Week’s Best from Kid Wealth (#1)

I thought I’d try something new this week. I’m sharing some of the best things I’ve seen in the news throughout the week. If you find any cool stuff that you want to share, follow KidWealth on Twitter and tweet me those findings.

Employ Your Kids

I love this idea from Rob Phelan:

I’ve tried to offer them money to do certain tasks, but they are usually in a different mental space and it doesn’t go well. I like this idea because the kid can choose to do it and it’s their idea. I might customize it to chocolate instead of money for one of my kids though. While money can buy chocolate, he lacks easy access to places where he can convert his money into chocolate.

On a similar theme, I had a chart where kids could earn a prize if they completed five tasks. The tasks were almost always a worksheet. It was a great success, but we’ve moved away from it as they have too many other things to do.

Free Money Workbook for Kids

On the topic of worksheet tasks… this caught my eye:

I didn’t wait around for TD Canada to respond. Instead, I did a little searching and found this free PDF of the Thrify and Fritter kid money workbook.

Print it and enjoy!

You Can Have Anything you Want If…

This was a really sweet message from Sammy Rabbit.

Georgia Requires Personal Finance Education for High School Graduation

Just yesterday Georgia signed into law that
high school curriculum will require students have personal finance education. This has been a huge trend in many states over the last few years. Let’s hope this continues.

Of course, if you are a Kid Wealth reader, you and/or your kid could probably teach the class.

Grandpa’s Fortune Fables (Book Review)

Grandpa's Fortune Fables

On my Kid Wealth Twitter account (@KidWealth), I noticed a lot of my followers saying how good Grandpa’s Fortune Fables by Will Rainey is. I started following him and his Blue Tree Savings website. He had some great blog posts about a millionaire janitor and how McDonalds really makes their money.

Naturally, I fast-tracked Grandpa’s Fables to the top of my “to read / to review” list. To be honest, it helped that the Kindle price is currently $3. This was an easy buy because I get to help a fellow kid financial literacy advocate… and because I could be frugal at the same time.

Grandpa Fortune Fables’ Audience

Grandpa’s Fortune Fables was written for kids ages 7-13. This is a much better fit for my kids (age 8 and 9) than M is for Money. That book was aimed at younger kids. I was able to read it myself over two days. I’m a slow reader and it took me around a couple of hours. It’s 21,339 words (that information is a tiny bit of a spoiler that you get at the end of the book).

My 8-year-old is at a guided reading level of “N” and he did two chapters earlier today. I was hoping to have my kids read it and contribute to this review, but they could sense that it was “learning” and resisted. When I convinced my 8-year-old to read one chapter, he read a second one on his own because he wanted to solve the money code. Each chapter has a question at the end about the main idea. The correct answer corresponds to a letter. Get all the letters and you solve the money code, which can be used for a discount to a money club.

Maybe it’s my kids, but I’ve found that a book needs to have a gimmick to hook my kids. They’re busy with school, karate, soccer, baseball, scouts, music lessons, Duolingo, etc. I can understand why they wouldn’t want to do extra reading.

Grandpa Fortune Fables’ Format

I had expected the book to have different, unrelated money fables. I was pleasantly surprised to find that all the fables are connected by a running story of a couple of main characters. Most of the chapters end with a bit of a cliffhanger, which made it difficult to put down. I wasn’t expecting to read it in two days, but I just kept on flipping through to the next chapter to see what the next money lesson would be.

The characters themselves are a little reminiscent of Rich Dad, Poor Dad with one character who is good with money teaching the kid who comes from a family with poor money management. Rainey does list Rich Dad, Poor Dad as one of the inspirations for his book. It’s a little outside the scope of this review, but I’ve included more information at the end of this article about why I cringed when I saw this. Fortunately, readers of Grandpa Fortune Fables can be blissfully unaware of this reality and still get great financial information.

