Children and Money

Teach Kids How To Save, Spend and Share Their Money

Teach Kids How To Save, Spend and Share Their Money | www.TheHeavyPurse.comEvery blogger will tell you that they didn’t exactly know what to expect when they started, and I was certainly no different. I had my mission and lots of passion around financial literacy, but wasn’t sure if anyone else would care. Well, thankfully you did! Today we’re going back to the beginning because when I find a new blogger to follow, I join them in progress and suspect many of you do the same. We wind up missing out on lots of great information that bears repeating.

One of my biggest a-ha’s as a Certified Financial Planner (CFP®) has been how much our parents influence our relationship with money and how our money habits and beliefs form in our childhood. We often think it happens much later, when our kids are in their teens or are young adults, but by that time, their money habits and beliefs have deep roots. Long before I ever had Lauren and Taylor, I started building a program to teach children how to think about money because I knew teaching kids about money early was key to instilling good money habits and beliefs.

Why Kids Need To Learn about Money Now

Rarely do I find a parent who doesn’t think children should learn about money, but there is a huge debate as to when we should start talking to them. Some believe money is a grown-up concern and want to wait until their children leave home. Others, like me, want to start when their children are young.

The reality is your children are learning now, regardless of whether or not you are actively teaching them about money. They observe how you handle money and will mimic your behaviors and inherit your hang-ups. So I suggest you take control now and help shape their money views, rather than having to play clean-up later.

Money Needs a Purpose

We started talking to Lauren and Taylor about money over dinner, generally about how we were using our family money on a vacation, also known as our family save goal. We kept the conversations light and positive and made it clear that our money had purpose. We carefully thought about the money we had available to us and how we could use it in a way that made us the happiest.

When we were in the store with the girls and they wanted us to buy them something, we reminded them of our vacation. Even though there were times they were disappointed we couldn’t buy them the toy they wanted, they understood why we said “no”. Our money had another purpose, which guided our decisions.

Help Your Children Set Save, Spend and Share Goals

When the girls turned six, we had them set their own annual save, spend and share goals. Because they were already familiar with goal-setting through the family goals, they were eager to set their own. The process couldn’t be simpler and that’s by design. We have a tendency to overcomplicate things, believing it makes it better or more valuable, but when it comes to teaching kids about money, simplicity is the best.

It starts with 3 simple questions:

  1. What is something worth saving your money for and not spending it right now?
  2. What is something you want to spend your money on right now?
  3. Who is someone you love and want to share your money with?

Now you have to help them choose their goals:

  1. Create a list of items for each category. Give them a number to aim for so they an ample selection, without it being overwhelming. I suggest no more than 10 items.
  2. Review the list with them. Is there anything on the list that isn’t realistic or you won’t allow, i.e. such as a pet. Explain why and remove the item now. They may be disappointed, but they will be angrier if you let them set the goal, then refuse to let them adopt the dog or cat once they have saved enough money.
  3. Now have them compare one item against the next and choose which one they want more. After they pick one, have them compare it agains the next item on the list and so on until they find out which item they want the most.
  4. These are their goals. How do your kids feel about them? They should be really excited and eager to achieve them. If not, ask them why. It may take them a couple of tries before they set goals they truly want. Kids, like adults, sometimes set goals based on what others want, so be patient and work with them to find their true goals. Don’t be afraid to scrap their goals and start the process over. Their goals should make their hearts happy, and they should be highly motivated to achieve them.

Use Your Goals to Make Value-Based Decisions

Now that your children have their goals, those goals become their barometer when they find something else they want, which they will. I taught my girls every time they found something they wanted to ask themselves, “Does this bring me closer or further away from my goals?” and occasionally they decide that this new “want” means more to them than their goals. Sometimes they are wrong (and I know it), but I respect their decision. When they inevitably come crying to me later, we talk through it, so they understand how their emotions may have mislead them. Trust me, they only make this mistake once or twice before they get very good at distinguishing between what they truly want and what they like.

Money Smart Decisions Today Lead to Money Smart Decisions Tomorrow

My father’s money lessons played a significant role in the person I became and the people I’ve been able to help through my financial planning practice. I know my money lessons with the girls will affect who they became as well. I can’t control everything they do or prevent them from making mistakes, but I can do everything within my power to give them the tools to succeed on their own, which includes knowing how to make good decisions with their money.

