Teaching Money-Sense to a 5-year-old?...

csdax

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May 5, 2012
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All kids seem to know that money is something you get from the cash machine. If you lose or break something, you just go buy another, and if you need more money you get it from the machine, right?

So I've decided it's time to start giving my 5-year-old some spending money. She already has a piggy bank, and occasionally we take it to the bank to put into her account. Now, I've also given her two jars, labelled 'Spend' and 'Donate'. The 'Spend' money, she can take with her when we go out, and she can buy things for herself. The 'Donate' money, she can choose which charity to give it to. The piggy bank will be for saving.

(I gave her $3, today, and after swapping jars for a while, she finally decided to put $2.75 into the 'Donate' jar, and 25 cents into the 'spend' jar. She said "Some people don't have enough money to buy food, and I already have lots of toys, so it's good to give most of it away!")

Anyway, I'd like some advice about how to help her learn about money:
- How much spending money do you think is appropriate for a 5 year old?
- Should I let her have free-rein with the 'spend' jar, or should I stop her if she wants to spend it on overpriced junk?
- Of course, I want her to be generous, but not just give her money away willy-nilly, and there needs to be some balance. Any suggestions on this?

Any ideas on how to help her to start learning good financial skills would be helpful, please. I'm new to the whole 'allowance' business.
 

bssage

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Oct 20, 2008
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I am going to resist getting on my soap box.

IMHO what you are doing is both: commendable and a great starting point. I believe it should be <U>the</U> starting point. In my opinion the next logical step should be in the needs/wants category. I think so many kids and adults alike: fail at this lesson (including myself at times).

I am sure there are programs available on the web. I personally am a big Dave Ramsey fan. And I know he has programs for kids. Really most of these people tell us stuff we already know. It just becomes formalized when we hear it from someone else.

In my head the logical step for a kid would be start with the "needs" jar. If the money accumulates in the "needs" jar to a certain predetermined point. It can be moved to the Wants/donate jar.


Since its probably safe to assume you are already covering her needs. I would choose something small and simple she can be responsible for that is a <U>true</U> need. School milk money for example. Of course give her enough to cover that need. All lessons dont need to be painful.

I also would think a goal of some kind with the wants jar. A new toy: a favorite food: Or even a day with mom at the mall (if that is her thing). That way the process can begin again and the lesson can be reinforced.

Now Dave Ramsey is a big charity guy. I imagine he would advise you-- that the needs jar and charity jar are both "first event" jars. I am charitable but want to make sure my needs are met first. That is completely your call.

And I agree that 5 may be a little to young to grasp this concept. I don't see the harm in trying.

ps that was the edge of the soap box.
 
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IADad

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Feb 23, 2009
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I think the charitable jar is a great thing, it reinforces the whole notion about caring for others, as well as introducing the concept that we don't have free reign over all our money (paying taxes, our overhead expenses, charity/tithing etc.) Simplying it to the degree you havee makes a lot of sense.

Maybe a simple way to both allow the autonomy to spend and to teach saving would be to have a "save for big things" jar...you can talk about big things to dream/plan for, that way less money goes into the spend jar but it's still her money...maybe start a list of "big things" and keep it in the jar with the money, to add to/modify etc, and to remind when she wants to raid it (for one of those over-priced pieces of crap as you put it.)
 

K_Stepmom2b

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Jan 2, 2012
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I love this!

Currently I work for a non-profit and my position directly deals with the homeless on day to day interactions.
The LO constantly has asked what I do at work and when I tell her the population that I assist with she gets interested even more.

We have the same effect. Two Jars and we have one titled "Disneyland" and the other titles "The Poor", her idea. We have a system set up in our house to where she does certain things, it allows her to earn money, somewhat of an allowance. She divides it up evenly between the two jars and in a lot of cases she asks us for quarters (It's its a dollar that we give her)
We also have her putting out toys she wants to donate and clothes that she doesn't wear anymore either. As a way of "giving".

