My wife and I have a three year old son.  He is constantly learning new things and comes up with new words and ideas.  My wife and I frequently look at each other in amazement and just shake our heads wondering “Where did he learn that?!”  We’ve recently begun to teach him about money.  In very simple terms we’re teaching him that there are three things you can do with money.  Give, save and spend.  This is the core of good financial practice.  You need to do all three in order to have a well balanced approach to your finances.

How does this work?  Well, we decided to give him two very simple chores that he needs to do 5 days a week.  Both are around picking up toys and clothes.  He earns $.50 per chore which totals $1.00 per day.  Not much, but enough to provide some teachable moments.  As with any three year old, he helps us pick up the toys.  As he ages we will expect him to pick up more and more toys until he finally does it all without any help.

What does it look like?  Every night after he picks up the downstairs and his room we put 50 cents next to each chore.  We do this Monday - Friday and he is paid Friday nights before he goes to bed.  After we pay him, we help him put the money into three labeled envelopes.  Conveniently labeled, Give, Save and Spend.  1 dollar to Give, $2 to Save and the final $2 to spend.  It’s a great deal of fun to watch as he excitedly talks about his dollars.  In fact, I’m smiling just thinking about it.

We took him shopping last week and he had a great time spending his money on a new train for his Thomas and Friend’s collection of trains.  He didn’t quite understand that he had to give away his dollars in order to buy the train and wanted the cashier to give the money back.  :-)  He’s learning and that’s the most important thing to me.  I want him to learn how to handle money under my watchful eye.  I would rather have him gain valuable experience under my tutelage and make some mistakes now with $2, $4 or $10, now than have him making $50,000 or $500,000 dollar mistakes later in life.  This is key, because you can’t afford something if you can’t pay for it with money you have.  Some 50 and 60 year old people have not learned that lesson.

Final thoughts.  We started this several weeks ago and I think he’s beginning to learn that you get money by working.  I also hope that he is learning to determine what he really wants because the dollars at his disposal are limited.  I hope that he learns to handle money wisely because I want him to avoid the mistakes that I made with money.   Last thing, the chart we use has a penalty box that can be used to deduct money for pre-defined misbehavior.  We haven’t begun to use those deductions yet.  Be assured we have plans to make use of those very very soon as incentive to behave correctly.  It’s worthless to teach your children how to handle money if you don’t instill character, including integrity into their little minds. 

By the way, if a three year old can learn this, then what’s keeping you from doing this?  Are you smarter than a three year old?

What are you doing to teach your children how to handle money?  And what are you doing to demonstrate that you know how to handle money?  Put a plan together and act on it this week.   Use the comment section to let me and the other readers know what you are trying and how it’s working out for you!