How Do You Teach Kids About Money?


The question of giving kids an allowance is a thorny issue. But when a kid turns around and tears up an allowance ‘because it wasn’t the amount his mom said she would give him,’ you’ve stepped into a minefield!

Child tears up allowance

Last month, I read on MarketWatch that a mom on Facebook posted this picture of a torn-up pile of money with the following caption:

‘A child ripped up their allowance because it wasn’t the amount his mom Said she would give him. She walked out her room and saw this. What would you do? Not how you would feel, but what exactly would you do if this was your child’s behavior?

Who knows if this is a spoof, but it’s been shared 38,000 times and attracted 41,000 comments on Facebook at the time of this writing. The comments are a real riot.

People can debate all day until they’re blue in the face about the merit of earning an allowance for chores vs. just getting the money for breathing. But if you have a kid who is so ungrateful and entitled, something ain’t working!

My take on allowances

I have a bias toward allowance as a paycheck that is earned for doing chores. The typical allowance for a kid is now $15 a week, though it’s nowhere near that in my house.

My thing is around age 5, when a kid is old enough to understand, you can consider an allowance. I have given my kids a dollar a week according to their grade level as long as they complete their chores. The chores are detailed for them on a chore wheel so everybody knows what they’ve got to take care of.

For younger kids, I love the three jars concept that came out of the Christian fundamentalist movement. Each jar is marked with a red, green or yellow heart. One jar can be used to hold money for charity; another jar holds money for current spending; and the third has money for longer-term savings. This provides a very simple, clear, and tangible lesson for children.

It is my belief that an allowance up to age 16 is more about discipline and responsibility with a kid than it is about teaching the value of a dollar. The point at which you can teach a kid about the value of money is as a junior or senior in high school.

As a parent, there is so much you can do in this arena, yet a recent T. Rowe Price survey found that four in 10 parents said their own parents didn’t do a good job teaching them about money. Those same respondents in turn graded themselves at a ‘C’ or lower when it comes to teaching their own children.

More recently, I read additional T. Rowe Price research that found moms and dads — both individually and together — spend more time talking to their sons than their daughters about money. Without even realizing it, parents are giving girls less knowledge and info about how money works.

Try these tips to talk to your kids about money

The thing is, one talk won’t get the job done with your kids. You have to do it every time a teaching moment arises. At the same time, this is something that you don’t want to obsess over, but you do want to impart good values.


Kids can ask all kinds of questions. ‘How much do you make?’ ‘How much does mommy or daddy make?’ ‘How much did our house cost?’ The T. Rowe Price survey shows that 80% of parents lie or evade such questions. I believe there is a time to answer these questions with specifics, but it may not be when you have very young minor children.

When I wrote Clark Smart Parents, Clark Smart Kids some years ago, I talked about scaling things down to the age of your child. One of my favorite things to do is sit down with a dollar in coins and ask, ‘How much of this goes for housing? For our car? For our food?’ Pretty quickly kids realize the dollar is gone and we haven’t even talked about a present for them yet! You use finite resources that a kid can get their arms around to teach them with.

There’s no one formula, no one way to teach your kids. You have to keep trying to meet them at their level to increase their knowledge and responsibility.

UPDATE: On the investing side of things, Charles Schwab has their MoneyWise Investment Accounts for Kids. Check them out.

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