Grandpa Fortune Fables’ Money Lessons

There are 14 money lessons covered in the book. They are:

  1. Everyone Can Become Wealthy
  2. Getting Rich Quick
  3. Rich Vs. Wealthy
  4. Working Smart
  5. Kid Entrepreneur
  6. Save Then Spend
  7. Invest
  8. Debt and Gambling
  9. Tax
  10. Risk
  11. Strategy (Leave Investments Alone)
  12. Home is not an Asset
  13. Charity
  14. Starting a Business

Almost all of the chapters are done extremely well – so well, I couldn’t imagine any way to improve on them. However, the chapter on debt used a metaphor of growing red trees to illustrate debt seemed out of place. I understood what the metaphor meant knowing that compound interest in the form of debt can work against you. It just wasn’t clear in the book why the character loaning the money would plant a tree to represent how much debt the borrower would need to pay back. Even then, I can’t think of a better analogy to model it.

The chapter on your home not being an asset is a valuable lesson, but I’m not sure how relatable it is for the average 10-year-old who doesn’t own a home. This is one money lesson that will probably need reinforcement every few years until the young adult gets to house-buying age. This chapter will be a great discussion with our kids when they ask about why all their friends live in mansions and we live in a more modest house.

Final Thoughts on Grandpa Fortune Fables

I may have been overly critical on a couple of minor points of this book. I think that’s because it is overall so well done that those minor things stood out to me. I have previously said that If You Made a Million is the best personal finance book for kids, but Grandpa Fortune Fables surpasses it. In hindsight, If You Made a Million, tries to cover too much taking you from a description of what a penny is to financial independence by earning interest on a big nest egg.

The stories in Grandpa’s Fortune Fables are more engaging than the If You Made Million. I would love to have seen this book come home from school because my kids would have had less resistance to reading it. It should be the core book of any financial education for kids ages 7 to 13.

The problem with the Rich Dad, Poor Dad

Rich Dad, Poor Dad is widely considered the worst personal finance book. It comes up on most search results for “Worst Personal Finance book.” The author Kiyosaki himself seems to be modeled in Grandpa’s Fortune Fables as Shovel Sam – the scammer who tells everyone that there is gold on the island so he can get rich selling shovels. Kiyosaki is active in the MLM/pyramid scheme community. He’s also sold a $45,000 course on real estate and suggested that people fund it with credit cards.

You can learn more about these courses in this CBC Marketplace news expose:



Nonetheless, Robert Kiyosaki filed for bankruptcy. There’s so much negative with Kiyosaki it’s hard to know where the bad money lessons end.

Inspire a Kid Entrepreneur this Earth Day

Yes, today is Earth Day. I don’t know about your kids’ school, but my kids’ school puts a lot of focus on the environment. Maybe it’s just being a good citizen, but I think some of it is because Rhode Island is the Ocean State and we see all the trash that gets washed up on our beaches.

When COVID shut down schools in spring of 2020, I “taught” Earth Day by introducing them to a classic show from my youth, Captain Planet. (Sorry, it seems no streaming service includes it. If you choose to buy it from that link, Kid Wealth may earn a commission.) We got through four episodes, which was enough television for a homeschool day. While I do encourage teaching kids with television, sometimes you need something more “hands-on.”

Kid Entrepreneur Earth Day

What if you could do something for the environment and make money at the same time? I was at a yard sale with my son and this can tab bracelet caught my attention. It was mixed in with a bunch of odds and ends. It was only a quarter, but I would have easily paid a couple of dollars. Of course, I had to have it. My son wore it religiously, but after a few weeks he moved on to something else. I guess he’s a typical kid, right?

We bring it out every Earth Day because it sparks a conversation about smart recycling. However, this Earth Day, I thought, “What if we made them and sold them?” Wouldn’t that be a good business? The cost of goods (can tabs and string) is very, very close to zero. Hopefully, you have access to a bunch of can tabs – recycling them is the point of Earth Day. We don’t have a bunch of them, so we’d have to buy them. If you already have can tabs, the biggest cost is the “Inspire” tag in the picture. You can buy 80 different motivational tags on Amazon for $11 – about 15 cents each. My 9-year-old says that his friends would probably pay $3 to $5 for one. That’s a profit of more than $2.50 and $4.50 for each sale.

