I wrote a similar post last week about helping kids to understand, and participate in, household budgeting. This takes the next logical step, from self interest to more outward looking budgeting. Hope you don’t mind me including the link here: http://facedestiny.com/blog/money/teach-your-kids-how-to-budget/

I’m not a photography buff anymore, but I do remember the lessons I learned from having to manage money at such a young age.

I also enjoy lookin at my savings account balance go up every paycheck & my mortgage balance go down ever payment.

See also resources hosted by the Cooperative Extension System (community ed materials from multiple universities). They have a personal finance section at http://www.extension.org/personal_finance

with a section on children and money at http://www.extension.org/pages/Financial_Security:_Children_and_Money

My daughter just turned 8. She has had allowance for three years. We decreed that she must save 25% for longer-term goals (not yet determined, although she has a mental image of a horse) and she must set aside 25% for charity. She can spend 50% on whatever she likes. We advise her sometimes (can’t help commenting), but it is her choice. She can choose where to give the charity money, and she has contributed to Trick or Treat for UNICEF, animal rescue organizations and our sponsored family at Christmas.

A while back, I explained about compound interest to her and she ran to get her “savings” envelope so I could invest it in an interest-earning account.

Birthday money is hers to keep, although if she gets a windfall we encourage her to save some of it. Also, if she has outgrown a valuable toy and decides to sell it (we give most things to charity or friends when she outgrows them), she can have the proceeds. Last fall, she sold some princess items and “reinvested” in an American Girl doll on eBay. She chose a less expensive, older doll to get the most doll/accessories for the least cash.

We pay for movies or family activities, but we don’t buy her toys during the year — that is up to her. Sometimes she splurges, often she saves for goals independently, and it’s exciting to see her putting life lessons into practice all by herself.

I’m all for teaching children the value of money and how it should be used, but it’s also a touchy subject for me. When I was a kid, my parents were very careful to not talk about their personal finances around me. Now that I’m an adult with my own child I feel the same way, although, in practice, I’m not as good as it as my parents. My son really grabs on to things you say, and sometimes he’ll not ask for things because he doesn’t think we have the money – that is definitely something a child should *never* have to worry about.

The “candy study” in the comments above is a bad example, imo, as it satisfies an immediate want and the 3 promised later is akin to the old “out of sight out of mind” that they won’t want until it’s in front of them again anyway.

With our 3 year old, we started this earlier, him filling all kinds of fun things with money he’s saved (a “real wallet like daddy’s” for bills, a mini-toolbox for loose coins and a dump truck for rolled coins). A jar is very boring, even for me, and this gives him an incentive to “fill ‘em up”. When any of these are getting full, we count it and either roll it, or take him to the bank where he deposits it into his account with a 100% match from me. So how does he know or even care I’m matching him or why he’s even saving it to begin with? Physical and visual representation; a star chart for example. Whatever works for your little one.

While I agree it’s never to early to start teaching children responsible financing; they need to be kids for a little while. Ergo, you need to step back and make sure you’re not exerting your financial prowess upon them like some pushy, overbearing parent trying to live through them. While your intentions may be good, too much of anything is not good for anyone…

Also re the “candy now or later” test – four-year olds who were able to distract themselves from the temptation of eating ONE marshmallow while the tester was out of the room, so that they could have TWO marshmallows when the tester returned, went on to be more successful in delaying gratification and reaching long term goals later in life than those who weren’t. Google “The Marshmallow Test”.

Off to hide my “marshmallows”. From me! ;)