! I too, look forward to watching them make their own decisions as they get older. I plan to take advantage of every teachable moment I can. You should of seen Isaac at the store trying to pick out a toy. It was almost as if he was on a shopping spree and when we told him he couldn’t get something because he didn’t have enough money he seemed confused by that. I have to say it was mighty cute!

      Angie – Yeah I agree Angie! I want them to learn to live on less so they can save and give more. I am very excited to be able to teach my children about money. I like Dave’s car program too. I believe he calls it the 401Dave. He recalls a story in FPU where his daughters took advantage of that. The first one saved a lot, but the second one, after realizing Dave was serious, saved almost $10,000. She bought and paid for her first car with cash, and that must have been a very influential part of her life. The pride that must come from being able to do that is the best.

      Dave – It’s okay that we disagree Dave, it’s a part of life. I would love to know of these Governments you speak of that spend the money properly. Bottom line for me is that freedom is more important. By taxing the people into oblivion you are limiting their potential and making them more dependent on the Government. That is not freedom. Working to give almost half of your money to an inept and wasteful Government is servitude which is far from living free. I tell you what. When, or if, the tax system in this country ever changes, you can give extra come tax time and I will give my money to charities that can better and more efficiently help those that it intends on helping. That is the difference for me. Where Government is involved there is likely gobs of waste and red tape. To each is own my friend.

      Ken – I know what you mean Ken. For me, we never talked about money either and I know of many people who consider their finances to be TOP SECRET. In my opinion that is how your children learn the value of a dollar, or in our current state, the devalue of the dollar. lol I plan on sharing our entire financial situation with our children so that they may see just how it works. If you want your children to take over the family business you wouldn’t keep the operational and financial plans a secret. You would instead teach them hands on so that they may successfully run the business themselves one day. That’s the way I see the money side of teaching kids. Nothing is a secret. Thanks for your thoughts Ken! Keep on making that progress my friend! :D

  9. Tina Fortune says:

    I love it!!! Teach him now. I pay my children $10 per grade they are in at school. (8th grade=$80) They can earn money for A’s and B’s only. I don’t pay for “C’s” which are average. They really enjoy getting their money and of course, they have a budget and it’s loads of fun to see them make choices (like bday parties) based on their accounts.

  10. Angie says:

    Great post! I just listened to a podcast from Dave Ramsey today talking about how to teach kids about money. We’ve been giving our kids money for doing chores but were only doing 10% giving and 10% savings – your way makes a lot more sense. I also want to encourage them to start saving for a car, like Dave suggests. Thanks for the info.

  11. Dave says:

    A note on your government and tax section…

    I think you should reference the US government. Many other countries are taxed by their government much greater, the money is properly used and the people don’t complain about higher taxes. I understand your US government theory (disagree with your tax and government stance..that’s for another day), but saying ‘the government’ is much different than ‘the US government’.

    Just saying…

    Dave Damron
    LifeExcursion

  12. Ken Kurosawa says:

    I think you’re giving junior a great head start into understanding how money works.
    I was raised in a family where my parents forbade us from discussing money. The only thing my parents would say to me regarding money was to ‘save it,’ and even that was without guidance. With that said, I had to learn the hard way, but I’ve finally gotten a grip on my goals and making great progress.
    Have a great weekend!

  13. Petey says:

    The bank my family banks with has some good FUN programs fro the kids to get them interested in saving. Even their online site is kid friendly.

  14. children always good in saving money.. i used to do the same piggy bank

  15. Colin T says:

    A friend of mine gives young son £2 pocket money per week, but in change. He has 3 “piggy banks” (only one is a pig) labelled GIVE SAVE SPEND. He can allocate the money has he chooses and whenever he needs money for something (like sweets etc) he takes it from his spend piggy.

    When it all began, Dad explained the importance of giving and saving, and suggested that he gave at least 20p and that savings were at least 20p, but it was up entirely up to him.

    Next Saturday the son milled the coins around in his hands for ages, seemingly separating them out and reckoning. Eventually, he put 40p in the Save piggy and the rest in the Give piggy.

    Concerned his son might not have understood, he asked him why he’d chosen to give all but 40p.

    He said, “I thought I’d Save twice as much. I don’t need anything, so I don’t need to put anything in Spend, so I’ll give the rest to those who do.”

    Dad, full of joy, with tears in his eyes, picked up the kid and thew him up in the air. “Come on son, we’re going down the sweet and toy shops: I am SO proud of you!” and promptly spent £20 on him!

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