As a parent, we strive to raise children who are kind and generous. In other words, the opposite of the dreaded “me monster”. One valuable way to instill this love of giving back to others is by using a piggy bank to teach children what I call the order of money. Parents should teach children to allocate their money in the following order: give, save, invest and spend. The best way to do this is through a four-slotted piggy bank, which can either be created or found online in places such as Amazon or Etsy.
Parents should encourage their children to find ways to fill their slots through earning money in exchange for participating in activities such as chores and helping others. Children will learn that resources, like money, are provided in exchange for time and talents. However, children can also be rewarded for completing other household tasks that weren’t asked of them, such as cleaning up their toys on their own free will.
One of the greatest success stories I have seen so far with this activity came from my four-year-old daughter, Cora. As my wife and I have been teaching her this order of money through her chores, she has been able to learn invaluable lessons about money. One day, when asking if I would be home for breakfast the next morning, I told her I wouldn’t be home because of my participation in a fundraiser for the homeless. When Cora learned this, she immediately wanted to help. However, when looking at her piggy bank, she found that her give slot was empty due to a previous donation. She immediately dug into her spend slots to donate the remainder of her money in the piggy bank to this cause. She also asked what she could do to receive more money to donate to this cause. Already at a very young age, my daughter has learned the importance of giving to others.
Here are several ways you can begin to teach the order of money to your children – even at a young age.
- Give
“Give back to others”
One thing I always stress to my clients is the importance of preventing the “me monster”, or an egocentric child. Therefore, I encourage parents to begin with focusing on the give slot of their child’s piggy bank. While each parent will choose to have this conversation with their children differently, depending on their personal philosophy, I firmly believe it’s an important conversation to have with your children. Instilling the joy and importance of giving to others is an incredibly important lesson that will stay with them throughout their lifetime.
To further expand on this lesson, allow your children to choose where their “give” money goes. Whether it be during offering at church, a fundraiser at school or a charity close to your family’s heart; your children will find a deeper level of purpose if they are involved in this decision process.
When charitable giving is a cornerstone of a child’s upbringing, they will continue to give their money generously as they get older and seek to serve others whenever possible.
- Save
“Make sure money is there for tomorrow”
Depending on your child’s age and maturity level, talking to them about the importance of saving may vary. Regardless, parents should relay the importance of saving money for tomorrow. Discuss with them situations that may arise that you weren’t prepared for, or how they can save up money for a bigger purchase they can’t afford today.
Equally important, children should understand that when money is saved, it is not always readily available. Explain to your children that they should not pull from their savings unless absolutely necessary or if they had been saving up for a particular purchase.
- Invest
“Put money away for the future”
While young children will not naturally understand the concept of investing, it is still important to include this slot in their piggy bank so that this order of money will be ingrained in them from a young age. Teach them that you can prepare for the future through investments and help them to understand this money will likely sit untouched for a long time.
For older children, consider discussing investments with them through related activities, such as monitoring favorite companies on the stock market or even assisting your children in purchasing their own stock.
- Spend
“For the things I need to spend today”
Once your children’s money has been allocated to the give, save and invest slots on their piggy banks, it’s time for them to put the remainder of the money in the spend slot. By teaching this mindset to them – that spending comes last in the order of money – your children will be less likely to spend all of the money they receive. Help them to also understand that the money they place in their spend slot is readily available to them. However, once they spend it all, it’s gone and they’ll have to do more work to earn more spending money.
Parents should also consider having their children use the money from their spend slot whenever they ask to buy something. Likewise, if saving up for a larger purchase, parents can assist their children by offering money for additional chores, as this will also help to build a strong work ethic in them.
By teaching your children about the order of money, you have the ability to impact their money mindset at a young age. The lessons you teach them today will have a lasting effect your children’s money management skills as an adult. For additional financial lessons for children, you can request to learn more about my complimentary workshop, Raising Financially Fit Families, which I present to groups and organizations of all sizes.
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