Teaching Kids About Money: The Early Years {Series}

Where did you learn what you know about money? Your parents? Your friends? The school of hard knocks? Or maybe you still don’t know much about money. You are not alone!
So what can we teach our kids about money – even if we don’t know much ourselves?

Before we go there, we need to lay a few ground rules. First, it’s important that your kids understand that money is ok to talk about. Some families discuss it behind closed doors or at the top of their lungs (or not at all) and this creates a perception in kids that it’s not ok (or safe) to talk about. Second, you have to agree to some consistent methods of operating as a family before you start actively teaching these lessons. You don’t have to have everything figured out, but you need to be on the same page so you don’t confuse your kids by teaching different things. And third, you have to (HAVE TO) remember that the work you put in now pays dividends later. This parenting gig is a long game and it may seem strange to talk to little kids (like 3-5) about money, but it shouldn’t be. We don’t hesitate to teach them other critical lessons like looking both ways, sharing, or eating healthy food because we want them to be good co-workers, excellent spouses, and healthy adults, but we get all nervous about money – we shouldn’t. The cost is too high.

In an effort to make things simple, I’m going to break this into two posts, because I believe there are two critical things we can teach our little kiddos:

The first thing we can teach them is where money comes from. This one seems straight-forward, but it’s actually one of the toughest to comprehend – and I believe that’s our fault, because we never tell them! They ask for something and we give it to them (or we don’t) and we don’t explain why. We push buttons on an ATM and cash comes out. Or for most of us we swipe a card to pay for almost everything and money quickly becomes a seemingly-infinite resource for our kids (and for us sometimes).

When you are little (and when you are big) money comes from two places: work and gifts. Yes, there are other places money comes from, like investments, but those are for a later discussion (please see the title of this post). You see, if we do this whole parenting thing well they’ll be taking care of themselves far longer than we take care of them and working is a skill they’ll need.

So, how do you teach a little kid that money comes from work? Two ways. Show them how the money you spend comes from work and/or allow them to work themselves. Yep, I think it’s ok (and even a good idea) to give little kids the chance to work. Note that I didn’t say “make” them work. Whether they are little or big, I find that we have better success when it’s their idea. Stay with me – you’ll see how in a minute.

For us, giving them the chance to work looks like paying him small amounts for going above and beyond his regular responsibilities. Of course, you have to determine what the regular responsibilities will be in order to define above and beyond (refer to ground rule number two above). We typically draw the line between things he’s personally responsible for (like carrying his own dishes to the sink, cleaning up his own toys, and making his own bed) and things that help the whole family (like mopping the floor, cleaning the toilet, and folding laundry). We have not begun paying him for all of these things yet, but we’ll build them in slowly as he asks for more responsibility. You choose what makes sense in your house, but the idea is that your kiddos have the opportunity to earn money by doing work.

The other (and I think more difficult) side of this “money comes from work” lesson is putting the responsibility of paying for things they want on them – even when they’re little.

Here’s an example of what this looks like in action (in the check-out lane):

Him: Mama, I please have this candy?
Me: Thanks for your manners buddy. Do you have money to buy that candy?
Him: (long pause) No.
Me: Hmmm. Can you think of a way you could get the money ?
Him: Ask Daddy.
Me: (snickering) That’s one option buddy. Where do you think Daddy would get the money to buy that candy?
Him: He go to work.
Me: Right buddy. Would you like to earn your own money so you could buy that candy yourself?
Him: Yes.
Me: I think it would be great if you had some of your own money. We can talk about how you can earn some money when we get home.

And then we do. We talk about his money (yes, he has his own money already) and how he would like to spend it. If he doesn’t have enough to purchase what he wants then we talk about how he can earn more by doing work. At this point he typically moves on to something else because he’s three and his desire for the thing he wants is less than his desire to work for it, but he’s learning that the opportunity is there and that money comes from work.

The other primary way we receive money is through gifts. Whether it’s a dollar in a card or more for special occasions and birthdays, it’s important to teach your kids that while they may not have worked for it, someone did (so really, if you are paying attention, there aren’t two ways we get money there’s one: work). Understanding that someone had to work to earn the money to pay for their gifts helps them be more appreciative.

The second thing we can teach kids is where money goes, and I’ll explain how we teach those concepts in my next post. In the meantime, do not be overwhelmed. Start simple by teaching your kids that money comes from work.