Money management is a valuable skill that every child should experience and learn. Many poor financial decisions made in adulthood involving large amounts of money are honest mistakes that could have been prevented with some experience in earning and managing smaller amounts of money during childhood. What is the best way for a parent to teach their child this vital skill? How can parents provide opportunities for their children to earn and manage their money?
(Note: throughout this article, I have used “him” as the pronoun referring to the child. Of course this applies to both girls and boys!)
I am personally thankful for the opportunities and encouragement I had as a child to be entrepreneurial and look for ways to earn my own money. I remember when I was five years old, I had my own garden plot and I would sell produce from that plot. It was completely my own project – I bought the seeds, did everything to take care of the garden, and figured out ways to sell my produce. At about age 7, I was making some little wooden toys to sell. Looking for one-off opportunities is valuable too. I remember (I was about 6, I think) my grandpa having a bumper crop of strawberries one year that were going to rot. I “contracted” with our neighbor who liked to make strawberry-rhubarb pie and picked 25 lbs of strawberries for them.
Encouraging a child to come up with ways to make money from those other than his parents is good as it helps avoid the mentality of depending on Mom or Dad for money. I remember many times that Mom didn’t have anything extra for me to do to make money, so it was up to me to figure out how I was going to earn money elsewhere. This encouraged me to be resourceful. As I got older and became a youth and young adult, I often learned new skills and ran businesses as needed. This was such a great experience for me and has taught me many valuable lessons in resourcefulness, perseverance, responsibility, and money management.
This is important and simple preparation for real life. So here are eight tips for parents to use in helping their children earn and manage money.
1. No allowances!
Giving children an allowance is very common, but in reality it’s not the ideal way to teach money management. As most adults understand all-too well, money doesn’t come free! We want to prepare our children for real life, and we should be careful to not give them an unrealistic view and experience during childhood. We want our children to become responsible adults, capable of earning their own money, and we should avoid anything that may give them a feeling of “entitlement” as if someone owes them money. Not only can allowances teach irresponsibility, but a child who receives allowances will be in for quite a shock when they encounter the real world!
Instead of providing an allowance, provide opportunities for them to earn money.
2. Jobs to earn money should be “extra”.
Without the allowance, parents will need to help their child find some other ways to earn money. Home is a good place to start, but money-making jobs should be ones that are out of the ordinary round of daily chores. We adults don’t get paid to clean our house, cook breakfast, or take out the trash, etc., and neither should our children. Children should be trained to willingly help with the chores of the home as a normal part of life.
Again, it is important to keep in mind what the purpose is of giving a child the opportunity to earn some money – it is to help prepare him for real life. Jobs for pay should be over and above the usual daily chores. I’ll share some examples later.
3. Making money on their own time
Just as we adults have to manage our time to be able to tend to the duties of the home and our paying jobs, children should also have this experience.
A daily schedule is important for any family. There should be regular times for rising and going to bed, for eating, for family worship, and other such essentials. The daily duties of the home should also be part of the schedule, and these can take up quite a bit of time. In fact, with young children most of the day will be spent doing household duties and outside work – like washing dishes, sweeping, vacuuming, cleaning the bathroom, doing the laundry, gardening, carrying firewood, etc. As any parent knows, the chores always take longer when the children help, so these things can easily take up a large portion of the day. It’s all part of education! In addition to the chores, be sure to include time to play with your little child, time outdoors and in nature (for all ages!), and some time for study if needed by the young person. The age of the child will dictate exactly what is placed on the schedule.
In addition to these daily activities , part of the schedule should include some time that the child can use at his discretion, after, and dependent upon, completion of the required duties. Many families call this (and I like the term) freetime. And this is where the money-making comes in.
Mom or Dad can make a daily or weekly list of what work needs to be done (which is a great way for children to learn some real-life reading skills!), and children can learn to complete the list before having freetime. If they don’t complete the work, then, no freetime. Work slowly? Less freetime. It is a simple way for children to learn real-life cause-to-effect reasoning. Of course, parents should give an amount of chores appropriate to the age and ability of the child so that it is reasonable for him to complete the list and still have some freetime. The amount of freetime can vary, but 1 to 2 hours a day is plenty for most young children.
This freetime is when the child can have the opportunity to earn money. As mentioned, the child should be allowed to choose how he spends this time, but if he wants to earn money, now is the time, rather than part of the normal workday.
Many parents find it helpful to keep a list of extra jobs by which the child can earn money – perhaps some extra cleaning above and beyond the normal weekly cleaning, maybe some items around the house that need to be fixed, or maybe an extra organizational job. Keep a list of these job opportunities for your child to reference and do during his freetime if he desires.
4. How much to pay?
As you begin to teach your child these skills and help him earn his own money, it is important to start off on the right foot and be careful about what precedents you set.
First of all, be careful not to pay your little child for something that you wouldn’t pay him for when he’s older. To pay a child for a particular job when he’s four-years-old, but require the job to be done without payment when he’s eight isn’t very fair. As already mentioned, be sure the jobs you pay him for are ones above and beyond the normal duties of the home. Try to develop an entrepreneurial spirit – one that doesn’t support the mentality that one is entitled to a paycheck for simply helping out around the house.