I think this helps in the saving aspect, as well as learning how to count aspect and then the giving aspect.

I think that any amount for a 5 year old can be appropriate, remember that you have final say in what the child purchases with the money.
 

IADad

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Feb 23, 2009
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K_Stepmom2b said:
I think that any amount for a 5 year old can be appropriate, remember that you have final say in what the child purchases with the money.
I have to add...sometimes allowing an unwise expenditure can be a learning experience as well. With our 10yo, he frequently gets gift cards as gifts, and he has to ask us before he spends them, and we will talk about the relative merits of any given purchase, but there are cases where we aren't entirely in favor of a purchase, but we'll let it happen.

Two cases in point that have proven instructive - One was at an office supply store, there were pens that were on a clearance shelf. I let him get them, even though I probably would have bought him pens if he needed them. Well, I watched him through the transaction, but didn't pay much attention to the amounts. When he got to the car he found out that they had rung up full price. So, I was not going to drive back for the sake of just under $3, so we talked about paying attention to your purchases and the transaction as well as the concept that not being aware of your transaction does not necessarily mean you've been "ripped off."

Two - He wanted to buy "Styluses" (styli?) to use on his tablet...so he bought a little package of cool ones, something like $9 for 4 of them. Only to find out that they don't work on his tablet...He felt "ripped off" but again, just because he assumed they would work for that didn't mean the retailer was responsible for his assumptions...he has since found other uses for them, but again, it was good to go through jumping into a purchase without knowing everything about it.
 

jack123

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May 9, 2012
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I like the idea of a charitable jar. I totally agree that kids need to be responsible when it comes to money right from a young age. We should also mind our actions and never over spend in front of a kid as they pock up habits from us.
 

Bhills

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Apr 21, 2012
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Teaching kids the value of money early in life is a great thing,however i suggest you should also consider teaching them the importance of hard work in the money equation.
I think that you can make them "earn" the money instead of just "giving" them the money. This can be done by attaching monetary value to simple tasks.That in my opinion will make the child appreciate the fact that money has to be worked for before being spent.
Just my two cents........
 

Supermom4

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Jun 1, 2012
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I would make her start helping around the house and learn exchange by doing chores. Let her spend the money as she pleases but do give her advice. If she makes a mistake with her money, talk with her about it and let her know why it was wrong and since she made the decision she will learn not to make it again.
 

jollysmith123

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Jun 5, 2012
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Do explain everything you’re doing that is associated with money making decision. Don’t take them aware cash from a cash machine or with cheque without explaining how works otherwise the kids will think that the machine gives money. Make them aware that every single penny counts and it is earned on completing every piece of task.
 

scarletjones

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Apr 10, 2013
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I think money matters should not be told to such a small child this will make him selfish so we should not discuss these things to them, so better is make him live like a child.
 

investingparent

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Aug 28, 2014
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This is an older post but I've been working through the same question. It's crazy how quickly children connect the fact that money helps them obtain things. It's the gap in how it's earned and what the value of things, they want, really is. I've wondered about investing for them or how to help them invest.

I found this website, http://pigmybank.myinstapage.com/, in research and wonder if there is any benefit in using something like this to determine what amount of their money they spend and what they invest. As my child gets older I wonder if I can then allow them to choose what amount to save for himself. However, it is still only in the build phase, I think, as I entered my info to learn more and received an email about what is coming with more details but it hasn't gone live when I check back.

Do you know of any other resources comparable to the above?
 

Marie0816

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Oct 16, 2014
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This is a really great idea. I would use this step as you have it until she really gets the hang of it, I've learned that changing the program too often tends to diminish their interest. I would continue to add more layers so that you cover all the necessary components for financial literacy. Next I would include the different ways of earning money, but I would steer away from the allowance method, because it prepares children for a job.

