Teaching Children about Money

I was in the store the other day and ahead of me in line was a little girl with her mom. The girl was throwing a tantrum about not getting a candy bar. Talk about annoying. After about 2 minutes of crying, the mom gave in and put the candy bar on the checkout belt.

Then, to top it off, the mom’s credit card was declined at the register. As I waited patiently a few spots behind her, she fumbled through her purse looking for some cash. She didn’t have enough for everything – so instead of putting back the candy bar, she puts back bananas and some soup cans!

While that moment could have served as an excellent teachable moment for that small child, it also made me realize that I need to make sure I teach my future children financial responsibility, and part of it is role modeling myself. I found this list of 12 Things I Want My Kids to Know About Money, which is a good start, but here are some simpler thoughts from me.

1. Money has to be Earned

The first thing that I want to make sure is engrained in my children’s minds is the fact that money has to be earned. As in my recent shopping experience, that child has no sense of money, and the mom just made the problem worse. She essentially rewarded the child (with money she didn’t even have) for throwing a tantrum.

I plan on giving my children a commission for doing chores, and teaching them that they have to earn the money they want to spend on things. Frankly, this was one of the greatest things that my mom taught me. To this day I have no problem with work ethic and am willing to do whatever is necessary to make sure the bills are paid each month.

2. You Can’t Always Afford Everything You Want

I’m waiting for the day when my child wants to buy some toy that they didn’t save up for. I think it will be a great lesson to highlight that you can’t always afford everything you want. This lesson seems to be lost on so many adults these days, and it’s one I didn’t grasp until I had major financial struggles of my own.

While I understand that teaching your children this lesson will be difficult (possibly painful), it’s absolutely necessary. It’s so rare to see parents that are willing to tell their kids, “NO!”. It’s no wonder that kids these days think everybody should be handed to them.

3. Spend Less Than You Make

I also want to make sure that my children always spend less than they make. I haven’t fully decided on how to do it yet, but it will probably involve making them open a savings account at the local bank, and going down to deposit some of their commission there every month. I think that both the aspect of saving, and going to the bank monthly, will make it memorable and build a lesson around it.

4. Be Prepared

Finally, I want to make sure that my children are prepared. Like I mentioned saving each month, I want to make sure that they know the importance of being prepared for emergencies of all kinds and other things that may come up. I saw a news clip the other day about a house fire, where the children knew what to do because their dad had taught them what to do in emergencies. The same applies to all types of emergencies – including financial.

The sad truth is that most parents avoid financial conversations with their children. The reasons for this are infinite but it mostly revolves around two things: (1) the parents don’t know much about money themselves and (2) the topic is typically filled with stress and parental fights. So bringing it up around the children is often forbidden.

While it’s great to find ways to TEACH your children how to handle finances, it’s important to remember that they’re always watching what you do. Regardless of what you say, it’s likely they’ll follow in your footsteps.

About the Author

By , on Aug 8, 2013
Andy Tenton
Andy is a 30-something New Yorker who turned his financial life around. He took charge of his finances, got out of debt, and is now working his way toward financial success. He is the publisher of WorkSaveLive.com.

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  1. S. B. says:

    While I have no issue with your financial points, I feel the example said a lot more about basic parenting than finances. Kids are not stupid. Once a child observes that throwing a tantrum results in the candy bar being granted – even ahead of the household groceries – the parents should expect a lot more of that behavior to be forthcoming.

  2. Mary says:

    Great post Andy! Being a parent is really hard, and sometimes I am guilty of giving my kids the candies they want. Even tho I know that it is not good to give up, sometimes it is about surviving the moment, the day. I like to give the benefit of the doubt to parents, we don’t know their lives and their struggles. I like to think that we are all doing our best.

  3. I think I’ll give a small weekly allowance, assuming they helped out around the house. Of that money, I’ll help them set up a system for saving some of it for the “long term.”

  4. Andy, I felt the same way as you before we had kids. People said things to me like “just wait until you have kids, you will see things differently.” Well, now I have two kids and feel the exact same way. Spoiled children are a very sad thing to see and it makes me furious when I see people overindulging their children because they are too lazy to say “no.”