Before you can legitimately consider this business, you’d have to know how to make these can tab bracelets. Fortunately, the internet has you covered. Here’s an Instructable on making can tab bracelets.

There are two remaining things to consider. The kid has to put in the time and sweat equity to make the bracelets. Additionally, the child has to come up with a marketing and selling plan. It sounds easy, but it wouldn’t be right to sell at school – we don’t want to distract from learning. Maybe it’s possible to sell at soccer or Little League games? You might have to check with the league and the rules on that.

Don’t Forget to Reduce, Reuse, Recycle

Ever since we watched the Curious George movie, I’ve been hooked on Jack Johnson music. It’s great for kids because there are no cuss words and the songs usually have an uplifting message. Jack Johnson is a champion of the environment. Check out this sweet video of him singing his song “Reduce, Reuse, Recycle” with some children. It’s not only great for the environment, but it helps save money too:



M is for Money (Book Review)

Before I get started with my M is for Money book review, I need to make a disclosure. I helped fund this book through Kickstarter. My level of funding was enough to get a credit in the Champions of Finance at the back of the book. I knew that I wanted Kid Wealth to do more than create our content… I wanted to make a bigger difference and support child financial literacy from other creators. The Kickstarter funding also donated several copies of the book to schools.

I want to get my only criticism of the book out there early. It’s listed as being for ages 3-8. When the book was released my kids were 7 and 8 – on the older side of the intended audience. That 8-year-old is now 9 and a half and reading chapter books. For example, he learned a lot from A Smart Girl’s Guide To Money. (One of these days, I’ll offer him a book that’s actually in his demographic.) I would recommend it for kids at a younger age, maybe 3-6.

As a Kickstarter funder, we got a very early edition that had a small typo. I was excited because it was like a limited edition baseball card with an error. The typo is fixed in more recent printings. The typo came in handy though. I offered my kids a quarter if they could find it. Suddenly they were very interested to read the “baby book about money.” What was interesting is that my kids remembered which letters were for which words. They couldn’t find the error without me telling the page, but when I said the letter, they knew which word it was for.

M is for Money

Reading Level

As mentioned earlier, this book is good for Pre-Kindergarten to first grade. In the notes at the end of the book the author, Rob Phelan said he specifically chose words for those reading levels. I’m not a teacher, so I’m not qualified to say it is a certain reading level, but I would estimate it to be guided reading level D.

Characters

The book is full of diverse characters. It’s not just interracial couples, but also families with two mommies and daddies, different cultures like Hawaii, and handicaps. As Phalen wrote on the Amazon page:

“I want as much opportunity as possible for a child to find a character in the book with whom they can relate, and who is demonstrating using money in a positive way.”

It was great to see one of the kids wear glasses like my oldest. There were no blond hair or blue-eyed people in the book as far as I could tell. There is a woman who has light brown hair that could be arguably blonde. There are so many types of people, it’s nearly impossible to do them all, right?

Artwork

The artwork is beautifully done. I’m not an art expert, but all the characters look happy. The colors are bright and pop off the page. On the topic of pages, they are thick – it feels like the book would last through quite a few readings even with rough kids.

Financial Literacy Value

For its intended audience, the book knocks it out of the park. It’s hard to bring financial literacy to the kindergarten crowd. I loved how Stash the Squirrel is on every page with a question to create a discussion between kids and adults.

Final Thoughts

M is for Money is a great money book for early readers. It functions well as a beginner A-B-C book, but it goes beyond that fostering deeper discussions.

My biggest complaint is that it didn’t exist when my kids were younger. Instead I turned to If I Made a Million, but that book is best for kids who are 7 to 10 years old.

