Teaching Kids to Manage Money

Start with the Piggy Bank

source flickr
source flickr

Importance of Understanding Finance

Children need to begin to understand money starting at a young age, about four years old. We have many adults in serious financial shape, partially because they don’t understand money and how to budget properly. The recent recession has caused the many responsible people to lose their homes and ruin their credit.

Many people live pay day to pay day and only pay the principal on credit card debt, which means they will not be able to get out of debt until they start paying on the principal. A large number of people bought homes with no down payment, and their monthly mortgages cost 40-50% of their income instead of the recommended 25% to 35%, which also must have taxes, insurance and PMI taken into account. With may other costs rising they just don't have enough money to stay current with all their bills.

Financial Trouble

I know someone who checks her bank balance at the ATM machine, then withdraws based on that information. Obviously she will have problems eventually using that method since she is not taking into account any automatic withdrawals she might have, any checks that may not have cleared or the fact that sometimes the machines are a day behind.

Without a good understanding of money, financial disaster is inevitable. That is why it is so important to start teaching your children about money while they are still young. Even a trip to the grocery store can be a learning experience if you talk to your child about what you are buying and why. There are numerous board games that involve money which the family can play together, and there are also Internet site games that will teach children more about money. Teaching them to manage a small allowance is also a good beginning,

Counting Money

source commonswickimedia
source commonswickimedia

Ways Children Learn

Children are very observant and they will watch your spending habits. They hear you if you argue about money. They learn a lot by watching your personal financial dealings even when they don’t seem to be paying attention. Being a role model for your children is invaluable. Actions always speak louder than words.

Ideally, we will teach our children some strong saving habits and how to make smart purchases. My son started this process with my grandson when he was young. He loved Lego’s. He had a couple of little chores around the house and got a small allowance. Then, there was some type of coupons he could get toward purchasing Lego’s. When he had enough money and coupons he would be delighted to get his next Lego set. He is a senior in high school now and works enough to pay his own car insurance and have some spending money as well. He naturally looks for bargains as his mother is a wise shopper, and he manages his money well for a seventeen year old.

As children advance toward adulthood their understanding of money will hopefully increase, and they will begin to learn about the meaning of investment. If you have a child that works, make sure they have a savings account and deposit a little of their income into that account each payday; ten percent is a good steady amount to save. They will see their savings grow and this will enforce their understanding of having secure financial stability. Help them when they make purchases, explaining why one item might be a better choice than another.

Low Income VS High Income Households

Children from low-income households have less opportunity to be in financial institutions or learn about their products and services according to the Financial Services Authority (FSA) of England, so they don’t always understand the services offered by banks. New research shows a large gap of knowledge between the low-income household children and higher income households. Children from lower income homes see their parents operate primarily with cash. They are aware of their parents putting cash in different places for particular bills using jars or some type of hiding place. They do understand the dire consequences of running out of money.

Whereas children from higher income homes understand a variety of methods of paying for things, such as checks, credit cards and even paying bills online but they still have limited knowledge about budgeting ones income. It is important that all children learn the necessary basic skills to managing their personal finances. This really should be taught in school, as it is not taught in low income homes. If we are going to remove the inequities between lower and higher income children then it is essential this information be taught somewhere.

Jobs, Money and Savings

When I was in grade school (yes, many years ago) we had a savings account set up in the school.  I presume it was from a local bank. We could deposit money every Wednesday morning, which was usually not more than a quarter, but this gave us the opportunity to see those small amounts grow. 

My sister and I each had our ways of earning a little bit of money. I helped an older lady do a few little things around her house each week.  My sister received a potholder making kit for Christmas at her request, and she made pot holders which she would sell to the neighbors.The small amount of money we earned taught us to start saving and when I started working in high school I always had a savings account.  We were from a middle class family and we earned money to help buy clothing to add to our wardrobes.  This was not uncommon during that era.

Money Management Should be Taught in the School Curriculum

source commons wickimedia
source commons wickimedia

Teaching kids money management - How to teach kids about money

Teaching Children About Money Management

In Conclusion

Whether you are rich or poor your child’s focal idea about handling money will be learned by watching you.  How well you train your children about money is what will determine their financial future and that is probably one of the most important skills for an adult to possess.  You can start with such simple steps and let that body of knowledge grow as the child matures

© 2011 Pamela Oglesby

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Comments 31 comments

Wendy 5 years ago

They used to teach you how to balance a checkbook in high school. They don't anymore. I would bring the girls grocery shopping with me say here's what you can spend and make sure we have 2 weeks worth of groceries. They really didn't understand that you can't just spend what you want. Everything needs budgeting. I think they really appreciated the lessons.


onceuponatime66 profile image

onceuponatime66 5 years ago from USA IL

Bravo! Excellent hub about how to teach children about money. In a way it is good that the recession has helped parents to help their kids regarding money.


oceansnsunsets profile image

oceansnsunsets 5 years ago from The Midwest, USA

Great Hub Pamela. These are good reminders for all of us, and especially those with kids. They indeed are watching, and I want to be a good example to my children.


