A few years ago I discovered that the six-year-olds in my class couldn’t differentiate between a nickel, dime or quarter, much less a half-dollar. They did recognize a one-, five- and ten-dollar bill, along with a penny.
With parents using debit and credit cards for most purchases, children have few experiences with cash. With further investigation, I found out that these students didn’t get an allowance. Mom or Dad added whatever the child’s requests, within reason, into the shopping cart.
Having a piggy bank and counting the money over and over to determine if there was enough for a purchase from the ice cream truck are parts of my earliest childhood memories. At three I knew the difference between a nickel, dime and quarter, and the combination of coins needs for a frozen treat on a hot day.
Children need an allowance beginning around age three that is not tied to chores, but given on a weekly basis. A dollar is probably right for a three to six-year-old, paid in differing cash combinations each week.
A four- and five-year-old (and teenagers too) can begin to understand the family budget by using a dollar’s worth of pennies.
Figure your monthly budget by percentages. Make labels on 3” x 5” cards with a word and pictures when possible for house, car, gas, food, insurance, utilities, clothes, entertainment, taxes and whatever expense categories you might have.
The talk would go something like this: ”I want to talk to you about a tool we have to help us get things. This tool is called money. For every dollar, or one hundred pennies, that we earn I want to show you how that money is used. The first thing that comes out of our dollar is taxes. Taxes help build schools, roads and parks and pay policeman, firefighters, schoolteachers and other people that help our community and our country. Our taxes help pay for the President and the White House, too.”
Place the label for taxes on the table, and place the percentage in pennies under amount label. I am using 25% for the tax rate in this example.
”We spend 25 cents of every dollar we earn for taxes.”
”Next, we put 10 cents of each dollar into our savings account for things like college and retirement. We call this long-term savings.” Place label and coins. (If you don’t save this amount, work towards this goal. Pay yourself first, and teach your children to do the same.)
”For our home we use 12 cents of our dollar.” Place label, and put 12 cents underneath.
”For food we use another 12 cents.” Place label and coins.
”For our car and transportation, we use 6 cents.” Place label and coins.
”For our electricity and other utilities, we use 6 cents.” Place label and coins.
”We spend 4 cents on clothes and shoes.” Place label and coins.
”We spend 15 cents on saving for vacations, buying things for the house, and Christmas and birthday presents. We call this short-term savings.”
”With our last 10 cents, we use our money to help other people. Some people call this charity or service to others.”
”With each of your dollars you get for allowance, we think you should only be responsible for three of these spending categories: long-term savings, service to others and short-term savings.”
”Save 10 cents of every dollar for when you get older and want to get a car, or go on a trip, or go to college. You might call it dream money. Save another 10 cents to help people. You might call it service to others. Save 15 cents for things you might want but don’t have enough money to buy with just a dollar. For example, a game. We might call it wish money. The rest of the dollar you can spend anyway you would like.”
At this point bring out three jars, or banks, with the labels: ”dreams,” ”service” and ”wishes” on them. Put the corresponding amount of money in each jar.
”When your dream jar has $5 in it, we will go to the bank and open a savings account for you.”
Take the time to help your children learn about where money goes and how to save it for dreams, wishes and service to others. That will be a big help to them for all their lives.