7 Easy Ways to Teach Young Children Financial Responsibility

Some of my earliest memories involve picking up rusty bottle caps strewn around the backyard fire pit of my parent’s college-town rental units, and scrubbing dusty windows, sticky floors, and stained counter tops between the not-so-clean tenants.  Of course, I was handsomely rewarded for these efforts, raking in a penny for each bottle cap and a few nickels and the occasional shiny dime for the other cleaning jobs.  I remember my parents counting out the small coins into my hand after a long day of cleaning; on a good day I’d rack up a whopping 37 cents or so–I was living the high life!  Then on the way home we’d stop by the local bank where I deposited the money into my own personal bank account.  I recall how carefully I’d write the numbers in the squares on the crisp deposit slips and proudly hand over my newly-earned money to the bank teller in exchange for a printout of my account balance to add to my “records” at home. 

Looking back on this it seems a bit ridiculous—going to the bank to cash in a nickel, or setting up a rudimentary filing system in a five-year-old’s room to store bank statements showing $5.87 in the account.  However, now that the five bucks has ballooned into a much higher number I’m ever-grateful to my family for teaching me the value of hard work, the power of savings, and the importance of knowing how the money is spent.

Here’s some ideas you can use to teach your children these same lessons.  First we’ll start with ways for them to earn money.  Let me emphasize the word “earn”—this isn’t a reward for good behavior, an allowance, or some other handout, rather it’s an exchange for quality labor, time, attention, and energy.

Hire them!  Small odd jobs rewarded with even tiny amounts of money are enough to teach the most fundamental lessons.  I’d argue the less you pay, the better the lesson is learned.  This forces them to save in order to purchase even inexpensive things, plus it forces them to be extremely discretionary with their meager sum.  Here’s some ideas:  cleaning the house, shoveling snow, planting or gathering vegetables from the garden, filling in holes in the yard, clearing ditches, feeding pets.

Pick up recycling.  Some states have programs where you can turn in bottles and cans for 5 or 10 cents.  Walk your kids down the road with a bag and pick up all the empties—this might quickly add up to a few dollars.  As a bonus, it also teaches them respect for the environment. If your state doesn’t pay, then do it anyways and simply pay them from the spare change in your own pocket.

Help them start a business.  Sell lemonade from the porch, mow the neighbor’s yard, shovel sidewalks for the older couple across the street, wash cars, haul dumped firewood into neatly-arranged rows.  A bit more in-depth lesson is financing your child’s first business loan and having them buy seeds in bulk to sell to the neighborhood, and then making them pay you back in weekly payments plus interest. (Yes, my parents did this when I was 7, and I spent what seemed years working to pay off that $73 loan after I failed to sell more than a few dollars of seeds!)

Earning a bit of cash is only part of the equation.  Teaching them what to do with it and how to spend it are just as important.  Here’s a few tips on that front:

Open a bank account in their name.  They’ll take great pride in having something in their own name that they alone are contributing to and responsible for the outcome.  Also, use this moment to teach them about interest.  I remember being fascinated at watching my pitifully-small sum earn its first penny in interest.  At the time, I equated that to picking up a bottle cap—but magically I didn’t have to do any work at all to make that penny.  That’s a powerful lesson for a young child, especially since the time value of money means a child learning this will benefit so much more than a 30-year-old learning this.

Gift them a US Savings bond.  Having an official document in their name gives the opportunity to teach them the importance of record keeping, and lets them glimpse into navigating the bureaucracy of government and financial institutions.

Gift them stocks or mutual funds and actively track the fluctuating value over time.  Let them sell it when they want.  I remember my dear grandmother gifted me some Bellsouth stock when I was young, and we’d look up the stock in the weekly paper to learn how much I’d made or lost that week.  Children exposed to this knowledge at a young age are at a huge advantage because they learn about and follow the financial markets for about a decade before they really start making any sizable amount of money worth investing, and therefore theoretically will make earlier, smarter decisions with their money once it becomes more plentiful with a real job.  

Before each purchase, discuss how it’s an exchange for work.  After picking up bottle caps for a few hours I learned a Snicker’s bar equaled a lot of scratches, bug bites, and dirty fingers.  Suddenly Snicker’s bars just didn’t taste as good—but a bowl of ice cream was totally worth it!

I haven’t given my parents and family members enough credit for the lessons they taught me as a child.  What I learned at a very young age has shaped my entire financial outlook and I’m certain I would not be where I am without their actions.  I’m most thankful and hope to perpetuate the good they’ve brought to my life through these lessons by offering them to you in hopes your children will benefit as well.

Bottom Line:  Here’s 7 easy ways to teach young children the value of hard work, the power of savings, and the importance of knowing where their money is going.

Did you find this post interesting?  If so, check out www.minmylife.org.  If this blog post caught your attention, I recommend starting with the Sustainable Finances page. 

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