Anyway, I saved my $1 coins for a whole month, and when I had $30, which was more money than I had ever held, I asked my mother to take me to the toy shop and I bought a little electronic handheld game that other kids at school had. No sooner had I got out to the car and pulled open the plastic box (which was no doubt cleverly made to be broken so that it could not be returned) and I held the joy in my little hands, did I realise how badly I had been ripped off. This game was stupid. It only did a few things; I was bored with it before I got home, and I had spent a whole month saving for it. I cried. My mother said little, as she knew this would happen. I definitely learnt from that experience.

I also learnt all about depreciation AND bartering the next day at school in the lunch break. A money-savvy friend, on learning about my disappointment, said she’d buy the toy from me. Yes! I thought – I won’t lose out after all. But – she said – she’d only pay $15 for it now, since it was used.

“But it’s only been used for one day!” I protested.

“Then barter with me,” she said. “Ask me for $20.”

“All right,” I said, “Bring $20 and you can have it.”

“Oh no,” she said. “$15 or you’re stuck with that boring toy for ever… and you don’t want that, do you!”

“Hey!” I said. “You told me to barter with you.”

“Yeah,” she said, “But it doesn’t mean I have to asgree with your asking price.”

I shrugged, feeling well behind in the matters of finance. I ended up keeping the toy. Even my little brother wouldn’t take it, as a gift, saying it was “a stupid little game for girls”.

Later, during my teen years, I became very devout and wanted to tithe to the local church. I diligently saved up every dollar I received and put away 10c into a piggy bank for the church. In
hindsight I would not do this anymore – perhaps I’d give the money to a charity, but probably not the local church whose historic building funds are probably higher than their actual local charity funds. (No offence churchgoers but I know how often old churches need restoration works.) Anyway, putting this 10c per dollar away helped me learn how to save. I never touched that box, even when I really really wanted an item…

I realised that I would spend every other dollar I kept on presents for my friends instead. Giving treats, cards and gifts to my friends felt good. However, I needed to budget – because my parents expected me to pay for my outings etc with the pocket money, too. So I divided the money after tithe in half – half for me, half for gifts. This system worked well and I kept it until I was 16 years old. Then I moved out of home and continued my budgeting and saving and spending on a larger scale, served well by my early penny-counting days!

Today I run a small business and I’m going to teach my first child to do the accounting. I knew a family whose 11-year-old daughter did the double-entry bookkeeping, including the tax. They were homeschooling and she learnt most of her number skills this way. I also know of a family whose 5-year-old always pays for the juice and cake when they go to a cafe – the mother gives the child some cash before they leave home, and when they get to the cafe, the child learns to hand over the appropriate-sized note and then they count the change together after. What valuable lessons.

Another family requires that each child gets an after-school job, even if only one day a week, so that they can save towards their first car. They are told that if they can save half the cost, the parents will pay the other half. All the kids work at after-school jobs quite happilly and still manage to do all the other things that kids like to do.

I want to do some things like this eventually. When I was a child I was terrified to handle money until I was about 12 years old – I wouldn’t even hand over money for a lollipop or an ice cream. I think I got that fear from the way my father handled money, as though it was always trying to hurt you.

It definitely matters what you teach the child by example when they are small.

Thanks for your article, it got me to remembering my childhood money stories.

I don’t know if a kid can learn something as complex as finances before they’re 2 or 3, but I remember at about 4ish that was my favorite game. Each time I invest in something, or take a loan, I think back to that game and the blessings that an early understanding of money has brought me.

Speaking as a former child rather than as a PF educator, he’ll have to know something about it when he reaches the likely point of filling out the FAFSA/Profile/whatever, and if his parents do not do things the same way as his peers do it will be much, much less bewildering if it’s discussed with him (budget limitations, so we prioritize buying X and investing in Y, so that’s why we don’t do Z).

So I’m curious to know what your take on this is and why. (For example, are there are some trade-offs to disclosing or not? That could be an interesting topic to discuss.)

When my kids started demanding pocket money I never had enough cash on hand so I set them up with their own accounts and EFTPOS cards and then direct credited money into their accounts for them to manage. This taught them how to read statements and my daughter caught the bank charging fees! She got a valuable lesson about how banks work for themselves and the costs of money

I’m definitely a proponent of teaching kids smart saving and spending early (which I wasn’t taught), so I support you fully.

I’ve read another about a man who gave control of the dining out/movie budget to the little boy.

In both cases, the kids made the predictable errors at first, then figured out some smart strategies after that.

–Michael