Starting Kids on a Financial Independence Path

I know what you are thinking – isn’t starting a kid down a financial independence path a little too early? Perhaps. However, have you ever heard anyone say that they took their finances seriously too early and should have waited? No, we always wish that we started the journey earlier. That’s more time for compound interest to help us get to our financial independence destination.

That doesn’t mean that you have to start teaching your five-year-old about P/E ratios. It simply means that you can guide them down a path of financial literacy early and let nature take its course.

I’ve been interested in personal finance since I was a teenager. I would read my mother’s Kiplinger magazine. I bought my first mutual fund when I was 14. That was almost unheard of in 1990. Investing early has worked well for me.

My other great interest is parenting. It surprised me because I’m not particularly known for my patience. However, I think I got lucky with my two boys – they don’t test my patience too much. That’s how Kid Wealth was born.

Getting them started on a path of financial independence was inevitable. One of the things they started earlier was saving up for a Nintendo Switch. (In hindsight, a video game system may not have been a perfect idea.) We had a great goal sheet on the fridge and they could see the steady progress. I saved a lot of their money when they were little and invested it. They didn’t need it because they had more toys than they could use. The investments have done well though. They’ve more than doubled. If we leave it there until they are 16 it may be a car. Maybe they’ll want it earlier.

Aside from those early financial moves, we’re doing something at home to help them financially:

Teaching Core Life Skills

This is a no-brainer. Some skills never grow old and can help you reach financial independence much earlier. Two skills that came to mind when I was thinking of what I could teach them now.

1. Cooking

Food is often a top-three expense after housing and transportation. Food doesn’t have to be expensive. Eating out at restaurants all the time can destroy a budget. If you know the basics of cooking, going out to eat is less appealing.

My 9-year-old loves to cook and he learned a lot during COVID. He went to a cooking camp last year and for a couple of weeks, he made amazing things. My 8-year-old is enrolled this year – hopefully, it goes as well.

In conjunction with learning cooking, I’ve been teaching the boys how to shop to save money. So far they aren’t very interested in hearing their dad talk about unit pricing on the shelves. There’s the occasional breakthrough, like when I point out that we could get more food for less money by making a different choice.

Being able to manage and limit one of their largest expenses can only help their financial bottom line in the future.

2. Fixing Stuff

I’m not handy at all. I can’t fix anything. I can barely work a screwdriver (maybe I’m exaggerating). If something breaks, I have to write a check.

That’s not good, especially because when you are a landlord like we are. If you are good at fixing things and home improvement in general, you can create a lot of real estate opportunities using sweat equity. You can do fix and flips of homes making hundreds of thousands of dollars tax-free.

I would love my kids to be better than I am at fixing stuff. Before COVID, Home Depot had “kid workshops” once a month. We only got to one before they shut them down. They do have kits that you can get and make small things like bookends. They’ve done that a bit for Cub Scouts. My 8-year-old loves building and figures stuff out quickly. I was able to give him the simplest Ikea shelves to put together at four and he got it.

Final Thoughts

I’m still thinking about what skills they’ll need to succeed in life. We focus on education and schoolwork. We also work on financial literacy (but not too much). Add in these life skills and some internal traits (grit for example) and hopefully, they’ll be ready for the real world.

Myth: Money Habits Are Set By Age 7

Money Habits Age 7

Whenever I research how kids learn about money, I come across the same claim:

“Money Habits are set by age 7”

Here are some examples:

If you are a parent of a 10-year-old, you may be shaking your fists in rage right now. The window of opportunity has closed and your child is doomed to a life of large debts and credit card fees. If only you had read about this a couple of years before!

You may also be thinking, “Why does educational programs like MoneyTime exist when they are intended for 10-14-year-olds.

This was my initial reaction when I read these articles. Call me naive, but I’m more optimistic. I believe that learning can be a life-long journey. I know I learned financial concepts after the age of 7. How many 7-year-olds do you know who can explain the value of index fund diversification?

