Teach your kids to manage money early

Boy washing white car in the sunshine
OCCU  -  04.04.2016

When it comes to finances, doesn’t it seem like some people just have a knack for managing their money wisely and some don’t? Think about it. You probably know someone who is usually in the black, regardless of their income level, staying ahead and living relatively stress free. And you might know others who spend more time in the red, juggling debt and living paycheck to paycheck. So where does this knack for staying in control come from? The truth is money management is a learned skill, not something you’re born with.

Money management exercise

In honor of Youth Savings Month, consider trying this simple exercise. Imagine giving your child $20 on a Saturday, telling him or her it’s for them to use as they wish. Would any of that money be left at the end of the weekend? Now imagine assigning them a list of Saturday chores, rewarding them with $20 upon completion and having a brief talk about the value of hard work. Chances are, letting go of that money would be a little more difficult for them.

While tying an allowance to chores is one sure way to get kids thinking harder about money, it may not necessarily be the best way according to Janet Bodnar, editor of Kiplinger’s Personal Finance magazine. After speaking with hundreds of families about different approaches to allowances, Bodnar believes kids should help out around the house, without necessarily expecting to be paid, because they are part of the family. That said, also she believes kids should learn to make the connection between work and pay.

Bodnar recommends what she calls a two-tier allowance system. Kids get a “base allowance” that’s not tied to specific chores they should be doing anyway – like making their bed and helping with the dishes. As they get a little older and have more opportunities to spend money (clothes, games, after-school outings, etc.), they can begin to take more specific chores off your shoulders (washing the car, doing the laundry or yard work, etc.) and be paid by the job as long as it meets your approval. This way, they learn to be responsible for their money without believing they should be paid for every little thing they do. Bodnar goes on to say that regardless of the system you choose, it should be monitored closely. If kids get money without having done their chores, or don’t get money after doing them, they miss out on the chance to learn how to manage it. She also reminds parents to keep cash on hand, as not doing so is another way a system can fall apart.

The Spend, Share & Save system

Another approach to financial literacy for youth focuses on teaching kids there’s more to do with their money than spend it. The Spend, Share & Save system is endorsed by Jean Folger, author and freelance writer specializing in financial markets and personal finance topics. According to Folger, it’s a great way to help kids think about what to do with their money while developing responsible financial habits for the long term. It involves reminding your kids there are three general choices when it comes to their money, and developing appropriate allocation percentages.


The spend category is for purchasing goods and services in order to meet wants and needs. If your child has a piggy bank or savings jar, have them bring it to the store and see if they have enough for what they want to buy. If they don’t, then it’s a good opportunity to talk with them about savings goals. And make sure those goals aren’t too lofty, as younger children will stay more engaged by taking smaller steps.


The save category is money that is set aside for future wants and needs. Talk to your kids about unexpected expenses that might come up in their life, like a concert by their favorite musician. This helps teach them to think ahead and resist impulse spending. A great habit is to make regular saving deposit trips with your child.


The share category is for make a habit of giving toward helping people, animals, the environment or any cause your kids might care about. Great lessons to be learned and cherished in this category, and it’s never too early to start teaching them.

The percentage of money allocated to each category is up to you and your child, and depends on a number of factors. What’s most important is that you develop the percentages together and stick to them. If you’re unsure, a good allocation to aim for might be 40% spending, 50% saving and 10% sharing.

Youth Savings Month is about much more than stocking a few dollars away in a savings account. It’s about teaching kids valuable habits that lead not only to a better financial life, but also teaches responsibility, work ethic, gratitude and caring about the greater good. OCCU is proud to support our community’s children and is here to help you and your family this month and beyond. Visit an OCCU branch with your kids this month for money management education and activities.

Sources: kiplinger.cominvestopedia.com