How to Talk to Your Kids about Money

I had two very eye-opening conversations with my 5- and 7-year olds last week, which really got me thinking about how we talk to our kids about money.

It all started when my husband rented a power washer to clean off our deck before restaining it. Our five-year old was particularly fascinated by the sprayer and was so sad — like crying big fat tears, sad — when we had to return it four hours later to Home Depot.

He kept begging us to buy our own power washer (I know, the things kids want!), so I finally told him that that kind can cost up to $1,000 to buy new, which is why we decided to rent.

His eye got big as saucers and he said, very quietly — as if in the presence of greatness, “A thousand dollars? No one has a thousand dollars. That’s like a billion dollars!”

I chuckled, and then explained to him that while $1,000 is a lot of money, it is nowhere near a billion. (I wish.) I went on to rock his world by telling him that we actually have a lot more than $1,000 in our savings account. But we only use that money for emergencies, which is why we don’t want to spend it on power washers.

The next day, I was driving my seven year-old to school. He’s my little spy — he hears everything you say (even when he’s down in the basement and you think he couldn’t possibly have heard) and then works it out in his brain. Eventually, though, we get some question or comment that reminds us that he’s always listening.

After overhearing my conversation with his brother, he was clearly ruminating. About two blocks before I got him to school, he asked me, “How come you’re always telling me that Bakugans and Pokeman aren’t in our budget when you have all that money? And how come you and daddy have to work so hard if you’re already rich.”

{Inside, I was thinking, “Bwahahahaha! That’s a good one kiddo. Rich! Hahaha!”}

But instead of laughing him out of the car, I explained that Daddy and I had worked very hard to save up the money in our savings account — and acknowledged that yes, it probably does sound to him like we have an awful lot.

“That money is only for emergencies, though,” I told him. “What kind of emergency?” he pushed me.

{Gulp} Without scaring him, I wanted him to understand why we’ve worked so hard on saving this money — and why keeping that up is so important to us. So I told him, “Well, what if we had a car accident and needed to buy a new van. Our insurance would pay for some of it, but not all of it. Or what if there was a fire at our house [he’d just learned about fire safety in the Boy Scouts] and we had to fix the things that burned?”

Always one step ahead of me, he challenged me again, “But you told me that savings were for things I really wanted to buy and didn’t have enough allowance to pay for this month.”

That’s true, I said. But there are actually two kinds of savings accounts: the first is for emergencies and the second is for things you want to buy or do in the future, like go on a vacation or get a new car. “Or buy a Nintendo DS,” he added. Right!

Finally, I told him that his dad and I continue to work hard every month, because there are things we have to pay for that don’t come from our savings — like food and electricity and winter coats. If we spent all of our money on “wants” — Bakugans, flat screen TVs — it would be gone before we knew it and we wouldn’t have anything left for what we really needed.

As we pulled up to the school, I wondered to what degree all these lessons we try to impart really sink in. I remember a lot of TALKING about money when I was growing up, but I don’t remember a lot of TEACHING about money.

I want to TEACH our kids that, sure, they can buy Bakugans and power washers, but there are opportunity costs to those choices. I want to teach them how to really make a budget — and more, importantly, how to stick to it. I want to teach them how to balance a checkbook and how to calculate compounded interest.

But most importantly, I want to teach our kids that they don’t have to be afraid of money. That money isn’t a mystery. And that saying no can sometimes be more of a blessing than saying yes.

Tell me, what lessons do you want to teach your kids about money?

Comments

comments

Comments

  1. Leigh Ann says:

    (nak, excuse typos :))

    Great post, Mara. My kids are a little young for such detailed conversation, but I just listened to a podcast on sort of this topic (“Teaching Kids How to budget” on the Manic Mommies) and it got me thinking. I guess philosophically I want to teach my kids that money constitues responsibility, that it takes responsibility to earn it, to save it, and to spend it, NO MATTER HOW MUCH YOU HAVE. From a Jewish standpoint, that money is one of our most powerful tools for fulfilling mitzvot and tikkun olam, and so even though we *could* buy 100 “How to Train Your Dragon” toys with $1000, what HaShem wants us to do is to save it for a rainy day or, depending how much we have, to give it to others who need it more. And that HaShem wants us to enjoy life, so maybe we buy 2 toys, but that He also wants us to be partners with Him in tikkun olam. (I really love the idea that HaShem gives the world enough food, but it is our job to complete the work of “hazan et ha-olam – He feeds everyone.”)