Secondly, be careful how much you pay. Don’t pay too much, no matter how cute your four-year old is, and help them understand that money isn’t exactly easy to come by and can take some significant effort to obtain. Little children don’t have as large of expenses as adults do, so the pay should be proportionate. Pay them a fair amount for their work, proportionate to their expenses and ability.
So how do we motivate a child to earn his own money? This is best accomplished the same way we as adults are motivated to earn money – we earn money because we need to! Children from a young age should learn to purchase their own necessities.
A good place to start with young children is for them to purchase their clothing. If you shop at second-hand shops, sales, or other inexpensive places (plus a few hand-me-downs from older friends or relatives!), there’s no reason a young child from age six or seven shouldn’t be able to purchase a large share, or even all, of his clothing.
As they grow, other expenses beyond clothing can be added. If a need for a particular item arises, and it is within their ability to earn the money to purchase it, encourage them to do so. Also help them learn to understand how to invest in tools or other such capital as part of starting a business or making money with a particular project. This way they can learn to think ahead and learn the principles of investment, profit and loss. They should also be encouraged to think ahead and save for larger purchases such as a bike, a car, or even a home.
6. Make a budget
Budgeting, and sticking to that budget, is a vital life skill. A child can learn to budget in his own simple way, improving as he gets older. First help him determine (after tithe and offering) how much goes to savings and how much is spending money. Out of that spending money, help him realize how much he needs for necessities – this should be a large portion of his spending money. After all, that is real life! For most of us, the majority of the money we make goes toward meeting expenses, not buying toys.
The envelope system is best for young children, since it is very hands-on and real-life. Have an envelope for each category (such as tithe, offering, savings, and spending) and help them learn to calculate how much of their earnings goes into each envelope (this is great for learning math, too!). Young children can easily understand a budget if they are handling real money and use the envelope system. As they get older they can open a bank account – and eventually learn to use checks and cards.
The empty envelope is also a great teacher. If a child has a need , but finds that the envelope is empty because he spent his money on a toy or he hasn’t been diligent about earning money, he will learn very clearly the need to think before spending and to live within his budget. These are extremely valuable life skills.
7. Other ideas for earning money
The sky is the limit for ideas for children to make some money, and much will depend on where you live and the opportunities around you.
As mentioned, extra duties around the home such as extra cleaning, organizational projects, or maintenance are excellent for small children.
Repairs on the house, home appliances, or even the car or lawn mower are great for older children. Rather than hiring a professional to make the repair, make a learning experience out of it and tell your child that if he would like to learn how to make the repair himself, you will pay him a specified amount. Most boys especially will jump at this opportunity. Occasionally it might not go well and you might lose more money than if you had hired a pro, but consider it an investment in your child’s education.
Agriculture is always an excellent way to earn some money, no matter where you are in the world. From farm kids in the rural Midwest USA putting a produce stand at the end of the driveway, to children of impoverished countries in Africa selling what they’ve grown in their garden to help support their family, I’ve seen many children learn to earn and manage money by starting a few seeds in the ground. Even families living in the city might grow herbs in window pots to sell to neighbors. Everyone has to eat, and if you can supply that food, chances are high they will buy it.
Kitchen products and baked goods such as bread can also be best sellers in your neighborhood. (Be sure to check the laws in your local area before selling food items.)
Starting a business is also a great idea for many young people or even entire families together. Woodworking and carpentry, mechanic work, lawn-care, snow removal, or a bakery are just a few out of thousands of business ideas that a young person could start. Starting and running a business is an excellent way for young people to learn money management, time management, responsibility, initiative, and many more important skills. And who knows but that a project like starting a business could change your life? I know of several instances where a young person started a small business and eventually ended up employing the entire family!
8. Allow the opportunity for some “bad decisions”
Remember, you want your child to learn real-life money management. Therefore, don’t heavily manage how he spends his money (but don’t bail him out of bad decisions).
Help him get set up with a budget, and continue to help him as time goes on, but don’t tell him “yes, you can buy this” or “no, you can’t buy this because you need to save your money for clothing”. The best way to teach him to be careful with his money is to let him learn by (sometimes hard) experience.
For example, if he knows that it is his responsibility to purchase his own clothes, but he decides to spend his money on something else, let him do it (after a gentle reminder maybe). Chances are he’ll start being more careful when his socks are worn out and he doesn’t have money for new ones, or his shoes become uncomfortably small. These might seem like hard lessons now, but they are far easier than facing serious financial trouble as an adult.
Warning for moms with boys: their clothes might get a little ragged as they go through the learning curve of wise money-management, and they might even try going without socks and shirts because they don’t want to buy them. (I may or may not have been guilty of this as a boy 🙂 ) Give it some time, gently and patiently guide, and allow some cause-to-effect experience. They’ll learn by and by 🙂
Do you have a success story in helping your children experience learning to manage their money? Share in the comments below. Be sure to subscribe for future blog articles.