Things I Learned While Teaching My Daughter About Money

February 3, 2016

My wife and I have been trying in fits and starts to teach our 7-year-old daughter about money. We’ve tried piggy banks to learn about saving. We’ve sat down and talked to her about coins and their denominations. I let her pay for things on her own. I even let her walk away without getting her change once, thinking she would miss the money.

She never figured it out.

There were some successes in those efforts but also many failures. Fortunately we managed to learn a few things along the way and came up with a system that seems to be working, for now anyway. The following are five things we did that worked well in learning money basics.

1. Keep it simple and fun.
When my daughter was 5-years-old we started playing “store” with her. Everything in the “store” was priced in dollar increments. Over a couple of play sessions, we expanded the complexity by pricing our merchandise in 50 cent increments followed by 25 cent increments, and so on down to pennies. Admittedly, $1.42 was challenging to figure out but since we started simple she had the basics down enough to figure it out with a little help.

2. Earning money rather than receiving money makes it more valuable.
We had a big trip planned for the end of this summer. Knowing that she would want a few souvenirs, we offered to pay her for doing chores outside of her normal chores. After each chore, my daughter and I meticulously recorded the amount earned and kept a running total of her earnings. When we finally hit a gift shop she had earned $20. Without any nudges, she thoughtfully shopped the store, keeping in mind that she wanted to stop at another gift shop later in the trip. My daughter had made the connection to the finite nature of the money she had earned. Did she still spend every penny by the end of the trip? Absolutely. But she had started the process of managing her limited funds.

3. Make the connection between hard work and earning potential.
This past fall, I offered to pay our daughter for helping me rake and bag leaves. I offered her $1 for raking a certain section of the yard into a pile plus $1 for each large bag she filled. Throughout the morning, Mara was keeping track of her progress and used the growing balance to motivate herself to keep going. After two hours we had completely cleaned the yard and stood examining our work. Mara had carefully arranged her bags together so we could count them. Eight full bags and one very tidy pile of leaves later she had earned $9 and a bonus Slurpee.

Note: Kids are notoriously bad at yard work. I cleaned up behind her and moved heavy bags around for her. Don’t expect perfection.

4. Let your child spend their earnings.
That day in the gift shop, I struggled to stand aside and let my little girl approach the cashier. I wanted to make sure she paid the correct amount and received the correct change. What I learned is that most cashiers are perfectly happy to play along and be patient with a kid just learning (just don’t choose the busiest moment of the day for this one).

Aside from the practice, I noticed a brief look of reluctance in my daughter’s face as she let her hard earned cash leave her hand. Spending money is just as good of a way to learn about money as earning it. Managing, spending, counting out payment, and calculating change are all great activities for learning the basics of cash flow in a tangible way.

5. Physically pay your child.
One mistake we made early in the process was not physically handing cash to our daughter after she earned it. We fell into a pattern that started with my daughter earning money, then asking for the money at a store, then one of us parents paying via debit card and subtracting from her running total. The result was, at times, three different ideas on what the actual amount owed was.

Tangible money sitting in a Hello Kitty purse will go a long way for a child to learn how finite money really is. Kids who hold money are bound to play with it. They look at it, count it, organize it, spend it in their heads, lose it, or even save a bit of it. Play is a thoroughly vetted method of learning in children. Almost any object put into the hands of a child becomes a toy that can be used to learn, even money.

The biggest take away through these past few years is that learning about money is a long process for anyone, much less a 7-year-old. We can’t expect too much from kids when it comes to money but we should set some goals early on in order to build basic concepts of money. Patience, like most things with children, is a key component when teaching them about money. Just because you save money doesn’t mean they will pick up on that quality as well. Both kids and parents learn by making mistakes, money is no different. Why not start the learning process when those mistakes are so much less consequential?