
How Do You Teach Kids the Value of Money? (2006) - ColinWright
http://www.getrichslowly.org/blog/2006/11/08/how-do-you-teach-kids-the-value-of-money/
======
dalke
The descriptions behind this worry does not echo strongly in me.

I grew up in a family without much money. I decided that the best solution to
reduce expenses was to not ask for things. I didn't tell my parents about this
because telling them might lead to them having more stress about money.

To give you some idea, everyone month or so we went out to dinner at a
restaurant. That was so exciting for my sister and me. The restaurant? Burger
King. Compare to the essay, where it says "we ate at McDonalds three times in
two days" Jim Anthony's 6 year old is in a very different demographic than I
was.

As an older kid, I might sometimes get a few quarters to play a video game
(this was the 1980s), and I would spend 30 minutes watching others play, to
make sure the quarter was worth it. I got my entertainment also by watching
the screens and thinking about how it might be played.

I did get an allowance. It wasn't much. I didn't often ask for my allowance,
since that would have been less money for the family. I recall I could get
extra money for taking out the garbage or mowing the lawn. Perhaps not
coincidentally, those are the two household tasks I now dread.

When I went off to college (full scholarship in a state school, including room
and board, for doing well in school and on the PSAT - doing homework is free),
I kept track of every single expense, down to a nickle used to make a
photocopy. If any activity cost money, I avoided doing it.

I'm lead to believe that my viewpoint is not uncommon among those growing up
without much money. It's not a fun feeling. My response still, when money is
tight, is to shut down and do nothing.

Mind you, that's not the same as budgeting. Budgeting is spending for things
that are worth it, and affordable. What I learned was to not spend.

Except for the parents mentioned in #11, I don't empathize with the comments.

Take #13. "It suggested an allowance of sorts, but it also required the
children to cover the costs of some everyday necessary items, not just snacks,
McDonalds or video games…more like clothes, shoes, haircuts, etc."

That wouldn't have worked for me. I didn't have the spending money for snacks,
etc., and I would wear clothes and shoes until they had holes in them, and
basically had to be ordered to get a haircut and new clothes. (See above,
under "not spend money.") Actually, more like my mother had to drag me.

The essay starts with a strange observation about "blue collar", based on
physical types. The entire essay can be seen as expressing a decades-old
class-based upper-middle class anxiety.

~~~
drharris
Your experience mirrors mine to a large degree. I think most intelligent kids
know their family's financial situation, and adjust accordingly. I didn't even
ask for name brand clothing or toys because 1) I knew we couldn't afford them,
and it would put stress on them, and 2) years of life in this environment made
me not care about such frivolities. Kids aren't stupid, they learn proper
spending behavior by what they see. I saw my parents buy bare necessities and
working hard jobs. Naturally, I learned a hard work ethic and proper spending
habits (barring a few years of excess in college when I started making actual
money and felt it should be spent).

Right now we make good money (gotta love computing), and because of my habits
the money fight is nonexistent in our family. If anything, I find myself
constantly fighting to buy our kids less crap. I saw both kinds of kids
growing up, and it's a really interesting thing to see how they are now as
thirty-somethings. Many of the kids like me are in my boat now - even those
who don't have education and professional jobs. Kids who got everything are
now suffering in the current economy. It's a stark and obvious difference, at
least where I'm originally from.

It's a nice life this way. I like getting a bunch of money for Christmas, and
splurging on a tea mug and a set of digital calipers. Everything else is
invested in the hope of early retirement. I hope my kids can see what I'm
doing and do the same.

~~~
gms7777
I think the key part of your comment is that kids learn by what they see their
parents doing. All the tricks and schemes of trying to teach your kids the
value of money will likely be useless if you, as a parent, don't have good
money management skills yourself.

~~~
drharris
I think that holds pretty true for many things in life (i.e. the "teen
pregnancy" gene), but definitely for money management. I also knew decently
smart kids that didn't have a lot that now as adults go out and waste money at
casinos and sports betting. They were a lot like us growing up, but their
parents would spend anything extra on the lotto. So it definitely seems it has
more to do with things we observe as children rather than actual income,
education, and even learning from bad examples.

------
tptacek
Probably not a great idea to comment on the minor weight variations of 11 year
old girls; their weight is significantly influenced by hormones. I read the
whole article (my kids, both disturbingly skinny, are 12 and 14) but couldn't
shake off the weird lack of empathy from that opening graf.

