15 Rules Kids Should Learn About Money

Do you struggle with managing money when it comes to your kids?  I have two kids and they demand so many items ranging from Pokemon cards and books to Lego and Harry Potter.  Unless you are rich and can spend the money to get everything your kids want, managing your kids requests can be hard.  I struggle with this often enough that I sometimes want to give in and buy them what they want.  Thank goodness my wife is there to stop me…

Recently, I ran into this book called “Piggybanking: Preparing Your Financial Life for Your Kids, and Your Kids for a Financial Life.” by Jeff D. Opdyke.  This book I thought did a great job of what we as parents should be doing to teach, prepare and deal with our kids to learn about money.  Below are 15 Money Rules for kids discussed in the book.

1.       “Spending money happens only after you earn it”

This is why it is important to teach our kids that you must earn money first before you can buy something that you want.  This can be a very difficult concept for children especially those who are below 10 years old.  Kids are probably asking themselves why they need to earn money when they have parents whose goal in life is to provide.  Even adults spend money without earning it first by using credit cards.  We need to not only start teaching our kids about rule #1 early but also show our kids that we adults follow this rule.

2.       “When kids start asking parents to drive to Toys “R” Us to buy some plastic whatnot, the time has come to start thinking about an allowance”

As parents, you can start early when it comes to giving allowance.  Make it as simple as possible for your kids to understand.  Basically, you can buy two piggy banks, one for spending and one for saving.  You can add a third one for tithing if you are a regular church member.  With two piggy banks, you can teach your kids half goes to saving while the other half goes to spending.  When you set this up, don’t be too frugal about the amount of allowance because you do not want your kids to wait too long to accumulate their spending money.  I would say $4 would be sufficient in kids who are between the age of 6 – 10.  This way, with 10 weeks of saving, your kids can get $20 worth of toys while saving the other $20 for later.

3.       “The size of an allowance should not be so meager that your child is a pauper among peers, not so generous that your child can easily afford all wants with little financial planning.”

See above.  I agree with this rule.  The purpose here is to make sure you kids can learn about money, not finding out their parents are too frugal.

4.       “Good grades are expected, and helping around the house is simply the price of family life”

I know there are many parents who like to reward their kids when they bring home good grades or help around the house by doing chores.  It might be better to just stick to weekly allowance.

5.       “While 16 is generally the legal age of employment, encourage kids starting around age 13 to think of ways they can earn an income”

Your kids can really use your help and support when it comes to finding ways to earn an income.  I think it is always good to see kids finding ways to earn money so that they do not have to always depend on their allowance.  Consider babysitting, neighbor’s yard work, and even consider tutoring elementary students or teaching instruments.  There are many other ways to earn money without the traditional lemonade stand.

6.       “Guide and advise your kids about money, but don’t dictate”

Make sure your kids are making decisions on how they want to use their money.  As parents, we can guide and advise them about money but never take total control of their decisions.  It’s much better for the kids to make mistakes and learn from their mistakes when they are still young.

7.       “Failure to balance the monthly debit card bank account statement means losing access to the debit card for a week or more; failure to replay an entire month’s credit card balance means the loss of the card until the balance is fully paid, plus one additional month”

My kids are not old enough to carry debit cards but I agree with properly disciplining your kids especially when it comes to credit or debit cards.  Do you have any good advice when it comes to kids handling debit or credit cards?

8.       “Only 50% of the money put into a piggy bank can be taken out to buy something.  At least half must remain inside the pig”

This is similar to my comment on rule #2.

9.       “Children should have the right to screw up financially so that they can learn from their mistakes”

This is a tough rule.  Personally, I really hate to see my kids fail at anything.  I always try to get involved early so that they won’t fail.  It does point out an important point here which is learning from their mistakes.  We need to realized that we cannot always be there for our kids.  They need to learn to be independent and hope that they will learn from making mistakes while they are still kids.  Making the same mistakes as a young adult could be costly.

10.   “When it comes to investing in stocks, kids should understand a company at such a basic level that they can draw a picture of the business model with a crayon”

I’m not sure if I totally agree with this rule…  I can’t even draw a picture of business model on companies that I invest in.  Maybe I should start doing this so that I can start teaching my kids when they are old enough to understand investing.  What is your experience related to this rule?

11.   “You don’t need to be wealthy to begin teaching your children about the stock market”

At the same time, you do not want to lose money while you teach your kids about the stock market.  The stock market is a risky in nature so parents must be very careful when teaching your kids.  The problem here is that most adults don’t even know much about the stock market so not sure how this applies…  If you are interested in teaching about the stock market, I recommend using the play money first before using the real money.

12.   “If a child’s charitable interests lie outside your special interests, so be it”

I think this is a simple rule.  I would be trilled if my kids have any interest in charitable giving.  As a parent, I really don’t care about my kids aligning their interests with mine.

13.   “Parents don’t have to save every last dime a child will need for college expenses.  You only have to save up to your ability or desire to pay”

I love this rule.  Many parents will struggle trying to save money for kids college costs.     This rule serves as a good reminder to parents that we can only go so far as to our capability.

14.   “One of the greatest gifts you can give your child is your own financial self-sufficiency when you’re old”

This is another good rule.  I hope and pray that I will not be dependent on my kids when I retire.  This is why I am doing my best to save as much as possible now when I am young.

15.   “At some point you have to tell your kids that the Bank of Mom & Dad is officially closed”

Not sure if I can do this.  As parents, we’re always open to helping our kids in anyway including financially.  I don’t know if I can ever close my “bank” to my kids.  For me, my bank will always be opened.  However, I do hope that they will be sufficient enough so that they are not dependent on me forever.

There you have it!  The 15 money rules every kids should learn by Jeff D. Opdyke.  Have you started any of these rules with your kids?  If you are those parents who already raised your kids, what were your experiences like when dealing with money for your kids?