Many of the articles declaring “money habits are set by age 7” don’t explain where they got that information. It’s presented as if it is just as reliable as our understanding of how gravity works. However, some articles do cite where they get that information. That’s a good thing because it allowed me to go track down the source.

The Money Habits Age 7 Study

That source is one research paper published by Dr. David Whitebread and Dr. Sue Bingham from the University of Cambridge back in 2013. You can read the Habit Formation and Learning in Young Children here. It’s 34 pages, but I warn you that it is fairly dull (and I’m a nerd who typically LOVES this stuff).

As you can tell, I’m skeptical about the research. I read it with an initial bias of “this can’t be true.” So it may not surprise you that when I finished, I came away with the conclusion, “This is complete hogwash!”

It’s not that the study is wrong or lying. It’s that I don’t believe the media is interpreting it accurately. Throughout the study, I find quotes that merely show that financial learning takes place before the age of seven. For example, take these two quotes:

“However, typically by the age of 7 years, the child is able to cognitively ‘represent’ value.”
“By the age of seven years, several basic concepts relating broadly to later ‘finance’ behaviours will typically have developed.”

These statements make sense. However, there’s a HUGE difference between learning taking place at one age and a lifetime of financial habits being cemented at the same age. My kids at seven understood the math concept of addition at age 7, but division and fractions came later. Just because a child understands the concept of adding, we don’t stop there and say, “the math habits are learned now.” No, we build on that math foundation. How else would children understand algebra, trigonometry, and calculus?

Perhaps the study’s best finding can be found in the opening statement of the conclusion:

“In summary, the evidence indicates that teaching young children explicit forms of ‘financial’ knowledge per se is likely to be ineffectual in shaping or changing their behaviours.”

My understanding of that conclusion is that young children likely can’t be taught money habits that are different than what they experience through their personal experience. That also makes sense. However, young children do grow and it would make sense that older children, tweens, teens, and adults of all ages can benefit from being taught personal finance.

Am I getting this wrong?

When I was looking up this study, I first came across the press release annoucing the findings.

What was interesting to me is that the press release highlights the business case behind the research. Specifically, it mentions Money Advice Service’s 2013/14 Business Plan. It also says that it will help them create “products and services.” That initially concerned me because I could the research being used to sell these products and services.

This is where I stress that the Money Advice Service is a non-profit that seems to be a government agency in England. It isn’t a company that has a nefarious plan to profit off of consumers (or at least I don’t think it is).

The press release also had a notable quote from Whitebread, one of the authors:

The ‘habits of mind’ which influence the ways children approach complex problems and decisions, including financial ones, are largely determined in the first few years of life. Simply imparting information is now recognised as being ineffective in this area. By contrast, early experiences provided by parents, caregivers and teachers which support children in learning how to plan ahead, in being reflective in their thinking and in being able to regulate their emotions can make a huge difference in promoting beneficial financial behaviour”.

That’s a lot of words, but it seems to boil down to what I pointed about above in the conclusion. Parents’ and teachers’ experiences with money and children age 7 and younger are important. It may not help to explicitly teach preschoolers about money other than to explain what you are doing as you do it just like you would when you teach a young child anything.

Also, importantly, the good news is that humans older than age 7 can control their financial future. Personal finance education still matters. Your 10-year-old is not doomed to a lifetime of debt.

Kids’ Money Books

April is financial literacy month. We’re kind of biased at Kid Wealth, but we feel it’s a great time for kids to read money books.

Don’t want to take our biased opinion? What about Warren Buffett’s opinion instead?

Warren Buffett said:

“Sometimes parents wait until their kids are in their teens before they start talking about managing money — when they could be starting when their kids are in preschool.”

With that in mind, I’ve compiled a list of kid money books. As you’ll see, it is far from complete. I need to review a lot more of these books. I’ll be adding information about the appropriate age of the book, the money lessons covered. Then you’ll be able to zero in on a few books that are perfect for your kids’ age and the lesson you want to focus on.

