So recently, my daughter’s tooth came out, right in the middle of class (Grade 1) on the second day of school. Everyone wanted to see it. They were probably just curious about it since most of them haven’t lost a single tooth yet. They were also probably too young to look at the tooth and see a golden nugget. After all, we all know that teeth are like gold because the tooth fairy will exchange lost teeth for coins while you sleep. She got her magical $1, then not a week later… #2 came out and another $1 came.
We’ve been trying to teach our kids, at a very young age, about proper money management. We give our oldest daughter (age 5) an allowance; $1/week. We sat down with 10 dimes and explained what happens with her $1/week.
- 1 dime goes towards tithing. Sacrifice is such an important trait to be taught. If you are not religious, give 10% to a charity of some kind…. find some systematic way to give. For us, tithing is the right choice. We have her make the donation herself to give her a proper sense of ownership and giving.
- 4 dimes go to savings. This comes out to her saving 40% of her income. At her young age, learning the value of saving is so important. We teach her that it is not wise to spend all of her money every week. We opened one of those no cost savings account and set up automatic weekly transfers from my account to hers for $0.40 – so I don’t forget. This is long-term savings, not to be withdrawn. This is the beginning of her college fund.
- 5 dimes go to her. She puts them in a small container and saves these for something that she wants. The tooth fairy money goes here too. Every once in a while we’ll review how much she has and she can decide if there is something she wants to buy with it. We set goals. If she does want to buy something, we check how much money she has saved to see if there is enough. If she wants something that she can afford, she can take her money and buy it.
Recently, there was a book fair at school. My daughter brought home an order form and chose not a book, but a kit for making princess tiaras. We looked at the contents listed and the cost. We then explained to her that we could probably go to the dollar store and get 2-3 times more materials for the same price and she could make many more crowns. It took some convincing (and we left the decision with her) but eventually, she went to the dollar store with my wife and came home with a bunch of materials and made a beautiful tiara. We reinforced the decision by complimenting her on her choice and now that she has so much extra material she’s decided that she can share the materials with her sisters :) Such a good daughter!
What techniques do you use to teach your child about money?