4 Things to Teach Your Kids About Money
It’s my pleasure to host Rachel Cruze today at MegMeekerMD.com. Rachel is the daughter of bestselling author and financial expert Dave Ramsey. She brings a unique perspective to talking to kids and teens about money. We hope to bring you more financially-oriented posts from Rachel in the future. —Meg
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Guest Post by Rachel Cruze
Let’s be honest. Sometimes, we just make money way too complicated.
Growing up, my parents did a great job of teaching me that managing money is based on one thing: common sense. Despite what you might hear, we all have it!
And the best thing you can do for your kids is to help them start putting their common sense into practice. You’ll do that by teaching them these basic principles of money management:
Work
We talk about it all the time—the most powerful wealth-building tool is your income. That goes for both kids and adults. The 6-year-old you teach to save for a bicycle will eventually turn into a 17-year-old who is eager to save for college.
Pay commissions, not allowances. Your kids get commission for doing chores around the house, like taking out the trash, feeding the dog, and helping with the dishes. Instead of simply giving your kids money for breathing, give them money for being productive around the house! That’s how they’ll learn discipline and work ethic.
Spend
Priorities. Priorities. Priorities. Making money shouldn’t be a license to go spend it all right away. Too many kids and teenagers make $50 and spend it within a day on something they will have forgotten about a month from now.
As a parent, how can you make sure your child understands how fun it is to spend while also remembering how important our next subject is?
Save
Yep, saving. It can seem so boring. But, believe me, it’s one of the most important things you can teach your child. If your child heads off to college without understanding the principle of saving, then he will most likely graduate with a lot of debt.
Start early. Use a piggy bank or, even better, a clear jar so they can see their money growing. Once they are old enough, open a basic savings account.
Give
Giving is what it’s all about. The point of building wealth is to change your family tree and give a bunch of it away. The earlier your child gets that, the better they will be in the long run.
Help them pick a charity to support and teach them about tithing. Instead of just giving them a dollar in the church parking lot, let them use their own money to tithe. That’s when they’ll really feel the impact of giving!
These are the basics—simple principles you can teach your kids at an early age.
And, remember, keep reinforcing the importance of working, spending, saving and giving. Don’t simply sit them down for one discussion and leave it at that. Look for teachable moments.
Talk about money as often as they want to, and be available for questions. Before you know it, you’ll be raising a money expert!
Growing up as Dave Ramsey’s kid, Rachel Cruze learned the basic principles of money at an early age. In the past year alone, Rachel has delivered those same principles, in a personal and passionate message of money and hope, to more than 100,000 teens and young adults across the country. To find out more about Rachel, visit daveramsey.com/speakers or follow her on Twitter at @RachelCruze.
6 Responses to “4 Things to Teach Your Kids About Money”
Those words are a mantra at our house since taking FPU a few years ago, along with “Is it in the budget?”
The importance of teaching your children these skills cannot be over-estimated. Kids are hungry for this information, too. Naturally growing up into a good financial steward opens a cornucopia of choices to this child when they move into adulthood. Want to be a SAHM? Can’t do it if you can’t manage money and you’re in debt up to your eyeballs. Want to take a leap to entrepreneurship? Not going to happen if you can’t bridge the gap financially.
Really understanding how to manage your money, as opposed to your money managing you, is a key to a life abundant with giving and much more freedom of choice.
As your dad reminds us, “Just think what you could do if you were debt free!”
Good to see you here, Rachel. I look forward to more of your wisdom. Enjoyed you in Generation Change, too, which we have taught to our teen youth group at church.
It’s hard to switch gears from wanting to provide so many things for my kids to wanting to provide the best gift of all — a work ethic that will provide well for them throughout their lives.
I got my first job at age 13 and have been employed in some form or another ever since. Teaching my kids the value of earning a dollar rather than expecting one as a handout (especially in the current economic climate) needs to become a much higher priority in my household. Thanks, Rachel, for the much-needed trouser kick!
At what age would you recommend starting to pay “commissions”? Also – at what age do you recommend opening up a basic saving’s account for a child?
Hi, Cara. I’m posting Rachel’s answer for you below.
From Rachel Cruze:
I suggest you start paying commissions as early as 3, but a commission and the work done to earn a commission is going to look much different at 3 and 13. When a child is 3 cleaning their room means you assist them in picking up their toys and they might earn $.25 for this. When they are very young make sure you pay the commission immediately so that they can make the connection between money and work. As they start to get older, the work they do will become more significant as should the money they get paid for this work.
I recommend opening a checking account for children around 14. If you all spend a particular amount each month on the child’s clothes and other various expenses, I would try putting this money in their account and letting them keep track of it. Make sure you explain to them where this money is coming from and that they are responsible for managing it. This allows them to take ownership of the money and start learning more in depth about budgeting. Remember that as a parent you are still in charge of parenting, though. If they start spending their money in this account on things you all do not approve of you still have the right as the parent to not allow these purchases.
I was so blessed by this blog. Thank you!
Thank you!!!