    Okay now that I have typed a novel, here is what money conversations look like out our house:

    Asher: “Why does Abba go to work?”
    Me: “To get money”
    Asher: “Why?”
    Me: “To buy lunch.”
    Asher: “And what else?”
    Me: “Clothes and shoes and our house.”

    He seems to have internalized those answers pretty well (can repeat them back to me) so I think that’s about the level he can handle. :)

    Thanks, Mara! I’m hoping to post more about this on my blog later.

    • Awesome comment, Leigh Ann! Thanks for adding the Jewish piece to it. I’m sort of laughing at myself right now, because the fact that I didn’t write about that lesson tells me where my angst lies. Giving it away, good. Saving it up, still working hard to internalize that part. When my husband read this post he had his own twist on, which just proves to me — yet again — how much our emotions (largely picked up in childhood, I’d imagine) impact our relationship to money!

      • Leigh Ann says:

        Haha, well, my angst is in the same place as yours, I’d reckon. I think that saving is HIGHLY underrated in the Jewish community as a whole, so much so that my husband and I anticipate there will be snags for us in the future because we are so CRAZY about saving SO MUCH money – and we are nowhere near where we want to be.

        You’re not alone. But it is a good point that everyone grows up with their own money attitudes and hangups, which can be the source of a lot of strife and misunderstanding in the community, I think. Shawn Zevit, a colleague of mine, put out a sort of course for congregations on that topic, it’s a good read – it’s called “A Torah of Money” I believe.

        Thanks again. :)

  2. My husband and I both grew up very poor, but there was a big difference. My family was poor and lived frugally. His was poor and lived on credit. The difference in our two families now (his siblings and mine)is amazingly far apart.

    We have been blessed by HaShem and knowing how little we both had at one point in our lives (no milk, no gas money, only second had clothes, etc) neither of us wanted to be there again. We knew it was important to impart what we had learned through the years on our children and to start YOUNG! Because, yes, to them $1000 does seem like a lot, but then dropping $10 on a doggie treat because “the dog deserves it” seems like very little to them. I digress, but last week when I was trying my darnedest to get out of Hyvee with a zero balance after using all my Mara taught techniques, my eldest was pleading her case for all these additional full priced non-essentials like doggie treats.

    As soon as their addition and subtraction skills were in place we started giving each child $5/week allowance. We usually pay it once a month at the beginning on the new Hebrew month. So they are given $20 each. This is not attached to any chores or is never held back as punishment. Chores are expected and that can be a whole different topic. With their allowance, 20% is given to tzedakah ($4), 20 % is given to family taxes ($4), 20% goes into their long term savings- college ($4), and the remaining 40% is theirs to with as they wish ($8). Each child handles that $8 differently. I have a child who has never spent a cent, and another child who buys treats for everyone.

    After that, if they make money outside the house babysititng or raking leaves, we ask them to pay 10% into tzedakah. We do not leverage family taxes on that money. We assume in the future their income will no longer be cash under the table and taxes will be taken out. So if our daughter somes home from a babysitting gig with $15 she will go to her room, make change and drop $1.50 into tzedakah.

    We set up this framework for our kids because it represents real life. First is Tikkun Olam and the 20% (For allowance) or 10% (for earnings) toward tzedakah. Second is our commitment to the family in the form of “family taxes”. This money is saved in a can and when it adds up the kids can decide it is time for us to do something as family. We will go to a movie or take the money along with us on vacation so they can get an added treat like ice cream. Then the long term savings. For grownups that is retirement, for kids that is in the form of funding their secondary education. With so many kids, they have got to learn now that they will have a BIG part in funding that. The last %40 is theirs to make decisions with as they see fit.