Pamela99 profile image

Pamela99 5 years ago from United States Author

Wendy, I agree with you completely and I think the shopping lessons are a great way for the girls to learn. Thanks so much for your comment.

onceuponatime, The recession probably has helped children become more award of how money needs to be spent. I hadn't thought about that, so thanks for adding it to your comments.

oseansnsunsets, I appreciate your comments and I think we all want to be a good example for our children.


breakfastpop profile image

breakfastpop 5 years ago

Very wise advice. Not understanding the value of a dollar is a RX for disaster.


Pamela99 profile image

Pamela99 5 years ago from United States Author

POP, I certainly agree with you. Thanks for your comment.


Reynold Jay profile image

Reynold Jay 5 years ago from Saginaw, Michigan

Teaching kids anything that they will carry with them for the rest of their lives is not an easy task. You can teach two identical twins the same thing and then will grow up at opposite ends of the scale. One becomes a saint and the other a demon. Money VALUES should start very early and relating it to chores (work)is a good start. Nice Hub RJ


Just Ask Susan profile image

Just Ask Susan 5 years ago from Ontario, Canada

Excellent Hub Pamela. I taught my boys with the use of an allowance chart that was posted on my fridge. The harder they worked the more money they were able to receive at the end of the week. I agree with you 100% that money should be deposited into a savings account when they are working.


Pamela99 profile image

Pamela99 5 years ago from United States Author

Reynold Jay, Thanks you for your comments and I think starting them early is the key.

Susan, That sounds like a very good way to teach them the value of money. Thanks for your comment.


Reynold Jay profile image

Reynold Jay 5 years ago from Saginaw, Michigan

Hi Susan, Yep,the fridge idea sounds right on target. RJ


Pamela99 profile image

Pamela99 5 years ago from United States Author

Reynold Jay, Thanks for the comment although I think it was for Susan.


Hello, hello, profile image

Hello, hello, 5 years ago from London, UK

I think they should teach kids more practical things in school. Thank you for your superb hub.


Pamela99 profile image

Pamela99 5 years ago from United States Author

Hello, I agree with you. Thank you for your comments.


Elisabeth Donati 5 years ago

Great information. We DO need financial education in the schools! We owe it to our kids' futures!


Pamela99 profile image

Pamela99 5 years ago from United States Author

Elizabeth, I am glad you agree. Thanks for you comment.


Happyboomernurse profile image

Happyboomernurse 5 years ago from South Carolina

Great hub. I totally agree that money management should be taught in schools as it's crucial to success as an adult.


Pamela99 profile image

Pamela99 5 years ago from United States Author

Happyboomernurse, Thank you so much for your comments.


akirchner profile image

akirchner 5 years ago from Central Oregon

Cool hub, Pamela! Great information as well.


Pamela99 profile image

Pamela99 5 years ago from United States Author

Audry, Thanks for your comments. Much appreciated.


Ingenira profile image

Ingenira 5 years ago

Wonderful hub. I agree with you that students should be taught about managing their finance at school. It'll be harder to learn when they have grown up and start to make many mistakes. And parents should set a good example of a wise spender or finance manager at home for their kids. Voted up ! (And I am following you.)


Pamela99 profile image

Pamela99 5 years ago from United States Author

Ingenira, Thank you so much for your comments which I fully agree with.


Eiddwen profile image

Eiddwen 5 years ago from Wales

This is a great hub and you are so right children do need to learn from a young age so that saving and coping financialy comes naturally to them.

A very useful hub.

Take care.


Pamela99 profile image

Pamela99 5 years ago from United States Author

Eiddwen, Thank you so much for your comments.


craftybegonia profile image

craftybegonia 5 years ago from Southwestern, United States

Nice hub! My dad taught me to save when I was six years old. It has been invaluable!


Pamela99 profile image

Pamela99 5 years ago from United States Author

craftybegonia, It would be nice if all parents did that. Thanks for your comment.


mwatkins profile image

mwatkins 5 years ago from Portland, Oregon & Vancouver BC

Right on, right on, right on!

My very first understanding of money was that it grew on trees, so when I wanted to go shopping with my mom one day and she said she didn't have any money, I was so horribly confused that I asked her to go outside with me and I would help her "pick" some so that we could go shopping. It was right after that when I got my first piggy bank. Having owned a bookkeeping business since 1999, I see the confusion almost daily in what "should be" a better educated society - Sadly that isn't the case. I wish I could vote twice - Thumbs UP! ;-)


Pamela99 profile image

Pamela99 5 years ago from United States Author

mwatkins, Thanks for sharing your experience and I appreciate the comments.


Jackie Lynnley profile image

Jackie Lynnley 3 years ago from The Beautiful South

This is very good. My two had generous grandparents and I set the rule for them that 50% had to go on things other than toys and junk. They never had an allowance either. They had chores the same as me and if they needed more money they had to work for it. They did too, I never got any argument from them. Strange really when I think about it, lol.


Pamela99 profile image

Pamela99 3 years ago from United States Author

Jackie, I think it is good for children to grow up having some responsibilities and understanding how they will ultimately work for a living. It sounds like you made great decisions. Thanks for your comments.


Lady_E profile image

Lady_E 3 years ago from London, UK

Thanks Pam. I agree it should be included in the School Curriculum bearing in mind how society is now. I think it will also stop them from having a habit of borrowing and saving up to buy things instead. Thanks for the video.


Pamela99 profile image

Pamela99 3 years ago from United States Author

Lady E, I hope you are right. Thanks for your comments.

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