~~~
sivetic
I agree, I'm not sure what relevance the girl's weight had to the paragraph.

~~~
andyjohnson0
The author says they were in the snack aisle and she was "begging for
cookies". I read the reference to her weight as a clumsy way of implying that
the girl's parents were giving in to her demands instead of teaching her what
the snacks cost.

As a hook for the article I thought it was clumsy and unnecessary.

~~~
dalke
It's even more odd juxtaposed with the "a blue-collar type."

I think it's reasonable to say that this introduction suggests a middle class
snobbishness towards the lower class. The worry is that by not teaching the
kids correctly, the kids will end up in the lower class.

On the other side, it's also teaching people that they shouldn't want to be in
the upper class, because then they would lose this important sense of money.

------
codegeek
"Leading by example" is one of the best, if not _the_ best ways to teach
something to your kids. Kids watch parents closely whether they are 3 years
old or 13 years old, even the rebellious types. They know what you are up to
as a dad/mom and will follow your lead. When it comes to money, if you are
responsible yourself, odds are that your kids will probably be good with
money. Having said that, there are definitely a few ways to teach them the
_value_ of money.

We were always taught to _respect_ money. Think before you let go of it.
Challenge (not haggle) spending on something. My dad always said "if you don't
respect money, it will never respect you". It is also important to show your
kids that money does not come free and it has to be earned just like respect.

Overall, my goal is to teach my kids these important math/formulae:

    
    
        It does not matter what you make but what you save.
    
        (Cashflow IN > CashFlow OUT) = "Financially happy".

------
morganm
While growing up, my dad took me and my two sisters on a family vacation. At
the beginning of the trip he handed us each $100 and told us we were free to
spend the money as desired, but first we had to treat the family to a single
meal.

I went first with a pizza lunch. When the waiter asked what we all wanted to
drink, those $2 pops suddenly had a very real impact on my bottom line. Water
would be fine for everyone!

My youngest sister opted for bagels the next morning, but it took a bit of
convincing to get her to spring for cream cheese!

The other sister, being the sweetheart she is, sprang for a real meal and
didn't give us too much grief.

Now we all look back and laugh at the experience, but it certainly had a very
real impact in the value we place on a dollar.

~~~
dalke
As the story goes: I and a friend were walking down the street. A robber came
up and demanded all of our money. I pulled $80 out my wallet, looked over to
my friend and said, "oh, here's the $40 I owe you" while passing it over. The
robber became so mad over this grave injustice, and demanded that my friend
loan me back the $40 plus the rest of my friend's money. The robber then stole
the lump sum from me. I now owe my friend $150!

In any case, I think you're missing part of the equation. Value isn't a stand-
alone concept. It isn't "the value we place on a dollar" but in how much each
of you values family meal time. Your youngest sister, at that time, placed a
low value on it, compared to other possibilities that she could do with the
money.

------
lingoberry
Give your child a monthly allowance that is 8-12 times lower than the price of
something it really wants. Watch as the child saves up to be able to buy it or
fails. Raise the allowance slowly as they get older, but never so high that
they can buy what they want comfortably.

Let children be children, don't force them to work summers and holidays to
teach them a lesson, that will come in its own time. They will have to work
the rest of their lives anyway. It's better to teach them how to save instead.

~~~
pmahoney
Anyone ever tried giving monthly allowance of something like (allowance +
$500) and then charging your kids $500/month in rent? In some sense it's silly
to give them money that they'll give right back, but on the other hand going
from rent-free with the parents to suddenly having to manage rent, utilities,
etc. is a big jump.

