Money management is a topic we began discussing with our children when they were young. When other parents started talking about the topic of giving kids an “allowance” we decided it was time to do a little research. Everyone we talked to had a different theory about how much and when allowance should be given – it was overwhelming!
We decided to step back and think about the life skills and lessons we really wanted to teach our children. For us the bigger issue was money management – helping our kids understand the value of money and how to build solid habits and decision making skills around managing their money.
Creating a program for your children doesn’t have to be difficult. Actually, we have found that keeping the program simple helps to keep the focus on the habits and lessons you want to cover. We were fortunate to find a program at our state homeschool convention that met our needs very well.
I’m not saying that everyone needs to purchase a program. We decided to purchase a program (we thought of it like another item of curriculum in our homeschool) because we found it was easy to implement and the materials gave our children resources to refer back to as often as needed.
For about five year now we have been using a program called KidsWealth.
Since consistency is the key to teaching children valuable lessons, the KidsWealth Money Kit™ includes a core set of principles throughout the program. The result is that kids come to appreciate their money since they are in control of their financial destiny. Starting at the beginning of each month, children manage their KidsPay into “Wallets” using our unique money management system. The program is designed to help children prioritize their money, and to track the progress of their accounts over time in less than 15 minutes a month. – KidsWealth.com
Encouraging Kids to Make Financial Decisions
Our children receive a set amount of money each month (called KidsPay) and that money is allocated into 5 different wallets. They make decisions for how to use their money based on the topics represented by each wallet:
Wealth – This money goes directly into the children’s savings account at the bank. Each month when the money is deposited we look at the new balance and the interest earned on the account.
Plan – Kids are encouraged to think long term and create a savings plan for a “big” purchase that is important to them. Over the years my guys have used their “Plan” money for things like a new bike, a guitar, an iPod, and more.
Learn – Funds can be used for items that will enhance their education. We take this wallet with us on field trips, to book stores, and anywhere we might find something to support our education efforts. They have used their “Learn” money to purchase items like books, DVDs, and materials for science experiments, and to attend conferences and demonstrations for topics they want to learn more about.
Fun – This is obviously the kids’ favorite wallet. They can spend this money any way they choose. It really took a while for them to figure out how this was going to work – for several months my younger son spent all of his “Fun” money on the first of the month, as soon as he placed the cash in his wallet. That was actually a very good lesson for him as the month moved along and he found even more things he thought about purchasing.
Over time he has grown and matured and the lessons have been learned and the habits have changed. Now he realizes this is really a fund to help cover a few of his “wants” after he sets aside enough money for his “needs”.
A note about the “Fun” money – Because we do travel a lot as a family we come across more than our share of souvenir shops and items to help remember our trips. The Fun wallet has been a lifesaver for these times. When the kids start asking “can I have that?” we just ask “do you have any money in your Fun wallet” and then it moves the decision making over to them!
Angel – This money is designated to be donated. My children love using their Angel money to bless organizations that mean a lot to our family. My children love animals and since we have been using this system, most of their Angel money has been given to organizations related to dogs. They have purchased beds and toys for the shelter where we rescued our hound. The have also used money to purchase items from the wish list of Canine Companions and presented the items during our field trips to the center. They have made donations to other organizations that support children in need. Each time they make a donation they have visited the organization and not only volunteered their money but also their time.
We have used the same basic program with our children for several years, making a few modifications as they have grown and matured in their decision making abilities. Although they still have many lessons to learn as we move forward, here are a few of the lessons I believe they have learned already. It is our hope that these lessons form the basis of a lifelong desire to understand and make sound money management decisions:
- The value of money – what things cost.
- Making purchasing decisions and determining the difference between “needs” vs. “wants”.
- Making a plan for a longer term financial goal, measuring progress toward the goal, and appreciating accomplishing a goal.
- Watching their bank saving account grow.
- We now have discussions about family budget expenses and long term goals. We talk together about things like trips and major household expenses so everyone understand the situation and the steps needed to meet our shared goals.
No matter how young your children are, it’s never too early to start teaching them important and practical life skills such as money management. Be sure to check back throughout this week as we share information about some additional life skills we have been working on in our homes.
What lessons have you taught your children about money management?