How To Teach Kids About Money (And When To Start)

“Can I have some paper money?”

Huh?

“What do you want with paper money?”

“I want to put it in my piggy bank with all my coins.”

For as long as I can remember, K has been obsessed with coins. Driven by the fact that family members delight in giving her their loose change, she loves to collect coins to fill her piggy bank.

Thanks to my dad, who decided he wanted to up his game and give her dollar bills, she has recently taken a shining to paper money too. Since paper money doesn’t fit in her piggy bank, her new collection lead to her discovery that I also have a small stack of “paper money” tucked away in her drawer for her. (Don’t get excited, it is less than $50 — the rest is in the bank.)

All of this has led to her interest in getting money. But the concept of money is still lost on her. She will be five next month (tear), so mom and dad have decided that it is time to start teaching her about the value of money.

Since she wants money, the logical first step is to set up chores and an allowance. I have often wondered what the right age for this is, and now I know — when the child is ready. For us, that’s five. She’s eager, she’s willing and she’s excited. We talked about the concept of doing chores and receiving an allowance explaining to her that mommy and daddy will talk about what would be good chores for her and lay out a plan. That was a week ago, and nearly every day she has come up with another idea for a chore for herself — yep, I think she’s ready.

Chore ideas:

• Make bed every morning (without being asked)
• Put away things in her clean-up box (daily)
• Swiffer the house (1-2 xs per week)
• Work in her workbooks (her idea)
• Help clean up as needed

To further her money education, we will set up two “piggy banks” – one for spending money and one for saving money. Even though I have no idea what she might spend her money on since this whole concept is new to us, it is very important to show her how to separate her money into two distinct purposes. (For now I think they will both be savings banks, but the idea will be planted.)

Of course, we will also have to work on the value of coins and paper money. We’ve talked about how much each is worth, but that idea is still lost on her. Her favorite coin is the nickel, so for now family gets off cheap.

Another seed we are planting is charitable contributions. K regularly sees mommy and daddy making charitable contributions to help others and has already asked about donating some of her paper money. So we will have to plan to include her in donations as well.

Setting up chores and a small allowance maybe a long way away from teaching our daughter financial responsibility, the importance of saving and the value of compound interest, but we will get there. For now these are the building blocks that we will lay now for conversations about money – how to earn it and what to do with it.

I’ve always been a squirrel, saving money here and there for “later.” I started a 401k at the first opportunity, and I have had a ROTH IRA since I was in college. I am a planner, and it has served me well. I credit my dad (yes, the same one who hands out dollar bills to his granddaughter) for teaching me and showing me how to save and how to plan. A skill I am determined to pass along to my daughters because I want them to be money smart. And that education starts now.

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