------
pinko
(Brief) HN discussion on this link from ~7 years ago:
[https://news.ycombinator.com/item?id=2725](https://news.ycombinator.com/item?id=2725)

------
mratzloff
I received no allowance as a kid. I was also expected to do a set of chores
each week to contribute to the family. These were things like cleaning my
room, washing dishes, and taking out the trash.

Beyond these, however, I could perform additional chores in exchange for small
amounts of money. My mom and I agreed on a price sheet. By doing a few of them
I would have the equivalent of $10 a week or so. If there was, say, a computer
game I wanted, I could do additional chores for a couple of weeks to earn the
money for it. They encouraged this by helping me open a savings account early
on.

Every now and then I approached my mom to renegotiate the prices (effectively
to ask her for a raise). If I had been doing a good job, she would usually
agree to small increases. Sometimes there were items that seemed too big for
the return, and I would negotiate an increase by explaining this.

My first part-time job was at 15, but I helped where I could before that for
odd money here and there. I paid for my first car with savings from that job,
and I also paid my way through college (with some help from my parents for
room and board).

I have never been afraid to negotiate on salary.

I feel like more than any of my friends growing up, and more than many adults
I know, I understand the value of money, and I give a lot of this credit to my
parents.

~~~
jtbigwoo
I really depends on the personality of the kid and their environment, too. I
had a good friend whose parents paid him for chores. They paid pretty good
rates (like $5 for cleaning his room or a bathroom or $10 for shoveling their
driveway). When he was in elementary school he worked really hard and had lots
of money. Combined with generous gifts from his parents and grandparents on
special occasions, he always had the very best stuff. Then, in 8th grade or
so, he realized that he had enough toys. He just stopped doing _any_ chores.
If he wanted something big, he'd just put it on his Christmas/birthday list.
His parents didn't have a recourse since they'd set up a system that involved
rewards for every household task.

Like I said above, it depends on the kid's personality and the family's
economic situation, but I think that an allowance along with an expectation of
age-appropriate daily and weekly chores works better than paying for
individual chores or hours.

~~~
mratzloff
Well, I think I addressed that. I had chores I always had to do that paid
nothing (cleaning my room was not negotiable, for instance). The money I
earned from doing additional chores was not that much--a couple bucks plus or
minus, depending on the difficulty.

My parents also didn't buy me much. I paid for many of my own toys after I was
old enough to do chores. For example, I bought my own NES and every single
game I owned for it. Each game represented perhaps a month or two of savings.
Although I had fewer games than most kids I knew, I definitely valued them
more. (Or tried to. I still distinctly remember the joy of buying the Teenage
Mutant Ninja Turtles NES game and the subsequent crushing disappointment of
actually playing it.)

Christmas wasn't a lavish present shower that it is for a lot of kids. My
parents didn't have a lot of money, so I'd usually receive a few action
figures, maybe a small vehicle for them, a book, and some socks.

~~~
jtbigwoo
Perhaps I'm just using you as a substitute for all those kids that told me, "I
don't get an allowance, I have to work for my money," and then finding out
that their dads paid them $40/week to mow their lawns and clean their rooms.

------
lazyant
I fail to see how giving his boy a budget for what he wants is different from
an allowance and the "entitlement" that the wanted to avoid.

~~~
mcherm
I think the difference is psychological.

Getting paid for household tasks suggests that the household tasks are not
part of your obligation to the family itself -- that if the child didn't
really want the money then they could just quit helping to mow the lawn or
wash the dishes.

Getting an allowance suggests that the money is theirs to do with whatever
they want. For instance, my son (11) gets an allowance but he almost never
spends it. It suggests that the child's finances are (at least partly)
separate from the family's. And it represents "free money" earned without
working for it which may or may not be a message you want to send.

