How to Teach Your Kids About Money…Without Allowance!0
Alec Gorynski, Vice President, Community Development and Corporate Social Responsibility, First National Bank of Omaho, shares his tips for teaching kids about money…without allowance. Instead of allowance, he opts to provide guidance on how to reach children financial wellness.
2-4 Years Olds
It may be too soon to discuss abstract financial topics but this is a great time to start practicing financial skills such as earning rewards for good behavior, counting, and waiting for something they want. Give your child a coin to place in his or her piggy bank (with adult supervision) as a reward for positive behaviors such as putting away toys after playing with them. Periodically, empty the bank to count the coins with them to demonstrate how their hard work pays off over time. Introduce the idea of commerce by turning in a certain number of coins for a certain reward. For example, 10 coins equal a trip to the park.
5-8 Years Olds
With this age group you can introduce the concept of earning and saving money from activities such as household chores, lemonade stands, birthday gifts etc. Have your child keep their earnings in their piggy bank or savings account and celebrate every time they make a deposit. Instill the feeling that saving is a good thing because it will help them get something bigger in the future. If they choose to spend some of their hard-earned money, teach them about making choices with their money. You can’t buy everything you want so if we buy a new doll today, you can’t buy new coloring books tomorrow.
Ages 9-12 Years Olds
The tween years are a good time to start talking about some of the bills we pay as adults and how they relate to ‘needs’ vs. ‘wants.’ For example, mom and dad have to buy groceries for the family which is a ‘need.’ If we spend all our money on all the latest toys which are a ‘want’, we won’t have enough money to buy food and we will be hungry. This is also the perfect time to start talking about budgets. Explain that you can’t spend more than you earn in a given time period and that the money you earn must pay for ‘needs’ first (food, shelter, utilities, etc.). After you have paid for all of your ‘needs’ you can then decide how much to save and spend on ‘wants’ with what is left over.
Ages 13+ Years Old
This is an ideal time to start encouraging a part-time job outside the home to earn more money and learn responsibility such as through babysitting, walking dogs for neighbors, or working as a grocery store carryout. Earning larger amounts of money sets the stage for saving for bigger ticket items such as a cell phone, computer, car, etc. Start encouraging your teen to save for these bigger ticket items to help them gain an appreciation for the hard work that goes into purchasing them. This is also an ideal time to introduce the concept of sharing some of our hard earned money with others by giving to a charity or purchasing special gifts for friends and loved ones. Work with your teen to determine an amount to set aside from their earnings in order to share with others while still setting aside enough for saving and spending.
We also publish the enclosed workbook, “Saving First,” with our partner, the Nebraska Educational Savings Trust, which provides a guideline for smart saving and spending. It helps children identify needs vs wants, set short- and long-term goals, and guides them through the goal setting process.