2019-2020 was an exercise in teaching our elementary school-aged children personal finance, driving independence and encouraging them to make constrained resource decisions.
In 2018, nobody under the age of 12 in our home understood what money is, where it comes from, and where it goes. They just knew they wanted control of it... the sooner the better.
At that time, Husband and I had 3 elementary school-age children. In our family (like most), money is a finite resource that requires ongoing creative and thoughtful management. When we began, our children didn’t understand this. It is our parental duty to teach them why and how.
The kids knew money is powerful, just as they viscerally understood that food, shelter, and video games are essential to life. The kids longed to engage with money on both the earning and burning sides of the equation. It’s part of adulting, and what kid can’t wait to grow up? If only they knew how good they have it today!
Exposure from a young age to the realities of the world is a super-big thing. ~ Bill Gates
All three children routinely asked me why I have to go to work since I have credit cards to pay for everything. At the beginning of the year, 7-year-old Little Man held me up one morning as I attempted to rush out the door.
He beseeched, “Why can’t you stay with us? When are you going to retire?” I was 46 at the time.
“Little Man, I have to go to work so we can pay the bills. We have to pay for our house, our electricity, and our food.” I made the decision to be a few extra minutes late to help him understand. Sitting down on a small stool, I looked at him eye to eye.
“But Mommy, you have credit cards to pay for all of that.”
“Yes Little Man, but we have to pay back the credit card companies.”
He paused for a moment. “Oh, so you buy the credit cards then?”
“Yes.” (close enough) “That’s the right concept. I must work to buy the credit cards, so we can pay for everything.”
“Oh, OK. I love you Mommy, have a good day at the office.”
At that moment, it was clear that our children have major disconnects in their minds between earning, spending, saving, borrowing, and investing. We had some other brewing issues that had to be addressed as well. It was time to step up our parenting game.
7 Catalysts for Change in our Home: The Before Situation
Finance 101. What is money? Where does it come from? Where does it go? The kids see credit cards and assume there’s an infinite pool of money.
Saying Yes. The children frequently ask us to buy stuff for them. Everyone gets frustrated with “No.”
Household Participation. The children do not pull their age-appropriate weight within the family. It’s time to engage them in the home labor force.
Income. The kids want the opportunity to earn more and need safe, age-appropriate ways to do so.
Spending With Purpose. Cash burns holes in little pockets. Once in hand, they want to spend it as soon as humanly possible.
Accounting. Cash is generally untrackable, driving countless disputes over how much belongs to each.
Future Planning. The kids need to learn how to handle small change when they are young, so they can handle the big bucks when they’re grown.
After a year of effort, our three chickadees have dramatically advanced their understanding of money. They have learned how to make spending decisions, within the framework of their income and savings. They make tradeoffs between reusing materials on hand versus buying new. They forgo small immediate gratifications to save up for large purchases. They find ways to negotiate amongst themselves and partner together to get what they want sooner. The oldest (now 10) started a neighborhood pet care business, complete with distributing business cards. They have more ownership of their financial future, where the conversation no longer is “Mommy will you buy me …” but rather “How much money do I have on my ledger?”
By using a few simple principles and by sticking to them, your young household can go through an equally astonishing transformation.
My next several posts will share both philosophy and practical methods for teaching the littles how to harness their finances. The philosophy is about mindset and empowerment.
Allow your children to make financial decisions. Help them experience the processes of earning, spending, and saving money. Force them to make constrained resource choices so they learn how.
The better they become with $5, $20, and $100 decisions now, the better they’ll be with $50K, $200K, and $1M decisions as adults.
As with all skills, practice builds muscle memory. Our kids have made tremendous strides forward in twelve short months, and I'm sure we are just scratching the surface so far.
What works well in your family? What practices do you employ to teach your children how to handle money in language and lessons that resonate with them? I am excited to adopt your best practices in our household too.
Stephanie Brooke Lennon is the author of Family Bank Blueprint, GoldQuest, and What Would Water Do? Simple Strategies for Navigating Life's Obstacles. Her titles are available in Paperback and Kindle on Amazon.com. Follow Stephanie Brooke on Facebook, Instagram, TikTok, YouTube, Twitter, Amazon, and at BrookeLennon.com.