Dasmah Accounting

Teaching Your Kids Healthy Money Habits

Posted on April 27, 2010

As parents we are always concerned about our childrens health and teaching them healthy habits.  Making sure they’ve eaten their fruits and veggies for the day.  Teaching them to wash their hands after being at school or using the restroom.  Telling them to cover their mouths when they cough, and so forth.  I’d like to pose another important healthy habit we should be instilling in our kids, I’m speaking about healthy money habits.

I’m confident that I can speak from experience since I’m a mother of 4 wonderful and intelligent children (if I do say so myself).  Recently my eldest son Craig married and I’m proud of his sense of recognizing the difference between a want and a need, and his desire to save and stay out of debt.  We sat down together and discussed what his budget might look like and how he and his new bride could save money before he got married and  I was reminded of  his little money box he had when he was 8 years old.  It had 3 compartments.  One for savings, one for spending, and one for charity.  I found it quite useful and proved more successful than anything else my husband and I tried. 

For simplicity purposes you could use jars.  Set up three jars, one for saving, one for spending and one for sharing or charity.  Teach your kids now while they are young to save 50%, 40% for spending and 10% for sharing with others.  I believe this simple model will help establish healthy money patterns early on.   Children can handle this type of percentage since all their needs are really being met by the parent so don’t feel badly about enforcing this.  Obviously, when your children are older and they’d like to save for a car or some other large ticket item these percentages can change…however, be firm with 10% to self and 10 % to charity. 

It is empowering to children to be able to practice with and use real money.  When kids spend their own money and not their parents’ money, they stop to think about what they are spending.  Ask them if this is a need or a want and remind them of something they maybe saving for to stay on track.

As a parent,  pay an allowance to your children and pay them on time.   A couple of dollars may seem trite to an adult but to a young child it’s their souce of independent income.

Make sure the amount of allowance is age appropriate.  Consider the age of your child, your expectations of what the allowance will be used for  and what your family budget can afford.  As a guide, I’ve have heard to use their age or half their age in dollars per week if they are under high school.

Teach them that work = pay.  A study showed that 13 million families in America that pay allowance, half  believe allowance should be tied to chores.  I can not emphysis this more strongly of the importance of allowing your children to learn the joy of work.  After all, you don’t want your children growing up with a sense of entitlement otherwise those apron strings will not be easily cut when the time comes.

I hope these few helpful tips to healthy money habits are a great place to start with your children.  Good luck and happy savings!

By Rachel Larsen

(photos from flickr.com)