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Q&A: Financial Planning ... Kid Style

What are some ways to teach my children about money?
By Dennis and Barbara Rainey


Do you have any suggestions for teaching children about money?

Dennis: We started our kids at age four or five by giving them about a dollar a month for allowance, and we gradually increased that as they got older. That's a small amount, but it seems very important to a little child.

From the beginning they were given three envelopes—for giving, saving, and spending. We had them place part of their allowance in each envelope. This taught them that they needed to put money in all three of those categories.

Barbara: We sometimes disagreed with how they spent their money, but we generally let them spend it how they wanted. In this way our little girls saved money for dolls and doll accessories. They also spent it on candy bars and experienced what it was like to not have any money left when they wanted something more significant.

Dennis: When the kids turned 14 or 15, we made an important transition. Now their monthly allowance included the amount of money we had budgeted for their clothing, field trips, movies, etc. And they began making the decisions of how they wanted to spend that money. It was challenging at times—the boys might splurge on tennis shoes and have nothing left over.

I can still remember my dad teaching me these same lessons about managing money wisely. If I wasted my allowance, he would say, "That money burned a hole in your pocket, didn't it?" It's important to give your kids some freedom and let them make their own mistakes.

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