For now, I simply recommend How Much is a Million for kids up to age 8-9 and A Smart Girl’s Guide to Money for girl tweens and up. Stay tuned for another list of money books written for parents to read.

TitleReview
If You Made A MillionKid Wealth Review
A Smart Girl's Guide: Money (Revised): How to Make It, Save It, and Spend ItKid Wealth Review
Grandpa's Fortune Fables: Fun stories to teach kids about moneyKid Wealth Review
M is for MoneyKid Wealth Review
A Boy, a Budget, and a Dream
A Chair for My Mother
Alexander, Who Used to Be Rich Last Sunday
Curious George Saves His Pennies
Give It! (A Moneybunny Book)
Growing Money: A Complete Investing Guide for Kids
Harmoney & the Empty Piggy Bank: A Book about Money, Budgeting, Entrepreneurship, and Persistence
If Money Doesn't Grow on Trees, Where Does it Grow?
Make Your Own Money: How Kids Can Earn It, Save It, Spend It, and Dream Big, with Danny Dollar, the King of Cha-Ching
Malik's First Job: Financial Tips for Teens and Young Adults
Milton the Money Savvy Pup: Brings Home the Bacon
Molly Earns Her Pie
Money Plan
Moneytopia: Earning: Financial Literacy for Children
No, No, Sonny, Save That Money! A Fun Rhyming Book about Money, Saving, & Investing
One Cent, Two Cents, Old Cent, New Cent: All About Money
Pennies for Piggy
Rock, Brock, and the Savings Shock
The Berenstain Bears' Trouble with Money
The Four Money Bears
Three Cups
Ultimate Kids' Money Book

Teach Kids Investing At Any Age

Teach Kids Investing
Teach Kids Investing? What about us dogs?

Most money experts will tell you that the number one money skill is investing. It’s the best way to make a lot of money doing the least amount of work. In fact, you can make a lot of money doing almost zero work. In the United States, it’s often better to own a company than work for a company.

Yes, it’s great to save money. You’ll need to save money if you are going to invest it. However, if you save money and stick it under your mattress, you’ll be missing out on potentially millions of dollars over your lifetime.

Yes, it’s great to be frugal. If you spot a bargain, you’ll have a much better chance to be financially independent at a young age. If you are frugal, you’ll be able to save more money to invest it.

Yes, it’s great to earn money. When you earn a lot of money and are frugal, you’ll be able to save a lot of money and invest a lot of money. Everything plays a role, but investing is where personal finance becomes fun. Where else can you turn one dollar into $32 by doing nothing?

We’ll get to that $32 example at the end. For now, let’s focus on how to teach kids about investing at the various stages of their lives.

Teach Preschoolers about Investing

It may sound silly to teach preschoolers about investing. In a lot of ways it is. At this age, kids have the concept of money buying things like goods and services. However, they don’t have the concept of money making money.

Beth Kobliner, author of Make Your Kid a Money Genius, has two great ideas for teaching preschoolers about investing:

  1. Plant some seeds and water them every day. As the seeds grow into a plant the kid will see the “investment” and the results. If you have a garden, you can show how a few seeds can grow into a lot of real food. When I was a kid, my parents grew tomatoes and cucumbers. We always had tons – more than enough to give away to neighbors.
  2. Read the Little Red Hen. My kids read this in Kindergarten – it was part of their curriculum. Even though they are in the 2nd and 3rd grades now, I still use the lessons in the book. You do the work and you get the reward. The Little Red Hen invested her time and effort and got to enjoy the cornbread.

Teach Grade Schoolers about Investing

For kids in elementary school, my best recommendation for teaching investing comes from The First National Bank of Dad. Author David Owen gives his kids extremely good interest rates to emphasize the point of compound interest. Nowadays, banks fail kids, they are boring locking up money in their vault returning barely more than a zero percent interest rate.