    Stick to your guns!

  5. “You can’t always afford everything that you want.” I think that one wins for me. I cannot stand it when someone is complaining to me about being broke but they start naming off tons of things that they do not have to spend money on! Wants and needs are not the same thing! You simply cannot afford everything you want all of the time. I’m sure even the uber-wealthy have to pick between which islands to buy…

  6. It is very hard not to just cave when your child is throwing a tantrum, but we have really never allowed bad behavior to be rewarded, and I can honestly say our five year old doesn’t throw fits to get things at the store. (Going to bed and putting away toys is sometimes another story). We do use bribery way more than we should as in “If you can be quit and good while x happens, we will get ice cream, candy, fill in the blank after.” You do the best you can, but it is never too early for kids to learn the things on your list.

  7. I remember the days when my ideals were intact… But then I became a father.

    To you I say this: good luck!

    • Andy says:

      LOL. I can dream, right? One of the reasons we haven’t had kids yet is just because I’m not ready. I know full-well that being the parent that my future kids will need will take an EXTREME amount of discipline, love, encouragement, patience, and guidance. Frankly, I’m not up to that challenge yet but when that day comes I pray I’ll be ready. It’s so easy to be a parent when you let your kids do whatever they want and have their way…however, I’ll say that I don’t think that’s best for the child and their future. It’s tough to be a great parent and who knows if I’ll be up for that challenge. Kudos to all of those out there that are really PARENTS to their children (and not just friends).

      • Don’t wait too long… You might never feel ready. I certainly didn’t.

        But there will be times where your child will break you down and exceed your abilities and limits. Often on an alarmingly regular basis. Our son has a stronger will than my partner and often my own. He will cry himself into a feed-back loop of misery some times. So he just gets worse and worse and worse until you are forced to end his suffering.

        Ask yourself this: how many completely sleepless nights can you endure before you and your partner go completely bonkers?

        It’s all about picking your battles. The younger the child the fewer battles you will win. They just don’t have the ability to understand what’s going on.

        • Andy says:

          In this particular scenario the child was 4-5 years old, so definitely old enough to start understanding some general rules and concepts. I’m not sure how many sleepless night I could endure but I do like the psychology I’ve read about letting a child cry himself out. The younger a kid is the less amount of time you should do that, but the older they get the more you can/should. There is a lot that goes into being a parent and frankly it hasn’t been placed on our heart to take that step. I don’t know when that day will come but I’m not in any rush.

          • My son is approaching 2 years old… We haven’t had a good night sleep since. See how crazy you feel after 2 years of sleep deprivation. Brutal doesn’t even begin to describe.

            As for a child of 4-5 sure lessons are great but if you’re flustered, out of cash, and a network failure made your card decline you might want to escape the shame and embarrassment of the implied stigma that the people in the lineup are casting your way and get the heck out of there as fast as possible.

            There are too many factors for your example that you simply couldn’t have known. If her card wasn’t refused due to a network error, perhaps she had recently lost her job and her deadbeat dad had skipped out on support payments. Or worse, the father might have been in hospital, or terminally ill, or passed from the previously aforementioned illness. Or she’s looking after her ailing parents, or has a special needs child at home.

            Something’s going to give now and again. Or for the hypothetical situation I’m alluding to, far more often. Children WILL repeatedly push you past your breaking point. You too will cave. You can think that you won’t. But you will. It happens to everybody.

            Sometimes the silence and relief even of a few minutes that the chocolate bar provides is worth it’s weight in gold.

            Lets talk again in 7-10 years!

        • Andy says:

          I forgot to mention that I’ve heard that picking battles thing from a lot of parents. It will be interesting to see which ones we cave on and which ones we don’t. My wife and I have joked that we’ll be the worst parents of all time. I think we’ll fall more in line with the European/French way of raising kids than what you see from Americans. Here is a great, controversial article I read a few months back about the differences: http://online.wsj.com/article/SB10001424052970204740904577196931457473816.html

  8. Sad story but I bet it happens every day! I hope to keep my kids in line and teach them the value of money and you have some good ideas for a decent start.

