Wondering if you should be paying your kids an allowance? Not sure what works and what doesn’t? You’re not alone. Talking to kids about money can feel complicated — especially when your own grownup finances aren’t where you wish they were.
My sister Sara has 4 kids a few years older than mine and she’s come up with a financial training system that seems to be working for her family. I asked her to share the details. This is what Sara says:
Incoming funds are a chance for kids to learn budgeting.
Twice a month our Family Bank opens for business. Each child is given a generous amount of money and a sucker from the Bank (me) and then learns to budget the money. Each child takes any money earned on their own since the last Family Bank day, plus the new money received, and splits it into five categories:
10% Long Term Savings (LTS)
10% Charitable Contributions
50 % Short Term Savings (STS)
Categories help kids learn the difference between long-term and short-term saving.
-Tithing goes directly to our Church.
-LTS is set aside for some future purchase, like college or a house.
-Charitable Contributions goes to something meaningful like rebuilding someone’s house or a tsunami relief fund or to the teacher at school with cancer.
-STS is something more immediate: a video game, a new bike or a baseball glove. Something they want and have to save for, but can be earned in weeks or months not years.
-Spending is stuff that disappears: a movie, a candy bar or a balloon.
We started this plan years ago, and we have stopped paying the older kids who have started babysitting and earning money outside of the home. Happily, the budgeting seems to have stayed in place.
Use this Family Bank activity as an opportunity for all kinds of money discussions.
This has also been a good platform for other money discussions like “Good Debt vs. Bad Debt” or “how and where to use credit cards” or even “getting a higher yield on your long term savings.” Our ten-year-old just asked his dad to explain Certificates of Deposit to him and asked if that is where he should keep his LTS. Which hopefully means the conversations are working.
From what I can tell, it doesn’t seem to matter much what your plan is for teaching your kids about money, as long as there is a plan.
Thank you, Sara. I really appreciate the clear advice. I love hearing about the discussion that have come from this Family Bank system.
Now it’s your turn, Dear Readers. What are your favorite methods for teaching your kids to be money-wise?