The article described putting the child in charge of a portion of the family
budget. The implication is that the family operates as a commune (which most
families do) and the income may be earned by the parents, but is to be spent
on everyone (as needed) and puts the child in charge of a piece of that. It
happens to be the part that the child cares about (McDonalds and video games)
because that is age-appropriate. An older child might get a larger budget and
also be responsible for paying the electric bill -- assuming that they can
influence it by helping to turn off lights and minimize wasteful use of
electricity.

~~~
mercutio2
Speaking as someone who lived happily for many years in an income-sharing
commune (not all modern US communes are full-on income-sharing), this is a
lovely way to explain the "control of a few budget lines" system.

My plans for my own daughter are for her to understand the total family budget
(and retirement plan), perhaps giving her control of a few line items would be
a good entrée into the overall much more complex budget.

------
my3681
I remember as a child the first time understanding the gravitas of significant
amounts of money. My parents had helped me save up with chores, birthday
money, etc. to the point where I could now afford the thing I always wanted: a
Nintendo 64.

I remember going to Toys R Us to buy it and when I got there, for the first
time in my life, I wasn't so sure about spending the money. There was so much
effort tied to it that, even as a child, it struck me that I was trading all
of this time and effort for this one product. My mom made me count out each
$20 bill, teaching me that money was not some nebulous idea (looking at you
credit cards). Every $20 bill I counted made me think more about what I was
doing.

I eventually bought it, but because all of the time spent saving up for it, I
took good care of it and found it to be the most beloved console I ever owned.
I feel that this experience definitely helped me understand the value of money
relative to my efforts.

Oh, and my mother bought me Starfox 64 specifically to nail the point home. If
you are reading this, mom, I love you.

------
DanBC
BBC Radio 4 has a programme called "Bringing Up Britain" which discusses the
topic of educating children about money.

[http://www.bbc.co.uk/programmes/b00jj0s5](http://www.bbc.co.uk/programmes/b00jj0s5)

I don't know how long it will be available for.

Some tradtitional kids-and-money activities are harder to do today. I
submitted an article some time ago about in reased policing of lemonade
stands.

[https://news.ycombinator.com/item?id=3171665](https://news.ycombinator.com/item?id=3171665)

------
skittles
Teaching kids about personal finance is important, but making your kids pay
for large expenses isn't a good thing. I've seen so many kids start out life
having to pay for their own car, insurance, and college. Most of them drop out
of school before graduating (no degree _and_ student loans). There's nothing
wrong with helping your children get started in life by paying for the things
that will financially cripple them.

~~~
mratzloff
Well, if we're trading anecdotes, several kids I know whose parents paid for
their car, paid for college, etc. did not value these contributions and drove
recklessly and wrecked their car, did poorly in school and dropped out, etc.

Not being _able_ to pay when faced with a large expense is one thing; most
parents would help out if their child was in that situation.

Not valuing the expense is definitely another, and it's a difficult lesson to
learn later in life.

------
aestra
I might be weird but _really_ I do not understand giving your child money. I
never got money as a child, ever. I just got things on birthdays and
Christmas, that was it. We went without a LOT mostly because we didn't have a
lot of money. This taught me to really value the things I do have, and not to
expect anything. I also never got into the consumer culture.

~~~
mercutio2
Did you never get cash for birthdays or Christmas? I had a sizable number of
friends growing up who claimed to "get no allowance", but they spent a
shocking amount on frivolities. Turns out their annual gifts-received line
item was significantly more than the pittance I received for allowance,
annualized.

Not saying that was your situation, just remembering my annoyance at my
friends dishonesty/innumeracy.

~~~
aestra
>Did you never get cash for birthdays or Christmas?

Nope, never. I never had cash, ever. Not ever a dollar until I started worked
at 16. Actually, that's not true, a couple times I went on a field trip to a
big city and I got $20 to spend there. My grandparents gave me savings bonds
once in a while on birthdays which I still have, but I never cashed them in.
The rest of my relatives were much poorer than us. A couple had their power
shut off. They certainly weren't giving me money.

Even if I did have money, I don't know how I would have the ability to ever
spend it. My parents hardly even went out shopping unless they were going out
for something specific they needed. When kids have cash do they just get taken
to the store once in a while to browse or something? Do people just go to the
store aimlessly to look for things to buy? Do kids so "I want X" and get taken
to the store?