    • Andy says:

      It’s definitely a sad story but it does happen ALL the time. Some of the best tips I’ve read on teaching kids about money is from AJ at the Free Financial Advisor. He’s got some GREAT life stories and it’s so fun to hear how kids learn/grow when they’re properly taught.

  9. Michelle says:

    It is a lot easier to give into your children when they throw tantrums, but it makes it a lot harder in the long run. We started “discipline” at 1 year for each of our kids. We don’t spank, but we do firmly say “no.” and then take the child out of the store if they continue to cry so that no one else has to listen to it! This isn’t just a lesson in money that the mom is ignoring; it’s a lesson in self-restraint that will carry over into many areas of that child’s life. The real world is going to kick that kid’s butt if mommy doesn’t teach him that you can’t always get what you want! I didn’t see the situation myself, so I feel weird being judgmental, but I’m being completely real here. I would probably think the same thing you did, Andy! ANNOYING!!

    • Andy says:

      I honestly feel terrible for parents when their child starts throwing a tantrum. To be frank, while it’s annoying, I get really excited to see when the parents don’t give into them and let the child continue to throw a fit. I’m more than happy to listen to it when the parent follows through on the lesson they’re trying to teach.

  10. bogofdebt says:

    Great post and yes children notice things even if you don’t think so. I knew better than to throw a tantrum because I would be taken away from the store and punished. But I didn’t understand the value of saving money or shopping by list. They eventually started to list shop but that was more in my high school years and I don’t think they ever saved any money. And I would have put back the candy bar!

    • Andy says:

      It’s quite interesting to hear stories from my clients on how their kids behave and act IF they’re been taught money principles and IF the parents have shared with their kids their thoughts on money. I’ve had many clients tell me that they’ve talked to their children about the family’s personal budget and explained to them what they can/can’t afford. In many of these circumstances the kids will ask, “mommy/daddy, can we afford to buy this candy bar?” I’ve had a few clients that have multiple kids and the older one will tell the younger child to ‘put that away, it’s not in the budget.’ LOL.

  11. I’ve talked about how to teach kids about money at some of my speaking engagements. There’s no art to it. And I think what you are doing is excellent. I’m sure the next step will be is to teach them the save and share the money!

    A friend of mine who has a little girl, teaches her about money by getting her involved. For example, he would have her give the money to the cashier and makes sure she asks for the receipt. He can see her daily involvement has quickly expedited her understanding of money. Especially, when they have to use their own money.

    • Andy says:

      Ornella, I think you’re right on. Each family and child are different and therefore require a different set of lessons. Regardless, finding some way to teach them is imperative and foregoing those responsibilities is unfortunately the reason so many young adults struggle with money today.

  12. Eddie says:

    Great post Andy!
    I learned a lot from my parents on discipline, and tackling instant gratification.
    This is something that I’ll pass one to my kids (hopefully one day). My parents pushed me and my brother hard into sports, not only were we gifted athletes, but now I understand that it was a lot from a discipline point of view, and learning to take on responsibility.

    • Andy says:

      Eddie, it’s so interesting to learn and understand the influences that parents really have on their kids. I’m convinced that your kids will be a direct reflection of you and your behaviors…whether good or bad. I believe many of my initial struggles with money was because my parents did spend without regard and I wasn’t taught ANY financial education growing up.

      The good things I learned though was from sports and being taught to work hard from both of my parents. The lessons learned there and how they’ve played into my life today have been a great blessing to me.

  13. I know a lot of adults who would benefit from studying your four thoughts! 🙂

  14. Sara says:

    If there is one thing that drives me bonkers, its people without kids shelling out judgement and advice. How old was this kid? Little kids have no concept of wants vs needs. And this mom maybe just got off working two jobs, and is exhausted from work and dealing with a needy kid. Maybe this was the only time she folded out of sheer exhaustion and realizing that everyone in the line was irritated with her kid. I hope you have many many moments to eat your words once you have kids. Just you try to “teach” your child about budgeting while he/she is screaming in the checkout lane with a bunch of people glarring at you. This was most likely a horrible moment for this lady, one that you could have helped by showing a tiny bit of compassion and you didn’t.

