Money Doesn’t Grow On Trees

Article by:  Jennifer Kirby & Andrea Kirby

Teaching kids about money is one of the greatest life lessons you can impart as a parent. Financial smarts are often learned at the kitchen table, and there are many different ways you can start the education process.

Recently, we met Kari, a very cool mother with four amazing, well-adjusted daughters between the ages of four and nine. Our conversation turned toward how, with such a big family, Kari and her husband dealt with the "I want this, mommy" tug-of-war and also managed to keep things equal between their daughters. Kari explained that the kids were terrific with money and that the kids had even made their own donation to World Vision over Christmas.

The family's approach to the kids' money and allowance evolved from a book called Money Doesn't Grow on Trees - A Parent's Guide to Raising Financially Responsible Children. This book gives lots of great ideas about teaching your child the basics of money management.  For example, author, Neale S. Godfrey, recommends that money received should be divided in four jars:

Jar #1:  For charity (sharing)

Jar #2:  Quick cash (spending money)

Jar #3:  Medium-term savings

Jar #4:  Long term savings

The sharing jar is money to be given away to a charity of the child's choice. Kari's kids combined their sharing money and selected essential items for needy families from the World Vision catalogue. This has helped her children develop an appreciation for those families who are less fortunate. 

The spending jar provides each child pocket money for immediate, smaller purchases such as a trip to the corner store or a new toy. The savings jars represent mid- to long-term goals. Medium-term savings might be bigger purchases like a bike or an X-Box. Long-term savings might be for university savings. Taping a picture to the jar can also help kids visualize their savings goal.

Author, Neale S. Godfrey also encourages parents to give allowance on a "work for pay" basis by setting up a series of chores for children.  She cautions parents against paying kids for duties that are considered citizens of the household duties such as making their bed or setting the table every night.

There are many different ways to help kids develop an understanding of basic financial principles:

• Develop a budget and keep a record of what they have purchased in order to review where the money went
• Give kids their own grocery list and ask them to help comparison shop
• Hold a garage sale to give kids an opportunity to price and sell their used items
• Match kids' contributions to charity or larger savings items
• Teach kids about how interest works. You may even want to open a high interest savings account or an in-trust mutual fund account on their behalf.
• Teach kids about credit cards and how interest is charged if balances are not paid off at the end of the month
• Arrange a meeting for your kids with your financial advisor

So many people that we meet regret not learning about money earlier in life. Simple systems like Kari's jar system can help keep the peace and will equip kids with the basics of money management. 

Andrea Kirby, BA, MBA works with Kirby Financial Group in Calgary.  She can be reached at andrea@kirbyfinancialgroup.com.