You might also consider explaining the very basics, such as “What is a stock?” This video covers it well in less than 5 minutes:



Teach Tweens about Investing

The options to teach investing around really expand around the ages of 10 to 14. Personally, I love MoneyTime. Over the last couple of years, kids have gotten a lot more experience learning online. It’s certainly not what we wanted and far from ideal. However, it’s very rare to find an in-person class on investing for kids. MoneyTime is a great way to get experts to teach your kids money.

If learning from a computer course isn’t for you, you are not alone. I know I learn best by doing. That means that I have to get my hands dirty and invest. This is a great age to open up a custodial brokerage account and buy some index funds.

Teach Teens about Investing

Unlike younger kids, teens can work real jobs and make a good amount of money. It’s a perfect time for them to invest in a kid Roth IRA. Since their retirement is fifty years away, every dollar invested will grow many times.

This is a great age to introduce them to Rule of 72. The rule of 72 is a way to estimate how fast your money will double. You divide 72 by the interest rate to get the number of years it takes for the money to double. If you were able to earn a 12% interest rate, your money would double in 6 years (72 divided by 12% = 6 years).

I like to assume that money will double every 10 years. That’s a 7.2% return, which is usually a safe estimate. With 50 years of compounding, every dollar can double 5 times. That means that every $1 becomes $2 (age 25), which becomes 4 (age 35), which becomes 8 (age 45), which becomes 16 (age 55), which becomes 32 (age 65).

Turning $1 into $32 is magical. A kid would “only” have to invest $33,000 one time at age 15 to have a million dollars in his retirement account at age 65. Of course, it’s very hard for a 15-year-old kid to earn and invest $33,000. However, all is not lost. A kid could continue to invest for several years and keep seeing that compound interest grow after age 65.

How To Give Your Child An Allowance

How to give your child an allowance? That’s easy, you just hand them money, right?

While the physical act of giving an allowance is easy, there’s more that you may want to think about first.

Should you Give Your Child An Allowance?

There’s no right and wrong answer here. There are many kids who never got an allowance growing up. Many are now parents and say, “Hey, I grew up okay.” There’s nothing wrong with that.

My opinion is that managing money helps your child begin their financial education. They get to start to make choices of what’s important to them. They learn to plan and save for more expensive purchases.

Getting access to money is the first step in their financial journey. I think it’s easier to do it through an allowance, or payment for extra work around the house. Otherwise, they may have to wait until they get a job like a paper route, lawnmowing, or babysitting.

Earning a Basic Allowance

How to Give Child an Allowance

I believe it’s important for kids to understand that they earn the allowance. They have to do some chores around the house. It could be making their beds, doing laundry, cleaning dishes, whatever you feel is most appropriate for their age group.

I believe children should also be given the chance to earn extra money for extra work. In our house, that means cleaning up after the dog or making him breakfast. It isn’t always clear what should count as basic work and what should count as extra work. This is a case where I think you just have to use your best judgment.

How Much Allowance to Give Your Child

The general rule of thumb is that every child should get a weekly allowance equal to their age. My 6 year old would get $6 and my 8-year-old would get $8. When I first read that, it seemed like too much. I cover many of their expenses… why do they need so much money?

However, the $1 a year rule of thumb will make more sense when you read the next section. When you budget that allowance it won’t seem like so much.

Teaching Your Kids to Budgeting Their Allowance

There are three basic things that kids can do with their money. They can give it to someone in need. They can save it for something in the future. Finally, they can spend it.

Many people get physical jars of Give, Save, and Spend so that the allowance can be divided out.

1. Give

I believe it’s important to start with the amount of money to give. As parents we don’t focus on giving. However, we have to cover basic needs like housing, transportation, and food. We also have to pay taxes. Kids have life good. They don’t have to pay any of those.

They can afford to give money. I think it’s valuable to get them thinking about others who are less fortunate, especially if they are as fortunate as my kids are.

The rule of thumb is to put one-third of the money in a giving jar.