    • Andy says:

      Hi Sara, big thanks on taking the time to comment for the first time and sharing your thoughts. I figured I’d get some criticism on the post for the reason you mentioned (not having kids of my own).

      To address your comments though, there was definitely a part in me that wanted to help the lady, but from my own experiences and also from coaching people over the years, I knew that I would simply be enabling instead of helping. Sure, that’s tough to do and acknowledge but when I struggled with money (see my Broke, Desperate, and Being an Idiot post) many people gave me money in hopes of “helping” – all it did was allow me to continue my terrible decisions for months longer. In reality giving people money that don’t know how to handle money doesn’t help them at all; it simply enables poor behavior and allows them to continue the poor behaviors they’ve developed.

      I’ve experienced this first-hand with trying to help close friends and family members. I’ve given people gas money to get to work when the night before they took their girlfriend out bowling and to dinner. Weeks later the event would replay itself and the person would come back claiming they had no money. I’ve given somebody a down payment for a car only to have the car repossessed months later.

      Even if the mom was exhausted it doesn’t mean you should give into your children and enforce their negative behavior by rewarding them with what they want…especially if you don’t have the money to do so.

      I could play the “what if” game with every person I come across every day, but my experience tells me that this wasn’t a one-time thing. Sure, it could have been, but odds are that is wasn’t. There’s typically a reason why a person has a credit card that is almost maxed out and doesn’t have money in their checking account to use the debit card as a fall-back plan.

      I do have compassion and grace in many situations, but again, experience has shown me that people that struggle with money only overcome their struggle when they hit bottom and are FORCED to change. From the clients I’ve coached to my own personal story, that’s the way 80% of people learn (unfortunately). They have to get scared enough and have fear slap them in the face before they get serious about things. My personal change didn’t come until ALL of my credit cards were maxed out, I couldn’t get anymore because my credit was so bad, and when one of my bank accounts were $1,000 negative. That situation meant I no longer had ANY option to spend money I didn’t have and I was then forced to learn how to budget, live on less than I made, and that’s when things changed.

      Sure, I would have loved to have “helped” and been compassionate, but in all likelihood the same situation and problem will arise for that person/family. I would have just delayed the inevitable a few days/weeks.

  15. Daisy says:

    I would also add that you have to work hard for it. I think it’s important to even teach kids about money as toddlers (if they can walk, talk, and play). When I babysit, the little girl always plays “store” where she makes me “ice cream”. I always pretend to pay her and ask for change.

    • Andy says:

      This is a great tip, Daisy. It’s so important to understand that working hard will result in good things. As a child my mom did instill this principle in me and I have little doubt it’s why I’m willing to work like a crazy-man these days. Furthermore, I mentioned this on a guest post I had at Money Saving Mom, but I believe that teaching me to work (and work hard) around the house helped me to be a better husband. I have no problem tackling many of the chores and household responsibilities that many men leave to their wives.

    • I completely agree. I try to do that with my godson. Knowing the value of money is so important. There are so many things that I wished I had learned earlier.

  16. Michelle says:

    That’s crazy about the mom. I don’t want to judge just because I don’t have kids, but I would have most likely put the candy back. These are all great things to teach kids. I learned a lot from my dad and I would hope to pass it down!

    • Andy says:

      Yeah, I don’t like to judge either but I’ve coached enough people over the years to see tendencies in people and parents in-particularly. The sad truth is that we weren’t told “no” often enough when we were children and it led to difficult times for my mom as we grew up. When I saw that mom it was a flashback of my childhood and I unfortunately have a pretty good idea where it will lead.

  17. Super post, Andy. Raising kids is an art, not a science, IMHO. Thinking through these kinds of issues are important. Be sure to mix in a sprinkle of grace with the lessons.

    • Andy says:

      I couldn’t agree more about the grace but I do believe as a culture we’ve become extremely passive when raising children. Very rarely are kids disciplined and told “NO!” and they’re often given whatever they want. I have little doubt that it’s HARD to raise children well but it’s something I hope my wife and I are disciplined enough to do.

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