Teaching Kids About Money Management & Work Ethic

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I’m pretty sure I was born with the tendency to be frugal.  Ever since I can remember holding my first nickel in the palms of my little hands, I took that shiny coin and hid it under my pillow.  Of all of my siblings I was the one who had “all the money”. Mostly because I saved every single cent that crossed my path.  My brothers would come and “borrow” money from me to play video games at the local laundry mat.  To this day we joke about all the money they owe me.

These two things are of great importance to me to pass on to my kids: money management & work ethic.  With money comes great responsibility.  The responsibility to have a giving heart, to spend well and to save for your future.  This is a lot to just learn the day you turn 18 and walk across your graduation stage.  So, I feel strongly about teaching our kids money management & work ethic at a young age.  These two things go hand in hand.

Update 5/17/2015: Having done this now for months now, I highly recommend this.  Giving our kids hands on interaction with money interaction has been the best thing ever, surpassing other ideas we’ve used like coupons and what not.  The first time they had enough money to spend they were a bit sad when they didn’t get any change back. It helped one of my boys realize that he just spent all his money on one thing. He didn’t do that again and since has asked how much money will he get back if he buys something.  I’ve also been so impressed to see how they add more money into their savings pouch in order to quickly come to the desired amount.

I know there are various camps for how to do chores. I’ve been going back and forth for years now on the concept of paying my kids for chores, allowance and what not. We decided we don’t want to pay them for chores. But on the other hand, I do want them to learn the value of money management and work ethic.

So, we came up with an allowance system that is not tied to good behavior or chores.  They are learning work ethic by the “jobs” they do around the house that aren’t tied to their chores.

So, basically it looks like this at our house:

• Allowance is given once a week, with the thinking in mind that with age comes more responsibility. Each of our kids receives a set amount each week.  So the older ones get more than the younger ones. This money is given to them and not used for bartering between parent and child. For example, we won’t say, “If you don’t make your bed today you won’t get an allowance.” But we do reserve the right to “hire” someone else to do it and take it out of their allowance.
• Chores -They do chores on a daily basis but it’s not tied to money or “getting paid”.
• “Jobs” are different than chores. I came up with some jobs around the house where they can earn some extra money if they so desire. It’s not mandatory but there jobs have to be done well to get paid. Jobs are things like wash windows, pick up leaves, clean out car…

This has worked perfectly for our family because it’s a great crossover of two things I’ve wanted to do but couldn’t figure out how to make it work: “allowance” & “chores”.

If you pay your kids for their chores and that works for your family then go for it!  But with my upbringing, values and beliefs I needed to find a different way to make this work for our family. So, do what works for your family! The important thing at the end of the day is that your teaching them how to manage money and work ethic.

Teaching Kids About Money Management & Work Ethic

Our system is really simple.  I really wanted to come up with something super cute in jars and fun labels but I knew that it had to be something simple in order for it to survive our very busy lives.

Supplies:

• Closet Hanging Organizer, jars, envelopes…
• Washi tape
• Clothes pins
• Save. Give. & Spend printable link is below

1. Make sure your organizer has 3 slots for: Saving, Giving & Spending.  Place washi tape over each pocket and label it accordingly. Our allowance day is Sunday.  Every Sunday, they split up their allowance into three equal parts and place each part into the 3 different slots. So lets say you give your kids $6 for their allowance then $2 goes in savings, $2 in Giving and $2 in Spending. They do have the flexibility to put less money into spending and add more to their giving or savings slots.

2. Since I have two boys doing this, I wrote their names on washi tape over on their side. My youngest who’s 4 gets an allowance but he doesn’t have to record it.

3. We have them record all the money that comes in and out so they can keep track of their money.   Print out this free printable by clicking this link to download it: Save. Give. & Spend Money Management Sheet  This check and balance system has been a good way for them to see visually where there money is going also we have a sneaky little guy who keeps dipping into his savings or giving so I can go back and show him how things aren’t matching up.

Now that your simple money management system is set up–take some time to explain it to your kiddos the difference between wants and needs. The importance of giving and saving. Make sure you don’t use long explanations for younger kids.  You don’t want to confuse them.

Save: What goes in save? Help them come up with something big they want to save for that cost a large amount (which will vary depending on how much money they are receiving).   Maybe it’s a big priced toy, a trip to Legoland, a bike, an iPad…  Also, you can have them open up a savings account and you can periodically go to the bank to deposit their money in it.
Update 11/2015: Our kids have been saving up since we started this for Lego toy that was really expensive. Over Thanksgiving they were able to buy it!  They were so very excited!