2. Save

My favorite jar is the saving jar. I’ve always been the type to save my Halloween candy for a rainy day. The comfort of having those “savings” meant a lot to me.

Saving money is important in three ways. A child can learn that they can save money for something extra special. A child doesn’t necessarily need an emergency fund, but saving lays the early groundwork for that. Finally, savings are necessary to take the critical step towards building wealth: investing.

3. Spend

Spending is very important. Children can learn a lot by spending money. They may even learn more when they make “mistakes” or realize that maybe they should have spent differently.

Give, save, spend… you have noticed that the math is easy – simply divide the allowance by three. If it doesn’t divide easily, I’d put the extra dollar in the saving jar.

When Should Give Your Child An Allowance

If there’s one theme to remember with everything when it comes to allowances, it’s that there are no firm rules. My 6 and 8-year-old don’t get an allowance yet. It’s not that they don’t deserve one or that we don’t believe they should get one. We’re simply very busy with a lot of other activities between karate, Boy Scouts, archery, and homework. The days go by so fast that we never get to everything.

I hope to get them started on an allowance in the next couple of weeks. I want to have a plan of standard chores and bonus chores. I’m also looking at getting this spend, save, give jar. We might also make due with a few mason jars and some rubber bands to hold them together.

Final Allowance Thoughts

Much of this article is based on my gut and only a little quick research into the best way to give a child an allowance. Like everything in parenting, I’m learning as I go. I’m sure there are more than a few things that I haven’t thought of. If you happen to have more experience or even different gut feelings, I’d appreciate it if you drop me a line in the comments.

Teach Your Tween About Money

Teach Your Tween About Money

The tween years (10-13) is the most exciting time to teach a kid about money. It is perfect for four reasons:

  1. Tweens have enough math skills to handle some difficult concepts.
  2. Tweens are old enough to want more expensive things. This means they’ll need to save money.
  3. Tweens are old enough to make money on their own through side hustles.
  4. Tweens still look up to you and don’t have the freedom to ditch you for their friends just yet. In other words, you can still influence them.

Tween math and money skills

tween moneyWhen I was a kid, the concept of compound interest got me hooked on personal finance. Back then banks were paying interest rates between 6-8%. The act of saving money was the same as investing it. Banks aren’t paying that kind of interest nowadays, but you can open up your own bank and subsidize those great interest rates.

When I introduced my 8-year-old to MoneyTime Kids it was a little cruel. It’s designed for tweens between the ages of 10-14. While he could understand many of the concepts the math was difficult and he wasn’t able to take full advantage of it. He’s nine and a half now and I think that 18 months has made a big difference. He went from only knowing half of his multiplication tables to multiplying 3 digit numbers and long division.

Tweens want more expensive things

There are still some times that my 8 and 9-year old boys are fine with a cheap knick-knack. However, more and more they are becoming more interested in expensive things. It started with the Switch and now it is games for the Switch. Fortunately, the Pokemon games they like tend to have a lot of replay value.

Soon my kids will be hanging out with friends more and spending money with them. I’m sure they’ll want to fit in with the latest shoes and clothes. While we’ll always get them certain shoes, if they want the best designer brands, they’ll have to cover some of the cost. That’s an opportunity for them to learn about saving and budgeting.

Tweens and side hustles

Tweens aren’t old enough to work “in the real world.” I had to wait until I was 16 before I could work at a fast-food restaurant. I saw that Mcdonald’s was advertising for kids age 14 to work there.

Fortunately, tweens can do some side hustles. Babysitting and mowing lawns is perfect for many 12 and 13-year-olds. This is a good way for them to earn significant money.

Tweens will still listen to parents – some times.

I know that when my kids are teens they’ll have better things to do than listen to me give them money lessons. They may not agree with me, but at least there’s a chance that they pay some attention.

Final thoughts about tweens and money

There are so many different directions you can go to teach your tween about money. Beyond what I already included in the article, this is a great age to give them insight into the family finances.