We teach our children in simple to understand methods about GIVING, INVESTING and SPENDING.
There are many tools on the market that will help children visually understand this concept such as piggy banks that are a replica of a Church, Bank and a Store, but we have always went to frugal route and devised or own visual aids.
We begin by using small envelopes. Each is marked with either the word GIVING, INVESTING or SPENDING. If the children want to be creative then they can draw a picture of a Church, Bank or a Store on each envelope.
My children do not get allowances but they do receive monetary gifts yearly from friends and family. Whenever they receive a monetary gifts they are divided as such:
SPENDING: 40% (maximum)
I divide all funds for my 4 and 6 year olds. They get to count the number of total bills and coins. I also give them time to sort bills and coins. (that’s the homeschooler in me) Once they are done their money is divided as noted above and they place it accordingly in each envelope.
My 7 and 14 year old are responsible for tally up and dividing their own money. Once The envelopes become over stuffed we graduate to a new method.
The Giving remains in envelopes since it is emptied every Sunday it doesn’t overfill.
The Savings goes into a jar of shoe box.
The Spending is held in your personal piggy bank or wallet. This only applies to the two oldest children. For the younger children, the Giving and Investing is all stored in one jar per child.
As the children get older and are able to earn money for odd jobs such as babysitting or washing a car their Investing is then divided into two categories.
Short Term Investing (This will become their first step building an Emergency Fund)
Long Term Investing
While they are still children and mom and dad handle their emergencies, we allow them to use this short term investing to save for items that are less than $100.00. This teaches them the concept of saving up for purchases. Once or children decide on an item and have saved enough money for it we will pay them .20 cents for every dollar saved.
The Long Term Investing is for them to contribute to their future. My daughter is currently saving for her first used car. Whatever she has saved in her long term savings at the time of purchase we will pay her .50 cents for every dollar.
This is the basis of our financial program. We teach the same method from the youngest to the oldest.
I would love to hear how you learned about finances as a child.