Give: What goes in give? In this pouch they’ll put the money they will give to a charity of their choice, buy a homeless person lunch, a Christmas gift to someone in another country, tithe to church.  In our home they’ll have to tithe to church and the rest they will choose from different organizations I’ve researched. We recently had the joy of watching their give money in action I share about it here.

Spend: What goes in spend? In this pouch they’ll put the money used for things like: treats at the store, snacks when we are out, movies, $1 store spending, ice cream and any other knick knacks that don’t cost a lot.

Work Ethic 

So what we are doing to help our kids learn work ethics at this young age is we show them how to do their paid job and we tell them what we expect and we pay them if they do it.  Now we are not looking for perfection especially if they are little but we are looking for them to do their job to the best of their ability.

The other day my son decided that he wanted to take on the job of washing windows.  He started it and quickly saw that it was more than he WANTED to do.  So he started to whine and said he didn’t want to do it anymore, he’s 10 years old and I knew he could do this job.  I showed him how to do it and I even helped him some but I reiterated our work ethic that I want him to start learning and valuing–commitment, responsibility and perseverance.  You don’t just give up because something is hard and what you commit to doing you do it well.

We took this teachable moment and shared with him that sometimes in life our jobs aren’t fun and sometimes not only are they not fun but they are hard. So, we plug along because we’ve committed to doing it.  Obviously, there are times where you weigh your advantages and disadvantages and you come to a crossroad having to make a decision to let go of that commitment but this shouldn’t be a regular thing.

So, we came up with our easy “Paid Jobs” system in hopes to have these teachable moments as I shared above giving us the opportunity to teach them to value a strong work ethic and how to manage their money.

This is also very easy and located in the same place where they are managing their money. Take your wooden clothes pins and also cover them with washi tape.  On each of them write the jobs you want them to complete and behind the pin write how much they will get.   Since we aren’t paying for their chores I came up with jobs that aren’t a part of their chores: sweep patio, clean windows, water plants, take out trash…   If you do pay them for their chores you could also use the clothes pins and keep track of how much you need to give them at the end of the week.

Tips for the adults!

If you haven’t had good experiences with  money management don’t fret, here are some tips for you as an adult so you can pass on healthy habits to your children.   Here’s a printable for you to have as a resource Credit Tip Sheet_ENGLISH

• Check your credit report annually

Make sure your credit report contains current and accurate information. Errors could negatively impact your credit score and even be a sign of possible identity theft. Request a free copy of your credit report at least once a year from AnnualCreditReport.com or call toll-free 1-877-322-8228.

• Pay your bills on time

Your payment history is one of the biggest factors in your credit score – including things that may surprise you like on-time payment of your rent and cell phone bill. Using free online tools, often available through your financial institution’s online banking, can help you develop a budget and create an automatic bill payment schedule.

• Set up alerts

Set up email and text alerts, as well as autopay, to help ensure that you pay your bills on time and build positive credit history.

• Pay more than the minimum

Paying more than what’s due on your credit card helps you pay down debt faster and can improve your credit score.

• Keep debt at no more than 35 percent of your gross monthly income

Lenders look at the amount of debt a consumer has compared to their monthly income when making credit decisions.

• Contact your lenders

If you ever have trouble paying a credit account, contact the lender rather than simply not paying. Oftentimes, they can work with you.

• Think before closing accounts

Closing credit card accounts may lower your available credit and could hurt your credit score in the short term.

• Understand how strong credit impacts your bottom line.

Your credit score influences the interest rate you qualify for. The lower the interest rate, the less you’ll pay in interest over time. Many sites, including Wells Fargo, offer calculators that help consumers understand how interest rates impact their payment and the total cost of the loan.

• Establish and maintain healthy credit – even if you don’t need a loan.

Lenders aren’t the only people who use credit scores to make decisions – many insurance companies, cell phone providers and landlords do, too.

Wells Fargo is committed to making financial education and in-language resources available to Latino consumers. That includes providing customers with bilingual online tools, Spanish Text Banking, Spanish account statements, Spanish-language call centers, Spanish-speaking bankers in stores across the nation, and more.

As part of that commitment and in order to connect with the Hispanic community in a meaningful way, Wells Fargo recently collaborated with Telemundo for the “Conversemos de Tus Finanzas” campaign. The campaign is focused on empowering Hispanics to enhance their financial knowledge and help them to reach their financial goals. The campaign provides customized content, tools and resources around the important financial topics of money management and credit. #WellsFargo