Teaching Kids the Value of Money

March 22, 2007

Our third grade niece spent a few days with us recently and got me thinking about kids and money. Our little guy isn’t a year old yet so he’s too little to understand the value of a dollar. Although I do occasionally remind him as he lays on the changing table that if he had better bladder control we’d save money on diapers 🙂

I know what kids learn in the early years of childhood is crucial to their mental development. I wonder what age is the right time to begin developing their financial skills. I don’t want to bore my son to death with talk of compound rates of growth and debt-to-asset ratios but on the other hand I want to make sure he is financially knowledgable and responsible.

I ran across an article in Business Week last night, The Five Rules of Money for Children, that gave five basic money principles to instill in your kids.

1. A penny saved is a penny earned.
2. Stick to the budget.
3. Learn the power of interest.
4. Stay out of debt.
5. Giving back is the best gift.

Just think, if everyone had learned these concepts at a young age what a different situation our country would be in financially. I’ll do my best to pass these onto my son, I only hope that he’ll listen to his dad 🙂


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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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5 Responses to Teaching Kids the Value of Money

  • Susanna

    Good advice, not just for kids but also for adults who don’t speak financialese.

  • Bernard Ng

    Go easy on the kid. Don’t bored him with compound interest theory and debt-to-whatever ratio.
    Perhaps get him the Cashflow game, or showing him some animated video like the one I had on my blog – http://www.richdadwisdom.com/?p=110. That will make it fun for them to learn.

  • Ben

    Cool Blaine, I’ll check out his allowance article.

    Jenn, thanks for all the tips! Sounds like good advice, I’ll have to try them out.

  • Jenn @ Frugal Upstate

    Well, my kiddos are 3 1/2 and 5, but I’m trying to teach them some very basic concepts.

    #1-I’m a stay at home mom, but I talk about the fact that the reason that Papa (which is what we call the hubby) goes to work is to make money so we can pay for things like food and the house, gas for the car and the things we buy at the store. Not constantly or anything, but just mention it occasionaly. I am trying to teach them the idea that someone must work for the things that we have.

    #2-Purposely make sure they don’t get everything they want for their birthdays and Christmas. I just want them to understand they you don’t automatically get everything you want. Our children are by no means abused-they get lots and lots of toys, but I don’t want them to think that every want is a need and will automatically be given to them.

    #3-We usually watch TV that doesn’t have commercials with the kids (ie videos, PBS or Disney-Nickelodian has commericals!) This does cut down on the “gimmies” or material wants, at least until they hit school age. But when we do happen to have something on that shows a commercial I try to discuss with my 5 year old how the commercial is trying to make you want to buy something. She’s a pretty smart cookie (not that I’m biased or anything) and now when she sees commercials she always tries to tell me what they are trying to sell to her, like it is a game! When she is older, this will lead hopefully into discussions of wether things are as cool as they are made to appear in advertising, and if they are really worth your hard earned money.

    #4-We actually have a store in town that still has penny candy. We go in occasionally and each child is given 5 pennies. They can pick out 5 pieces of penny candy, or one piece of the more expensive nickle candy. If they pick out 6 pieces of penny candy, I make them put one back. I am trying to teach them that money has a certain value, and when the items you want exceeds that value you have to make choices.

    That’s just what I’m doing with my very young kids.

  • Blaine Moore (First Time Home Owner)

    Head over to Nickel’s raising 4 boys website, and find an article where he talks about how he pays his allowance to his kids. He starts when they turn three, and the process itself is educational for them. I think that he has a good system.