    We pray we are doing right by them. The next lesson is credit cards, debit cards, atms, investments, etc. We are going to add that segment to our oldest child’s “curriculum” soon and perhaps the second child’s too. Once they have their Bar/Bat Mitzvah they come into a “wad” of money and it is so important for them to understand the fundamentals before it all gets wasted on disposable junk.

    • I always love your comments, Dana! I bet you can do a lot with this in terms of homeschooling. They can even get real checking accounts and practice all this money stuff, while they still have a safety net.

      I agree with you (and Anne) about chores – this is what you do as part of our family. We still haven’t figured out a system that works, so I always love hearing people talk about how they “do” chores. I do, by the way, sometimes let them earn extra money for especially grubby chores that go above and beyond.

  3. Great post Mara. We have given our kids allowance for the last couple years. They get $5 a week. $2 for spend, $1 for save, $1 for share, $1 for invest. They can spend their money on whatever they want. Often it is the ice cream man, pokemon cards and junk that I won’t buy at the store. When they talk about something they want we go see how much money they have in their “save” envelope. Sharing usually happens around the holidays. They like to put their money in the UNICEF halloween boxes or the salvation army bucket. We also donate to Kiva and they like to track and see how the person we lent money to is doing. Invest we don’t talk about too much yet but my thinking it will be for a car or something really big.

    We don’t tie this money to chores around the house. You do your chores because you live here and if you don’t do them you don’t get the privilege of doing anything else until they are done. :) This is simply to teach them about money. My childhood was the same where I heard a lot about money but wasn’t really taught about it.

    • Do they complain about having to “invest” when they don’t have a concrete goal? That’s one of the tough things about this money stuff and younger kids – how to make it concrete enough to keep them interested.

      I totally agree with you about chores – they are not paid, they are part of what is expected of you when you live in a family.

  4. I read in a book recently a man telling his wife who was commenting on not spending too much on a hat: no one gets rich by saving money.

    For some reason that comment struck me. I don’t know why. I’m a saver for the most part and I think teaching our children to live beneath their means is the basic tenet of finance we need to be sure they learn, understand and live.

    But the concept of getting wealthy is a different story. It’s one I don’t know how I feel about or whether I want to teach my kids about. Maybe that’s off-topic here but I suppose the basic tenet there is to use whatever you manage to save to buy things that earn you money.

    • I really appreciate this added angle, Amy. You are absolutely right that saving money is only one (small) part of the wealth-building equation. I do like your twist of using those savings to “buy things that earn you money”. Ultimately, that’s the investing lesson, I guess, but we aren’t there yet with our kids.

  5. This really is a great topic! We have a hard time making our son understand saving up for something he wants. For example, when he lost his first tooth, his Grandpa sent him $10. That money was burning a hole in his pocket and he was relentless about spending it. We kept telling him if he put it away he could save up for the Lego set he really wanted, but he opted to find a small set for under $10. It’s especially difficult because both my husband and I were savers growing up – it would never have occurred to either of us to spend money as soon as we got it.

    I’m intrigued by commenter Dana’s allowance budget – I really like the idea of a monthly allowance with set percentages for where the money goes. We get a lot of grief when we ask our son to add a couple of his own pennies to the tzedukah box before Shabbat.

    I’m very curious the methods for making sure chores get done, though, if they are not tied to the allowance.

    • I probably sound like a broken record, but with tzedakah as well, I think making it concrete is especially important for little kids. We try to really talk about where this money is going and who it is going to help. But we also make it “mandatory”, with the hope that it will become habit for when they actually have real money to save/spend/invest/give. We have this cute little bank with different categories. I’ll do a little post on it soon with a link so you can check it out. We need to get one for our 5 year-old, since he just had his birthday and that’s when we start allowance.

  6. Chores…I cannot say they get done completely without complaining, but they do get done. We have created what might seem an elaborate system (but really it is not). I have four kids and we have eight chores. The chores are paired in twos. Each kid is assigned a couplet of chores for the entire week. The following week they get the next two chores, etc. After four weeks they are back to the first set of chores. Of course they all have favorites and they all dread one or two of the chores, but they are only doing it for one week AND I have an assistant assigned to help them should the chore be excessive for the week. Sometimes the recycling is completely out of hand and I will send the first child with his or her helper out to tackle it. They never have to feel they are doing it alone.