Instead, I would encourage her to notice things that she does not like and brainstorm solutions, which should be rewarded. I tried this with my niece, her problem was that her sandwiches were soggy at lunch time. Her solution was to pack small portions of peanut butter and jelly and spread it herself. I took her to the store and bought little travel size spreads. I gave her $10 for solving her problem. Next, I challenged her to start solving other problems that can help other people. She did so by helping her grandma organize her lipsticks so that she would wear all of them or finding a basket for grandpa to put his old golf balls in (so that they don't bother grandma all over the garage), and they rewarded her. What she learned was that by helping others she can earn money, rather than simply completing tasks. It makes her more aware, empathetic and empowered.

My next step will be allowing her to sell her newest creations at my yard sale and things like that. However, she started this process when she was 6, so it may be too soon for your daughter.
 

Anna61

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Oct 19, 2014
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What a nice idea to pay for problem solving.

This is what I did with my three kids. I wanted them to feel as though they were an important part of the family so I did not pay them for general chores. I wanted them to learn delayed gratification and money management skills early on so I paid them a flat allowance from the age of five regardless of how many chores were completed. Since this flat allowance was low, they still had the incentive to earn extra money by doing larger chores around the house (such as washing a car or painting or doing major yard work).

At the age of 13 they received a larger allowance that were to cover all expenses except school related stuff. And I did not get involved in how they spent this money. It was not easy for me to not voice my opinion but it worked. They made mistakes but I rather have them learn now than when they were older and had to deal with larger amounts of money.

I never insisted that they give to charity. Instead, they learned by watching us help others from the day they were born. I encouraged them to get involved whenever they saw injustices in the world and they did with lemonade stands, selling fruits and vegetables and then giving that to the cause of their choice.

I now have three adult children who are very generous to those in need. In fact, yesterday when I asked my 19 yr old what happened to our nail clipper, he told me he gave them to a homeless man he buys food for on his lunch break. At 19 he works, goes to school and invests in the stock market. My oldest, worked hard, saved and moved back home at 25 to get a second degree in engineering with the money that she saved. I believe that much of their financial sense came from having their own money to do with as they saw fit. Even if that meant that they were crying over the fact that they forgot to budget for a new bathing suit when swim season came around, or that they could not go to every event their friends went to because they did not have a chance to make enough money for the tickets. Sometimes we micro manage our kids to the point that we get in the way of learning.
 

ihavehadababy

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Jan 15, 2015
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I remember when I was a kid my dad taught me the value of money. I must say it made me savvy with money however I think the way my dad did it was possibly extreme and has almost made me have an obsession with money not in a crazy way but I am obsessed with setting goals when I reach it I set another. I would say teaching the value of money is fabulous especially when you introduce charity it really is beautiful. I have responded to this post as I have a 17 month old son and I found this post to be brilliant and I certainly will be taking a bit from most threads to teach my son.
Thanks for starting a great post Anna61 and sorry for lack of grammar time poor!!!
 
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Ramana Nalla

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Jun 24, 2015
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I thought hard before teaching my 6 year old daughter about money. I succeeded in helping her understanding the importance of saving.

I put the electricity bills in front of her and compared the last three bills. I explained her why the amount we pay in each bill varies. I was able to explain the importance of saving the electricity and how by switching off appliances when we do not use can save us money. She understood well. It also helped her to learn to reduce green house gas emissions.

About Charity I took the below approach:
Luckily we have charity donation boxes very close to our house. I told her as soon as she finds her clothes or shoes gets tight or short, to drop it in the charity box. I told her drop them in charity box as soon as possible so they can be sent to poor and needy.
 

BellaBabyBoutiq

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Sep 1, 2015
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BHill I agree with you, they should earn the money by helping out around the house. There is nothing like earning your own money and the satisfaction of spending it. It teaches responsibility.

I thought this was a very interesting thread. I think you are doing the right thing teaching your child about saving and also being thoughtful of others in need.
 

patsgonecrazy

Junior Member
Nov 6, 2015
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I HIGHLY recommend Dave Ramsey's children material.

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