Helping Kids Understand Finances

I was sorting through articles I’ve kept over the years again and found several on helping kids manage money. Some of these tips were too good not to pass along. Many of them are great for adults, too.

Money Tip 1:dollar sign

I heard this tip on John Tesh’s radio show, Intelligence For Your Life. The tip’s geared toward adults, but could be tweaked for older children, tweens and high schoolers.

  • Instead of one big savings account, open several small accounts, earmarking them for different goals: Car, Computer/Electronics, Vacation, even Nights Out/Party. People who have earmarked savings accounts save 31% more. They have a goal and are excited to work toward it. Thirty-one percent seems an incredible number, but would John Tesh lie?

Money Tip 2:

Some people just aren’t cut out to budget. They are short every month. Plus kids don’t understand the concept yet. Enter The Money Envelope System. I don’t know the original person who came up with this idea, but it’s super.

  • Here’s how MES works:

envelope money1) Take large-sized letter envelopes.

2) Label them. Each monthly bill or priority gets its own envelope.

For adults: Rent, Food, Insurance, Phone, Utilities, etc. For kids: Games/Game Consoles, Bike, Friend Birthdays, etc.

Be sure to Include an envelope for Savings and Entertainment (movie rentals, dinner out, concert tickets, etc.).

3) Place cash from your paycheck/allowance into each envelope to cover that month’s expense. Example: if your rent is $350, $350 in cash goes into the Rent envelope. Don’t touch it for anything else.

MES Tip #1: IMPORTANT: Keep these envelopes somewhere very safe! After all, there’s cash in them.

4) After you’ve paid the month’s bills, any money remaining in any other envelope gets split between savings and entertainment.

5) Deposit the savings immediately. Your extra entertainment funds roll over to the next month to enjoy.

MES Tip #2: Your gas and electricity no doubt fluctuate monthly depending on the temperature. You should probably  leave the Utility envelope out of the savings/entertainment split at the end of the month. The money in it will grow and shrink depending upon the need.

Remember old television show moms who kept a wad of cash in their cookie jars? These envelopes are your cookie jars.Dave Ramsey Envelope System Wallets

Dave Ramsey has great wallets on sale for the money envelope system. I didn’t hear the original idea from him, but stumbled on these while visiting his great site. Dave Ramsey Envelope System Wallet

Money Tip 3:

Next time you give money to a child/grandchild/godchild for a birthcheckbookday or special occasion, split your gift in two.

The article says write two checks: one to the child, one to the charity of the child’s choice.

Personally, I’d give cash to the kid and a check to the charity. Have a  few charity suggestions in mind. Me? I’d suggest Make-A-Wish, March of Dimes, Special Olympics, Wounded Warrior Project, a local homeless mission, and a local animal shelter.

This idea works great for babysitting payments also. Pay the sitter the money they’ve earned and then give them an additional check for the charity of their choice. Or being the great person you are, tell them you’ll send the donation and ask where.

Set a wonderful example for our future charitable givers. It’s important.

Money Tip 4:

Rememmoney treeber when (and how often) your parents use to say, “Money doesn’t grow on trees.” You probably learned that the hard way after you got your first paycheck.

It’s important to talk specifics about money with your child.

  •  Show your child a paycheck. Tell them how you earn money. Explain how taxes are deducted, or savings are automatically deposited each pay period.
  • Show your child a credit card statement. Explain interest and what happens when you can’t pay off the amount charged. Be sure to tell them when it’s appropriate to use credit cards and how to avoid sinking into debt. Tell them they should never let others use their card or know the number.

***Insert here the discussion about why Mommy knows Daddy’s credit card number and uses it a lot…or vice versa.


  • Your child should be given a weekly/monthly allowance. Even if it’s only a few dollars. This teaches saving and fiscal responsibility.

I know, I know. I’m sure many congressmen and congresswomen got childhood allowances; I’m just not sure what happened during their college years.

  • Don’t tie your child’s allowance to behavior. You’ll be tempted to removekid piggybankmoney allowance for bad deeds, but don’t. Yes, I wanted to say dirty deeds done dirt cheap, but I refrained. 😉

If you want to charge a quarter for each cuss word or leaving Legos on the floor so Daddy screams in pain during middle of night, give the child an extra few dollars earmarked for that.

Tell them why. Hey, kids are smart. They know you don’t like them cussing or to be screaming in pain during the middle of the night. Also tell them if there’s any money left at the end of a certain time period, it’s theirs to keep.

If it were me, I’d give the extra funds to them in quarters and keep a quarter ‘cussing/bad habit’ jar handy for them to deposit their fines. I’d also reward good behaviors by giving back quarters.

Those are my suggestions. You may use two, one or none of them, but consider the benefits of talking over finances with your kids. It could put them on a path to a sound future.

Have a safe and prosperous week, and thanks for following Patti’s Pathways. 😀

 DISCLAIMER: Any and all ideas presented in this blog are solely my own unless otherwise noted. I experience troubles with technology just like any other person, and if I stumble upon a fix or suggestion I feel could benefit others I pass it along. At no time, have I suggested or implied that I hold any degrees or certificates related to computer repair.

I have during my career assembled parts into working computers; done troubleshooting on hardware and software; utilized a great many computer programs and software; designed and updated websites and blogs; as well as created brochures, banners, and flyers.


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