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Teaching Children to Manage Money

We would like to teach our child money management at a young age. I never had any training and have made some really stupid mistakes. He is only five, but he knows a bit about money, coupons, saving, and tithing. I am thinking $5 a month: $1 for tithing, $1 for saving for college (long term saving), $2 for short term saving and $1 for things he wants. This way he gets used to tithing, saving money, and realizing he has $1 to spend.


I was not thinking of tying this to his jobs, because he is pretty helpful and does his jobs. The other suggestion I read about is to give him credit for each job he does and tying the money into this (same % as above). I understand both points of view, using allowance for money management and to teach them they need do to things for their money. Any suggestions on which way would be best? Thanks.

By Mindy

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January 5, 20100 found this helpful
Best Answer

I commend you. Most people don't think or consider doing this and we have a lot of financially challenged kids in our country. Okay, to your inquiry, I think you are thrusting too much at him all at once. Let's break it down:

I am thinking $5 a month: $1 for tithing - this gives the wrong impression, start young with the understanding that the tithe is 10 percent and help him learn percentages early (note: I would also recommend if you are teaching to tithe you include money gifts as tithe-able income, including gift cards)

And please explain tithing to him completely, make sure he understands that by tithing the Lord will bless his income. He is not paying for salvation. I don't know your religion so I won't preach, just make sure "your" understanding of tithes and offerings are passed on and understood to your child.

$1 for saving for college (long term saving) - too early for the child to understand but you can start doing it for him, wait till he is a bit older and explain what you have been doing and let him know it is time for him to take over OR you can do what my parents did and bought a life insurance policy for me, at a young age it is very cheap and has potential (or at least it did)

$2 for short term saving - I think you have this one and the next one backwards, $1 short term saving and $2 spending. Only because the child needs to learn the purpose of saving money, my parents always told me to save for a rainy day, so I thought when it rained I could spend that money, be clear that you save money for items you can't quiet yet afford and it is their choice to save even more to get a specific thing.

$1 for things he wants - like I said above I think this should be the $2 amount, give him the option of saving more of it

You could also give him $1 to save for gifts for others (birthdays, valentines, Christmas, etc). I personally think the allowance should be weekly and thinking about it you could move it from monthly to weekly later in age. You are starting earlier than I think anyone I know of.

Another idea is a quarter reward for doing chores or $1 for really big tasks. (and don't forget tithe). It's a bit early for your child but I give my kids a $1 for every A on their report card. My youngest only gets +'s on her report card so I give her 50 cents for each because they are numerous and seem too easy to acquire.

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January 9, 20100 found this helpful
Best Answer

It sounds like you are thinking well and doing a good job at an early age. I have 3 kids myself but did not get them until they were in early grade school so I did not have the opportunity to start these lessons younger.

I had to start with this is money. Here you go every week. Then I progressed to this is your chore, now here is your pay for doing the chore. The next step is that is your pay and if you want to buy something pay for it with what you have or do not get it.

I am currently on the step of learning about credit this past Christmas they bought what they wanted for their presents with the money that was given to them from different family members but like any modern teenagers they want more, so at times I will pay for the item for them and then they are now in debt and have to owe me (the bank) back . Someone suggested to me that I should charge interest just like a regular bank [maybe that can be the next step].

When they start to understand the value on money and debt I will then progress to a savings step (since at this time they are unable to keep anything in their piggy banks)

my plan is to offer my kids a choice of helping out with the bills of the house or to place the same amount into a saving account for when they become 19 year old. I think they will all choose the savings account.

As for your tithing; I wish I could have started that at an early stage and it would be a habit by now. Good luck

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January 9, 20100 found this helpful

I think the $5.00 is perfect for teaching him, just make sure you use 5 ones so he can see each dollar and where it is going. As he gets older you can explain the 10% to the church. He is only 5 and you don't want to put so much on him to try to remember all at once. I teach 4 and 5 year olds and they can remember good but they also get upset if they have so much to remember and they start forgetting it. Hope you understand what I am trying to say!

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January 10, 20100 found this helpful

Umm, did you realize you've got your 5-year-old tithing double? 10% of $5 is $0.50.

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