Teaching Your Kids About Money

by Dave Ramsey

Plato said, "Let parents bequeath to their children not riches, but the spirit of reverence." That old guy knew what he was talking about. As parents, we're not just responsible for providing food, clothing and shelter for our kids. We're also responsible for teaching them about God and life — and money is a part of life!

Unfortunately, most kids aren't taught anything about dealing with money and personal finance. They graduate high school knowing what an amoeba is, but they have no idea how to balance a checkbook. Recently, the Jump$tart Coalition tested high school seniors in the area of personal finance. These kids averaged a grade of F, answering only 48 percent of the questions correctly.

When it comes to kids and money, I always hear the same questions:

  • When should I start teaching my kids about money?

  • Should I give my kids an allowance?

  • Should I get my teenager a credit card?

I believe you can successfully begin teaching kids about money before they start school, but please don't wait any later than third grade. Kids need to make an emotional connection between work and money at a young age. If you don't teach them early on about the concepts of spending, saving, giving and working, then you're going to have some major problems later!

An allowance?

I hate the whole idea of allowances for kids. After all, what exactly are you making an allowance for? It makes the whole situation sound like welfare. Money doesn't grow on trees, and one of the worst things you can do to your kids is to set them up for a lifetime of unrealistic expectations.

In the Ramsey home, we put our kids on commission at an early age. They each had jobs around the house that were associated with certain dollar amounts. If they did the job, they got paid. If they didn't do the job, they didn't get paid. It was as simple as that!

Then, we'd help them divide their money into three different envelopes: spending, saving and giving. We'd teach them to use the money in each one wisely. The concepts of spending and giving help develop problem-solving skills because the goal setting can become pretty detailed, depending on the child. Guiding your kids through this process is crucial because you're laying a foundation for their lives.

Get to work

Kids need to start learning the virtues of getting a little dirt under their fingernails at a young age. Making kids work does not constitute child abuse. Child abuse is letting them lie around playing video games and munching chips all the time! Just make sure the jobs you give them are age appropriate. Even preschoolers can learn to pick up toys in their rooms or help Mom and Dad do things around the house.

From ages 3 to 6, kids need to receive instant recognition for their work. It allows them to make an emotional connection to the work when they get an "Atta boy!" or "Way to go, kiddo!" on the spot. And, I promise, they'll be more willing to help out or do their chores the next time an opportunity rolls around. As they get older, the jobs should get harder and the commissions should pay more.

Credit cards

But of course, as soon as you start making money, there's always someone out there trying to take it away. As kids grow up and hit the high school and college years, they become a prime target of credit card companies. And once they walk onto campus — look out! The sidewalks are lined with booths from every credit card company on the planet. And these companies use every trick in the book to get our kids to sign up for a lifetime of debt and financial irresponsibility.

Credit card marketers have done such a thorough job of brainwashing our kids that having a credit card is now seen as a rite of passage into adulthood. Some parents even use the argument that giving their teenager a credit card will teach him to be responsible with money. Give me a break! Parents who do this are introducing a harmful substance — a financially harmful substance — into their kid's lives. Proverbs 22:7 says, "The rich rules over the poor, and the borrower is the slave of the lender" (ESV). So, parents and teens alike must learn to "just say no" when it comes to credit cards!

Teachable moments

There's an old Native American proverb that goes, "Tell me, and I'll forget. Show me, and I may not remember. Involve me, and I'll understand." Our kids are going to imitate our habits of handling money. Don't just make them work; let them see you working. Better yet, have them work alongside you. Let them know that work is how money is earned.

When it comes to saving, spending and giving, let them sit at the table with you when you work on the budget. Show them how you figure out where the money goes and what's most important. Not only will this help them better understand the principles you're trying to teach, but it will also maximize their self-esteem when they take on the task of handling their own money. There will be a sense of accomplishment because they did it. Their little faces will beam, and they'll stick out their chest because of a job well done.

Our kids were allowed to help fill out the check register and watch the process of paying bills when they were 10 years old. Sometimes, you can't explain things to kids by just talking. But if they help write out a big number and see $200 going out the door to pay the electric bill, a light goes on in their heads, and they realize, "Wow, that's a lot of money!" I know it made a huge impact on our kids. The next thing we knew, those little rug rats were running all over the house turning out the lights!

Just think about how many times you've smacked yourself on the head and wished you'd learned something when you were younger. It could have eliminated lots of mistakes and suffering, right? If your kids grasp this money stuff early on, they'll avoid many of the pitfalls later in life. After all, it's a lot better for little Billy to make a $10 mistake when you're there to help instead of a $10,000 mistake later!

Watch Dave Ramsey explain more about kids and money.

Listen to Dave Ramsey talk about money management on the Focus on the Family broadcast, Part 1 and Part 2.


Dave Ramsey is a nationally syndicated talk radio host and the best-selling author of The Total Money Makeover and Financial Peace.

This article first appeared in the January/February, 2011 issue of Thriving Family magazine. Copyright © 2010 by Dave Ramsey. Used by permission. ThrivingFamily.com.


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