Kids Learn About Money by Watching Us
Whether you’re a parent, grandparent, aunt, or uncle, you want to ensure the next generation is equipped to make sound financial choices.
We may not be actively teaching our children about money, but they pick up on things simply by watching how we use money. With that being the case, it is important to look at yourself and think about your values around money.
For example, is it important for you to purchase high-quality items? Do you prefer spending on experiences versus items? Do you rank generosity as an important item in your budget? Whatever you value, it is important to verbalize those things to children because we live in such a digital world. To them, money seems endless when we simply swipe a credit card or the package shows up in the next two days.
Introducing the Three Bucket Approach: Give, Save, Spend
To break it down for children in an easy-to-understand way, let’s describe to them three uses for money:
Give – the money you give to nonprofits or others in need
Save – the money you put into a savings or investment account for future use
Spend – the rest of the money you spend on the things you both need and want
My mom taught these strategies to me, and I am now teaching them to my kids. Each month, I give my kids $1 in change so it can be divided. They have three Tupperware® containers labeled Give, Save, and Spend. They divide those funds by putting 10 cents into the Give Tupperware, 10 cents into the Save Tupperware, and the remaining 80 cents into the Spend Tupperware. I know this is not a lot of money, but there is value in starting small. They have also received money for birthdays and holidays. Sometimes, they like to spend that money on a specific item and other times, those dollars end up accumulating in the spend container.
While the Tupperware strategy may be great for young kids, there may be other approaches for older kids. You could help them create checking and savings accounts and teach them about setting up automatic giving to a church or nonprofit from that account. No matter the strategy, the three categories are easy to explain.
Teaching Kids to Give
My husband and I talk to our kids about the importance of generosity. We let them know that we donate money to our church and other nonprofit organizations because money is not meant to be hoarded. We tell them how we want to be generous to others. We want them to notice the needs of others. If my boys have a fundraising event at school or church, they can take the money they have accumulated in their Give Tupperware containers to donate to that cause.
Teaching Kids to Save
I have seen statistics that many Americans don’t have enough in savings to cover an unexpected event. My husband and I talk to our kids about why we save for things that may come up in life, such as a flat tire, a broken dishwasher, or a job loss. We also talk about saving for bigger ticket items or future goals like cars, college, or retirement.
Teaching Kids to Spend Wisely
The best way to teach our kids about money is to give them “practice” money. I think it’s important to give them choices with money. If my boys want to purchase something, I often ask if they are willing to spend their own money on it. Sometimes, they want to spend their own money and other times, they decide the item is not worth it. This also helps kids understand the choices around money. One value we have been working on in our family is spending more money on experiences instead of items. Our boys have started appreciating the sporting events or concerts we attend together as a family, instead of purchasing more items that take up space. We can also teach our kids about not buying the cheapest toy but perhaps saving up for the more expensive one that will last longer. There is also value in talking to kids about the differences between needs (versus) wants. We may want to spend money on toys, but we need to spend money on electricity.
Teaching children money skills may feel overwhelming, but you can start small. Tell them the ways you think about dividing your money and talk about your Give, Save, and Spend values. Let’s work to prepare the next generation to make smart choices with money. What does it mean to be truly cared for? It means we understand your passions and use proven methods to help you reach your goals.
