I’m constantly thinking about what I can do to give my children happier lives. Outside of reading them stories at night, helping them develop healthy habits, and making time for goofing around together, my money nerd brain often kicks in.
I think about what financial habits I can teach my kids today that will have a lasting impression on their lives in the future. Research indicates children have their money habits set by age 7, so I knew I needed to start early.
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Here are five lessons we’re teaching our kids about money.
1. Hard Work Nets a Reward
Ever since our daughter was 5 years old, she has been doing chores around the house. These chores are kid-sized but helpful to our everyday lives.
With a little bit of Dad’s help, my daughter and son (aged 9 and 6 today) complete tasks like:
- Emptying the small garbage bins around the house
- Loading the washer and dryer
- Filling the bird feeder
- Putting away the silverware
- Taking the garbage cans to the street
In the beginning, there was a whole lot of complaining from the kids around their chores. Now that my daughter is 9 years old, she does these important family tasks without a whine or even a “c’mon, Dad!”
The kids are paid their age. My 9-year old daughter gets $9 per week and my 6-year old son gets $6 per week. As they get older, the chores get more difficult, but they get paid more.
The goal here is to help my kids understand that if you want money in life, you have to work for it. And henceforth, if you want anything in life, you have to work for it.
2. Spend Less Than You Earn
With the majority of Americans living paycheck to paycheck, I wanted to teach my kids early that you don’t spend all of the money you earn. When we started the chore and reward system, we created 4 jars to go along with it.
- Spend: Buying fun stuff that makes us happy today.
- Save: For bigger purchases later on.
- Give: Sharing with people, causes or organizations we want to help.
- Invest: Investing for experiences and things when we’re older (cars, homes, trips).
Although the amounts have changed over the years, the majority of the money goes into the “Spend Jar” and the other jars receive around $1. Roughly, you could call this a 70/10/10/10 split for my 9-year old.
I believe this habit of spending less than you earn will make my children’s lives immensely better. When you have money in the bank and aren’t living paycheck to paycheck, you feel a sense of freedom that is hard to deny.
3. Delayed Gratification is Powerful
My wife came up with a unique rule for our kid’s “Spend Jars” after becoming frustrated with the growing clutter in our home.
She had found that the kids would spend their money on a toy and then two days later, they were sick of the toy and wanted another one. Since they had the money, we let them buy another toy. Unfortunately, more purchases beget more things laying around the house and more consumption.
All of a sudden, we had created mini-mass-consumers!
My wife’s new rule became one purchase per month going forward. This helped our kids to understand the importance of delayed gratification.
When they wanted a “new something” after just buying their “current something,” we would encourage them to write down what they wanted to buy or take a picture of it. Then they could buy their “new something” next month.
Read More: How to Master a Household Budget
Oftentimes, the kids would wait a few days and realize they didn’t even want that new shiny thing anymore. What a lesson to learn!
4. Small Habits Create Huge Results
As the months roll by, our kid’s jars get filled up quite a bit. This more often than not surprises them when it comes time to spend their money.
The other day, my son said, “WOW, I have $20!” It’s as if the money was magically growing week over week in his jar without him being aware.
My hope is that they realize that small habits done on a daily and weekly basis can create huge results.
This lesson is doubly true when it comes to investing for kids. Every couple of months, I show my son and daughter how their investments are growing through time in the market and compound interest.
I doubt they fully grasp the concept of compound interest, but I figure if I keep at it, they’ll eventually get it.
5. Giving Money Can Fill Up Your Heart
In the past, I struggled with the concept of charitable giving. When we reached a level of feeling very comfortable with our money, it suddenly became a goal of mine to give more.
When we gave more of our money, I felt like we were moving toward the type of true wealth we wanted for our family.
With that spirit of giving, I wanted to bring my kids along for the ride and show them how giving your money can make you feel wonderful.
So every three months, we get together for the “Big Give.” This is a tradition where our kids empty out their “Give Jars” and we count how much they have. We then talk about how they want to give their money.
If they aren’t sure, I share a select few videos from organizations that they might like. In the past, our kids have supported charities that protect animals, feed the hungry, and shelter the homeless.
To keep it fun, I always make milkshakes for our Big Give. After all, milkshakes make everything more fun.
Will all of these ideas help my kids have a better life? Honestly, I have no clue, but I’m hopeful.
I can say that I’ve seen many signs of hope along the way. My kids are more patient, generous, and diligent than I was at their age.
At the end of the day, that’s what a lot of us want for our kids: a better and brighter life than we had.
Personal Capital compensates Andy Hill for providing the content contained in this blog post. The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.