------
yogo
Why shield them from the hardships of life? Put them to work early, like
during summers or on the weekends. It's like most things in life, you can tell
them "it's hard to [earn/do/learn] X," but the actual exposure to X develops a
different level of appreciation.

~~~
thezoid
Earning money is one thing. But teaching someone how to budget has drastically
better chances of using their money more effectively.

Besides, once they get old enough to work (maybe throw in chores) they'll
already have plans on what they want to do with the money that goes beyond
drinking, games and consumer goods.

~~~
jaxn
The key is to require the kids to make purchasing decisions.

Our kids (ages 12, 11, 9 & 8) are required to purchase all of their own school
supplies, clothes, activities, etc. They earn the money from us and can earn a
lot, but they have to complete their chores without us asking and turn in
their peg slips (like a time sheet).

They then have to decide, do they want the $80 jeans or the $20 jeans? If they
buy the $20 jeans then they can make more trips to the skatepark.

It works really well. Our system was derived from the book The Entitlement
Trap: [http://www.amazon.com/The-Entitlement-Trap-Choosing-
Ownershi...](http://www.amazon.com/The-Entitlement-Trap-Choosing-
Ownership/dp/1583334157)

~~~
icebraining
Requiring them to purchase school supplies seems counterproductive, unless
they really value them. If my brothers were given a choice, they'd buy the
shoddiest possible equipment to save money for fun stuff, and if you were to
force them to buy better things, you haven't really gave them the purchasing
decision, just faked it.

~~~
daeken
That seems like a great way to learn that you get what you pay for. Letting
kids make mistakes (especially relatively minor ones like that) is always
good.

~~~
gizmo686
The problem is that kids often under-value their education. As such, they
would allocate less of their money to school supplies then they should. They
may not realize this mistake until they realize the value of education, by
which point it may be to late.

~~~
jaxn
They receive a list from the school and buy what is on the list.

In general, we do have to tell them what to buy sometimes.

------
jswinghammer
I simply pay my kids for the work they do, they store it in a bank, and then I
let them spend it. When they get older they will need to put aside some money
for saving, some for spending, and some for giving away (their choice on the
breakdown but it needs to be something in each).

~~~
xlevus
I'm curious? Why force them to give their money away?

It sounds counter-intuitive to me. Teach them the value of money, but then
completely negate any value by forcing them to give it away?

~~~
mratzloff
In my opinion, reinforcing the idea that charity is an obligation to society
is probably just as important as reinforcing the value of money itself.

~~~
jswinghammer
I take a much more spiritual tact on the whole thing. I think giving is good
for the giver first and then helpful to the people receiving it (particularly
if they aren't just giving it away but investing it in something useful for
others). That's been my experience and reflects Biblical teaching on the
subject.

------
andyidsinga
my answer: i always worry about it.

i dont think its a great way - teaching indirectly via worrying - but it has
some value in that they know spending it has to be done with some thought
because there is only a finite supply and we like a nice warm house.

i try to counteract the negativity of 'not spending by worrying' by
occasionally making small purchases that are purly for enjoyment - a toy, a
dinner out, a weekend at the beach.

------
hoopism
Teach them about compound interest and then set up a vanguard account.

------
astrobe_
Scarcity.

------
rfnslyr
Same way I was taught. You don't get _shit_ unless you do something for it.

When I was a kid, my dad hired me to do jobs on the clock around the house for
$10 an hour, or whatever minimum wage was at the time. We had a set schedule,
we had a fake tax schedule. We wrote everything out, calculated it, pretended
to invest it into things like real estate etc.

When I was younger I used the money I saved up, around $15,000, to buy the
shack outside our house. My first "investment". Rules were it was completely
mine and my parents couldn't touch it. Insulated, spacious, my own little
lofty apartment type. It was great, during high school I basically turned it
into a smoke shack.

I kept it until college, at which point my dad pulled out the original $15k I
gave him for it and used it for my college fund and said "you now know how to
value money". He wasn't a man of many words, so when he says something like
that it really means a lot.

I was taught this from a super young age, I didn't even bother to beg or throw
a fit about anything because I knew my dad would just stare at me until it was
over, and if I didn't have the cash, I didn't get the cookies.

