Somebody’s watching you does not mean that you are under surveillance by “Big Brother”. What it means is that when you have children, they are watching you. You are their primary teacher. Children will emulate their parents’ behavior, whether good or bad, including financial behavior.
If children see you handling financial crises with debt, guess what, they’ll do the same thing. Therefore, you need to demonstrate proper financial behavior to them. Not only do they need to see proper financial behavior from you, they also need you to teach them proper financial behavior. Think about when you potty train your child. You don’t just have them watch you go, you physically take them and put them on their potty. Then, when they go, you make a big deal about it. It’s no different with money.
So how do you go about teaching them about money and when do you start? First, you must be age appropriate. You can’t tell a three-year-old that they need a savings account or a checking account. However, they understand piggybanks. With children from three to six you need to start with piggybanks. A teen on the other hand, is too old for a piggybank. They can get a bank account.
For the younger children, get yourself three plastic jars, one for saving, one for giving, and one for spending. Label one jar “Savings”, the other “Giving”, and the last jar “Spending”. [Empty plastic water bottles, empty peanut butter jars, or empty peanut jars work great.]
You can have your child help you decorate the jar. Have them cut out pictures from old magazines or newspaper inserts and paste them. For example, pictures of toys can go on the Spending jar; pictures of a church can go on the Giving jar, and a picture of dollar bill can go on the Savings jar. Let your child decide how they want to decorate their jars. They might just want to “draw” their own pictures for each jar. When the jars are done, you can “pay” your child for their work. Decide how much you want to pay them. Next, have them put some of the money in each jar. The spending jar should not get the majority of the money.
You need to teach your children that money is not free. They are not given money. They earn money. When you have young children under six years of age, you get them to help you clean. Of course, you know that you’ll be doing the majority of the work. However, they start getting the idea. Have them help you clean up their toys from around the house and put them in their toy box. Maybe give them a rag and have them “dust” a coffee table. Then, when they finish their “job” give them a big hug and pay them right then and there. Just as with the potty training, positive reinforcement is paramount.
Next, have them put their “wages” in the jars. Let’s say they earned a quarter for dusting. Give them two dimes and a nickel. Place one dime in the Savings jar, one in the Giving jar, and the nickel in the Spending jar. Plastic jars work great because they can see their money growing every time they add to it. They start saving their money for what they want to buy. Occasionally, have them count their Spending money and take them to the store, so they can buy what they want, as long as they can cover it with their money. You have taught your child that when they work, they earn money.
Before you go to your worship service, have your child take the money from the Giving jar with him. He will donate his money at the service. Your child is learning what he can do with the money he earns.
His Savings jar will continue to grow, as he adds money to it. Your child will get a big kick out learning that saving is fun. Just as he grows each year, his money grows too!
You are reinforcing the fact that when you work you earn money. Conversely, if you don’t work you don’t get money. Continue having them use their jars until they are able to get bank accounts. Nowadays, major banks will only allow checking accounts when your child reaches sixteen. However, most banks will allow your child to have savings accounts. Start your child with a savings account. Use the money they’ve saved in their Savings jar to open the account. Keep their Spending and Giving money at home in their jars. This way they have easy access to this money. Obliviously, as your child gets older, you won’t use the same chore chart. Change it up as the children grow. Look at what Deuteronomy 6: 6-7 says:
“These words, which I am commanding you today, shall be on your heart; and you shall teach them diligently to your sons and shall talk of them when you sit in your house and when you walk by the way and when you lie down and when you rise up.”
When your teen is old enough to get a job, have them start working. Their paychecks should be automatically deposited into their accounts. If you have been following the previous steps for teaching your children about money, they will know that the money they earn should continue to be split into Savings, Giving, and Spending. However, when your teen starts working, they can open a Roth IRA. This is a great time for them to start saving for their future. Remember the power of compound interest and the financial advantage of youth.
Another thing that you want to do is to have your child start paying for their extra-curricular activities and their clothes. Also, if they want to buy a car down the road, they should start saving for one. You could offer to match them with the same amount of money they save. If they are able to save $2,000, you can match them with another $2,000. This will allow them to buy a used car for $4,000. Only offer the match if you have been saving the money for the match as well or have money saved that will not come from your emergency savings or retirement.
Banks will often offer your teens a credit card. If you allow them to get the card, make sure they understand that they must pay it off in full a couple of days before the due date. The only reason I say before the due date is that banks will access a late fee if the due date falls on a weekend or a holiday and the payment gets posted on the Monday or the following non-holiday day. They also charge interest on the outstanding balance. Also, your teen needs to learn to handle credit cards at a young age. If they are unable to pay the charges in full, take away the credit card. As soon, as they get paid make sure they payoff the card. Do not give them the credit card back. Your teen has shown they are not ready to handle a credit card.
When you teach your children about money, you are empowering them to succeed. You are training them in the way God wants them to handle money. Look Proverbs 22:6-7:
“Train up a child in the way he should go, even when he is old he will not depart from it. The rich ruleth over the poor, and the borrower is servant to the lender”.