From the many parents I talk to on a daily basis, their kids have overall embraced the save, spend and share concept. They are setting goals that make their hearts happy and are building a healthy relationship with money. However, I also know that some kids are more reluctant to set goals or honor their goals, and parents aren’t sure what to do when this situation arises. This Wednesday, I’ll share some best practices to help you overcome any resistance you’re facing from your kids.

What did your parents teach you about money growing up? How are you talking to your kids about money?


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October 27, 2014  •  26 Comments  •  Children and Money

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  1. Monday, October 27th, 2014
    Thanks Shannon! I have three-year old son and considering to teach him the value of money. How young should parents teach their kids? I feel I should be teaching him because it seems he knows the purpose of money and he asks for it. This task of parents is really delicate.
    • Shannon Ryan
      Tuesday, October 28th, 2014
      I believe parents should start talking about money when their children are toddlers, so your son is at a great age to start. Kids learn very quickly from observation that money is very powerful. At his tender age, keep it very simple. For example, we talked about our family vacation with our girls when they were your son's age over dinner. We talked about all the fun things we would do and got them really excited about the trip. We referred to it as our family save goal and the girls knew that was what we were saving our money for. At the stores, we'd remind them of our vacation and all the fun things they were looking forward to doing when they asked to buy them toys. Because we were able to reinvigorate their excitement, they rarely got upset about the "no" because they were so excited about the "why" (our vacation). They did not start setting goals until they were 6.
  2. Monday, October 27th, 2014
    Most ADULTS I know could use these lessons :)
    • Shannon Ryan
      Tuesday, October 28th, 2014
      Very true, Stefanie! I often think if everyone just knew how to save, spend and share and let their goals guide their decisions, it would make a huge difference in how this country (and the world) handles their money.
  3. Monday, October 27th, 2014
    This is a fresh reminder of the importance of all three of these things! I will definitely be implementing this philosophy in my family when I have kids. As for me, growing up, money wasn't discussed much by my parents. As a result, I was clueless upon entering the "real world" (i.e. the working world), and that is what prompted me to go full force into blogging about money - especially for young, professional women who had a similar upbringing. Now, I love it and can't imagine my life without it (learning about money and blogging!).
    • Shannon Ryan
      Tuesday, October 28th, 2014
      Fantastic, Natalie. Although I never had a doubt that your kids will grow up in a home when money was discussed. :) Your story is common. So many young adults leave home with really understanding how to make good decisions with their money. They only know how to spend. I'm glad you're reaching out to other young, professional women to educate them on such an important topic.
  4. Monday, October 27th, 2014
    Excellent reminder Shannon! I agree with Shannon that many adults would benefit by doing this as well. :) Our daughter just turned seven a couple of weeks ago and we're now seriously starting to go through much of this. We had, of course, covered a lot of it but more high level. The thing we love to see is that it gets her excited about money, what she can do with it and who she can help with it. That's not something Nicole or I really got with our upbringing and excited to see how it impacts our kids.
    • Shannon Ryan
      Tuesday, October 28th, 2014
      Happy birthday to your daughter, John! Seven is such a fun age and definitely the age where your conversations can be a bit deeper as they more fully connect the dates. Isn't it amazing how empowering money knowledge can be to kids? It's going to make a huge difference in her life.
  5. Monday, October 27th, 2014
    I think that spend goals are really important because they help motivate your kids to save. Will always seems to do better with his money when he is working towards something bigger or something that he really wants rather than some general idea of saving money. It's the same thing that applies to my clients. They do better with their other goals when they have a spend focus. It keeps them motivated.
    • Shannon Ryan
      Tuesday, October 28th, 2014
      Goals can really focus and motivate both kids and adults. Knowing what you truly want and taking the steps to achieve it, is very empowering and we all want to feel strong and in control. Plus it makes it so much harder to get distracted by other "things" that you might normally spend your money on.
  6. Monday, October 27th, 2014
    The three questions you suggest asking kids about money are perfect. It will help them to see money more in the way as a steward and not as an owner, and therefore not hold onto it too tightly or value it too highly. We started teaching our kids about money around age three. They are now forming amazing money habits that we hope they'll have and use always.
    • Shannon Ryan
      Tuesday, October 28th, 2014