    We have managed to make chores happen without any punitive action. We just explain to the kids that there is a lot that needs to get done to make a house run and that we cannot do it all. My kids are all older (9-13) so maybe that helps, but we have been doing this for at least 2 years. Would love to hear what others do.

    • Your kids are incredible about doing their chores. I really need to get organized with this, since our chores are much more — “Okay, now mom says it’s time to clean up the basement” or “set the table” or whatever — rather than clear and predictable.

  7. Mara, this is a great entry. I really enjoyed what you wrote and what you said to both boys!

  8. Mara – Great to have this conversation with kids. I have no kids, but thought my parents did 2 good things (okay, lots more than 2, but 2 easy ones w/r/t money). First, there was always a tzedakah box on the dryer in the laundry room. My mom was always very frustrated with us for not emptying our pockets before putting clothes in the laundry. Any money that was not emptied from pockets by lazy or careless children went into the box and not back to us. We learned the importance of giving but also the value of money. Second, whenever we wanted something, we were asked whether we would still want it if we had to pay for it ourselves. It is a lot easier to be generous with someone else’s money. It also made us think twice about whether we really wanted or needed something (not that an affirmative answer necessarily meant that whatever it was would be purchased for us!).

    • Amy, thank you so much for reading and commenting! Lovely to “see” you! We do something similar with our kids’ and their many, many wants… we tell them to put it on a “list”. Whether a list for chanukah gifts, or birthday gifts, or just for them to save their money and buy. Seeing it on a list lets them really see that desire and figure out if it’s truly something they want… or just a passing fancy (and 9.5/10 times it’s the latter!). Thanks again for reading!

  9. I love this post! It is so important to teach our kids about money. My parents didn’t spend a whole lot of time on the subject – for some reason, money talk was taboo in my house, so I’ve had to learn a lot the hard way as an adult. My favorite part of your post is: “And that saying no can sometimes be more of a blessing than saying yes.” Yes!
    Thank you for sharing and linking up with me!

  10. love this post! I hope I can be this wise when we start having children.

  11. Hi Mara. I know this is an old post but I just came across it and wanted to ask your opinion.
    My allowance practices seem to be working out pretty well. My kids each get a reasonable allowance and they have occasional opportunities to earn more. We don’t pay for chores; as members of the household, everyone is responsible for pitching in.
    One of my questions/struggles is how to separate what is a required chore and what is an extra which they can earn extra cash for. For example, I’d like my older kids (12 yr old twins) to help out and babysit for my little one more (she’s 2). If I hired a babysitter, I’d pay $6 an hour. Do you think it’s fair to expect them to babysit for ‘free?’ Or should I be paying them the rate they could be earning if they were babysitting for neighbors?
    Would love to hear your thoughts.

    • I also do the same – you do chores because we all do chores. I do give occasional chores for “bonus bucks” – but those are more one-off tasks (gardening, snow removal, etc.) We’ve also found other means of currency (for the boys right now it’s baseball cards) that help us to incentivize certain tasks.

      As for the babysitting… hmmm… Well, would you pay a *12* year old $6 per hour, or are they still in mother’s helpers territory? I know that I had a mother’s helper who was 12 and I paid her less than that (I can’t remember the exact amount?) – it was her first job and she was helping with the boys while I was home with my daughter (a newborn at the time). Is this full-on babysitting or while you are in the house?

      I guess I do think you should pay them *something* – and while it doesn’t have to be the going rate, it should probably be in the ball park.

      Or… (can you tell I have no experience with this yet?)… what about talking to them about it and seeking their input? It occurs to me that a certain amount of pitching in is just part of being in a family (say one hour a day or less), but beyond that, you will pay them? I’d say get their input – let them track it – and then there won’t be feelings of resentment as they get older. (It’s possible that as the oldest, I’m especially sensitive to that part of the equation.)

      HTH in some small way! xo

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