Money Skills for Kids

Lesson 3: Elementary & Middle School Children And Money

Elementary school-aged children are beginning to leave the pretending games of the preschool years behind. Less interested in “pretending” to have money in the form of monopoly cash, they are now interested in actually handling real cash.

Middle school-aged children are highly likely to develop a keen sense of social pecking order, which quite often may be influenced by the materialistic “have’s” of one child over the “have not’s” of another. In addition to the foregoing, this age group is keenly aware of its sprouting wings and seeks to exercise them in an attempt to leave parental control behind.

While these developmental stages are ripe for arguments about money, peer pressure, consumerism, and materialistic attitude, they are also an excellent cultivating ground for good money habits, savvy consumerism, and the instilling of values that go deeper than the swoosh on the shoe.

Allowance: an opportunity to develop responsibility

At this point you have already established an allowance in keeping with your child’s age and maturity level. At the same time, your child has come to understand that a child to whom money is given is also expected to bear some of the burden of keeping the family’s household running smoothly. Now is the time to allow the child to use her/his money. For younger children, who are not yet big on reading or writing out elaborate budgets on paper, a highly recommended system of developing fiscal responsibility is found in the four-bank system (1).

This system suggests that you have four containers, preferably plastic or glass (the latter depending on your child’s age) that you simply label with “Save”, “Spend”, “Share”, and “Stash Away”.

The container labeled “Save” should get anywhere from five to 10 percent of your child’s allowance. You, the parent, determine the amount your child should save every week. Once you make that decision, stick to it and do not deviate from the plan. It is important to teach the child that saving is an activity that is done consistently, even if it is not always easy to forego instant gratification. If you pay your child’s allowance in small denominations, it will help show her/him how quickly the “Save” jar will fill up, and how quickly conscientious saving can yield result. (2)

The container labeled “Spend” is just for that: spending. Allow your child to determine what s/he wishes to spend her/his money on, even if you think that what s/he is buying is junk (in your eyes!); what spending is supposed to teach your child is that in order to buy one item, s/he may have to give up another item. Value based buying lessons come later, but will only take hold if the simple lesson of avoiding instant gratification is learned! (3)

The container labeled “Share” is for any money you determine your child should give to a charity; i.e. your church, a local or national charity, etc. Again, you, the parent, determine which percentage of your child’s money should go to charity. In general, an amount equal to the amount you save would be appropriate. The child will learn at this point that money is not just something s/he gets, but also something s/he is expected to use wisely in order to help others. At this step, the child learns that her/his responsibilities transcend the immediate family and also include those whom s/he does not know personally and may never get to meet on a personal basis. (4)

The container labeled “Stash Away” is the long-term savings plan for your child. At this point your child already has a savings account (as discussed in Learning to save: The first savings account) and is acquainted with the concept of taking money to the bank and the bank paying a small percentage for the permission to use the money. Your child should understand that this savings account is for the distant future, such as a college education, a first car, etc. Again, you, the parent, determine which percentage of the child’s money should go into this account. It should be about half the amount of the amount you dedicated to the “Save” jar, and, again, once you decide on the amount, it should not be changed. It would be wise to reward your child’s diligence in saving by matching her contributions to this bank, and by making a bi-monthly trip to the bank to deposit into the savings account whatever money was in that “Stash Away” jar. (5) This trip should be made with great fanfare and perhaps be concluded with an ice cream treat, at mom or dad’s expense, or a similar positive experience.

Please note that at this point the child will seek to learn about money not only by your words, but also by your actions. In other words, if you require your child to save money and give money to charity, as well as expect her/him to forgo instant gratification, you, too, must be prepared to do so!

Use your child‘s understanding of savings accounts and her/his acquaintance with the local bank to spend some time online reading and learning about the FDIC; play an easy game of buying words to create a card with virtual coins from the United States Mint.

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