Last week I talked about how to teach your teen about money. Today’s focus will be on teaching older children (~9-12) about money.
I’ve talked several times before about how poorly my parents prepared me to be financially on my own. If my parents had been intentional with money, I would likely have avoided several mistakes I’ve made to date. My parents were not intentional in managing their finances, let alone teaching me about finances. From an early age, I watched my parents do pretty much everything you’re not supposed to do with money, so I spent most of my childhood watching my parents essentially fail at personal finance.
As your children age, it’s important to give them more age-appropriate responsibility and freedom. For these older kids, this may look like saving up their own money to purchase a desired toy, game, book, or even experience (camp, anyone?).
The younger your children are when you begin intentionally teaching them about money, the more deeply ingrained your lessons will be, so be sure you’re teaching them good lessons.
Here are some ways to help teach your older children about money:
1. Talk To Them
Sitting down with your kids and talking to them is a great practice. You don’t need to have a long, drawn-out speech or lecture. One of the best things about kids is they ask a lot of questions so you’ll have plenty to work with, most likely.
When you talk to them, remember to focus on what you want them to take away from your time together. What family values do you want to pass on to them? How do you want them to handle future problems? What personal finance tips or advice do you have for them? For example, if saving money is a strong belief for you, be sure to not only share the belief but strategies to make it happen.
Please note, disclosing your family’s financial situation is not appropriate. Sharing how you save or budget, such as for a specific item or category, is appropriate.
2. Variable Chore Cost
Most older children are tasked with weekly chores and are given an allowance (“paycheck”) for completing their chores. I think chores are great for kids! They teach responsibility, prepare children for the future, and offer them some independence in how they acquire money.
There are two primary ways to handle chores: variable chore cost (addressed below) and collective chore pay (#3).
With variable chore cost, you assign a value to each chore your child is responsible for an individual price you will pay for the child to complete this task. This serves two purposes:
It teaches your older child that not all work is valued the same. This helps show your older child the difference in low skill work/cost and more advanced skill work/cost. This is not designed to make your older child think less of people work in low skill jobs but rather to show then the different options for the future.
This also teaches your older child what to expect in future jobs. If they pursue a less skill-oriented job they can expect a lower pay. If they pursue a more skill-oriented job they can expect a higher pay. This is not meant to discourage them from following their passions but to give them insight into how their decisions may play out.
3. Fixed Chore Cost
Alternately, you can give a lump sum for completing all chores to show your older child that all future professions have expectations that many different tasks must be completed.
4. Mandatory Family Costs
Every time your older child is paid, have them set aside 10% for a contribution to the family. This can be handled in one of two ways:
They still have access to this money and can decide how they wish to treat the family (order pizza, go out to dinner, take everyone to the movies, etc.). This helps to teach them self-confidence, pride, and a sense of accomplishment because they are able to provide something for their family.
This can be given to the parents/guardians as a “rent” payment. This rent payment is to help prepare your older child for future reoccurring bills and help them to manage their money to ensure all bills are paid. (Note: This money should be set aside in a separate bank account and returned to the older child when they prepare to move out on their own.)
5. Teaching Through Games
With the rise of technology, there are many different ways to teach your child about money through games. Traditional board games such as Monopoly, Life, and Payday may work, but more technological games, such as online games can be even more effective. Most of what I learned about personal finance, I learned independently through Neopets.
With Neopets, your child has an account where they can earn points to purchase items for their pets. There are many different games your child can play to earn points and work towards their goals. This whole process teaches working towards goals, saving money, comparison shopping, and much more.
Other online options include Reality Check, Celebrity Calamity, and Financial Football.
As always, when your child is on the internet, be sure to monitor what they are doing for safety.
6. Money Management System
Everyone needs some kind of money management system. A money management system is any system used to plan and manage your finances. This can take many different forms: a written budget, cash envelopes, electronic envelopes, jars, etc.
Each family will have their own system of what is important. The most common categories are:
Typically, four or fewer categories are ideal. The purpose of this is to show them how to divide their money into important categories. Be sure to explain the purpose of the system and your reasons for implementing the system.
Important note: if you want this information to stick, give your child a sense of control over their money by allowing them to determine how they would like to divide their money. If they don’t have a say in how it’s divided, they’re likely just doing to get angry and/or reject the system entirely.
Because most people are visual or kinesthetic learners, using a visual and tangible system (like jars or envelopes) is most helpful in teaching kids about how to prioritize their money. The act of seeing and manually dividing their money helps them to develop a more lasting understanding and practice of these skills.
If your child is an auditory learner, spend more time discussing the importance of this system and why you believe they should use it.
Regardless of what type of learner your child is, make sure you have them explain back their understanding of the system.
Help prepare your older child for their teens and adulthood by teaching them financial responsibility early on. Teach them the values of saving money, delayed gratification, routine costs, and future job expectations. Talk to them about your family values and how you want them to relate to money.