      Exactly, Laurie! My father taught money could create joy for myself and others when used in alignment with my goals, so that's what I'm teaching my girls too. Money is just paper. It's the purpose we give to it and how we use it that creates value. I'm glad you're witnessing how those early money talks influenced their habits and beliefs. It's exciting to see!
  7. Monday, October 27th, 2014
    There is no reason why kids shouldn't also be taught about goals through money and it can be applied at an early age. A lot of kids want things but need to understand that getting them takes planning and focus.
    • Shannon Ryan
      Tuesday, October 28th, 2014
      Exactly, Kassandra. It's an important lesson for them to learn and one many parents neglect to teach.
  8. Monday, October 27th, 2014
    I'm pretty weird... I actually always go back and read every single post when I find a new blogger to follow... It may take me a while to get caught up, but I like to know everyone's back story. That means I probably follow less bloggers than some other people, but I like to know the full story and I only follow ones that I really like and relate to.
    • Shannon Ryan
      Tuesday, October 28th, 2014
      I don't think you're weird, Kayla! :) It's actually very flattering that you take the time to do that and I'm honored to be one of the bloggers you follow.
  9. Monday, October 27th, 2014
    I think helping children set money goals is one of the best things parents can do. It has more benefits than people think and can even spark their entrepreneurial side. I know if I was, say, 10 years old and got an allowance of $5 a week, it would be unrealistic to get an expensive video game system within a couple months. Now, if a parent walked me through how much "extra" I would have to make to get the console faster I would be more likely to think about what I can do to make up the difference. Who knows? The business could take off. Kids can come up with ideas that many adults would never even think of.
    • Shannon Ryan
      Tuesday, October 28th, 2014
      You are so right, DC. Kids are incredibly creative. I am often blown away by Lauren and Taylor's imagination. Helping kids channel their creativity and cultivate their entrepreneurial spirit is often a missed opportunity. I definitely agree goal setting is one of the best things we can teach our kids. It has practical application and kids like being in charge of their money. Give them the skills and they will learn to make really good decisions too.
  10. Monday, October 27th, 2014
    I don't think that this is just necessarily for kids! I think we could all use this money talk at any age!
    • Shannon Ryan
      Tuesday, October 28th, 2014
      Agreed! You are never too old for a good, basic money talk! Because it is easy to fall out of the habit of setting goals and they make a big difference in our lives.
  11. Monday, October 27th, 2014
    I don't remember very many gifts from my childhood, but I will never forget the Frogger video game that my Mom said no to and made me save my own money. I think that was a great lesson and one I'm trying to pass along. One lesson I do not want to pass along is the whole "We can't afford it" argument. My Mom used that all the time. I think it was more because she didn't want a debate, but I think the debate is worth it, even if it can be exhausting.
    • Shannon Ryan
      Tuesday, October 28th, 2014
      I agree, so many parents fall back on "we can't afford it" because they don't want to argue with their kids. But it is worth the discussion, even if it can get tiring hearing "why not?" constantly. But understanding the "why" behind the "no" is critical and reduces the threat of feeling deprived, which often leads kids to always say "yes" as adults.
  12. Tuesday, October 28th, 2014
    My parents were excellent financial role models, but they didn't really try to teach us any money lessons. I hope to get my kids a little more involved so they can see what happens when they make good and bad decisions with their money.
    • Shannon Ryan
      Tuesday, October 28th, 2014
      Being a great financial role model is a definite must and it's not enough if you don't include the money lessons as to why you make the choices you do. Because sometimes those good decisions you make, don't always feel that way to kids who don't understand why they can't have what they want. I'm glad you plan to talk more openly with your kids, so they not only get to see Mom and Dad be good role models but why you make the choices you do.
  13. Tuesday, October 28th, 2014
    I think I will be bookmarking this post. Those are great questions to get kids thinking about money and I think it's great to involve kids in decision-making. While my parents were good financial role models, we weren't involved in making money decisions. It was pretty much..."what we say goes!" haha. I think it's important to let kids learn from their own experience and the lessons are more powerful and long-lasting when they make decisions themselves and see the consequences.
    • Shannon Ryan
      Thursday, October 30th, 2014
      Absolutely, Andrew. We need to empower our kids to make good decisions with their money and in order to do so, we have to let them choose how to use their money. These questions help them slow down and think through their answers. But they will still make mistakes and be blinded by momentary wants, and that's okay! I want them to experience the temptation now and see how it affects their ability to get the things they really want.
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan