How We’re Establishing a Household Cash Philosophy with Our Youngsters

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I have a kid old enough to start learning about money! Of all the parenting milestones we’ve marked over the years, I think I’m the most excited about this one. 

You all have been asking me for advice on teaching kids about money for eight years and I’ve demurred because I didn’t know how I was going to teach my own kids about money. Until today!

Our oldest child, six-year-old Kidwoods, started asking about money this fall and her curiosity reached an inflection point earlier this week thanks to a school book sale flier advertising a $7 unicorn book. So here’s my non-expert, imperfect tale of how we’re teaching money management to our children. Well, really just to Kidwoods since Littlewoods (age almost four) remains unimpressed and uninterested.

Wait Until They Indicate Readiness

You think I’m going to use the potty? HAH. I’m going to steal this apple.

This is the approach we’ve followed with pretty much every aspect of our parenting. Potty training? Wait until the child wants to and is ready. Sports? Wait until the child expresses interest and is ready.

I’m in no rush for my kids to grow up and I’m not interested in forcing them to do something they’re not cognitively/emotionally ready for. Every single time I’ve tried to force one of our kids into something they’re not ready for, it ends in tears. Theirs and mine. So I now try to sit back and let them lead.

Here’s a story:

I despaired when we couldn’t get 20-month-old Kidwoods to potty train in three days like the book promised. We did, eventually, get her fully trained at around two years old, but it was a struggle with a lot of bleach wipes involved. Our couch may never be the same.

I love this old pic and the missing shoe on Littlewoods!

With our younger kid, Littlewoods, we waited. We let her test out the potty, make mistakes and lead at her own pace. She potty trained herself in essentially a day at just shy of three years old because she was ready and enthusiastic. She has had far fewer potty accidents than her older sister, despite the fact that her older sister was technically potty trained at a younger age.

So there’s my sample size of two and my weird comparison of potty training to money training; but, I think the analogy holds up. Think about us adults: do we thrive when someone forces us to do something we’re not ready to do? NOPE. Same for kids.

Bottom line: I see no value in forcing a kid to do something they’re not ready to do, whether that’s potty training or money management. My reference point for this approach is Kim John Payne’s work in the Simplicity Parenting series (affiliate link).

Ok back to money… the same principle applies: we waited until Kidwoods demonstrated curiosity about money and was ready to handle money with care, which brings me to my next point:

Use Actual Dollar Bills

Gotta love the easy-to-read numbers!

Despite the fact that I do all my banking online, we’re starting Kidwoods off with paper money because it’s easier for her to comprehend a tangible object as opposed to ephemeral numbers on a screen. Conveniently our currency has large numbers on it, which Kidwoods can read and understand to be $1, $5, etc.

For Christmas, we gave her a wallet and purse (sourced from a garage sale for $0.50) to grant her full responsibility over her money. There was a minor panic last week when she couldn’t find her wallet and I had to say, “yeah, sometimes people lose their wallets and their money.” She did eventually find it, but the point is that the responsibility lies with her, not with her parents. It’s her money, she needs to keep track of it.

We’re starting with physical money and the concept of safeguarding money in a very real sense, which I imagine/hope will later translate into lessons on safeguarding your money in other less tangible ways, such as: avoiding debt, shopping second-hand, etc.

Start Basic and Small

Kidwoods’ price list. I wrote the first $ amount at the top and she did the rest. 

We’re starting Kidwoods off with basic concepts and small amounts of money. Very basic. Very small.

I taught her what a dollar sign is, how to write it, and how to indicate two decimal places for cents. Then, she wrote a list of prices and drew pictures of items next to each dollar amount. She informed me that each item was for sale at the price she’d written. Next, she “bought” the items from me, which introduced the concept of making change.

Once she realized that money is just math, her face brightened and she had no trouble calculating the change. I found it interesting that she initially thought the numbers in money operated under a different formula than the numbers in math. Made me realize that many adults think the same thing! My hope is that by initiating this very basic foundation, we’ll be able to build on it over the years.

Point being: no need to overcomplicate things. And if anyone knows where I can purchase a smiling snail for $5.50, please let me know.

Have Them Earn Their Own Money

Wait, are you saying I can earn money for this?!

The question of earning money arose organically, driven entirely by Kidwoods. That’s my preference for these lessons, because WOW was she ready, motivated and enthusiastic.

My parents sent Kidwoods $6 for her 6th birthday back in November and she later found a nickel on the ground somewhere.

She harbored that $6.05 for three months and periodically brought it out to count. A fine and simple introduction because yes, sometimes you do receive money as a gift. Then along came the…

School Book Sale Flier

Earlier this week, Kidwoods came home waving a flier advertising books for sale through the school. On principle I don’t like this because I think it encourages unnecessary consumerism, BUT, I recognize that’s a money lesson for another time. For now, my kindergartener is getting the fundamentals down and this book flier provided the perfect entry point for more money education. I mean truly, I could not have scripted this situation better if I’d tried.

Here’s the scene:

Tea time!

We sat down to tea-time as a family–our daily after-school tradition–and Kidwoods was OBSESSED with this book flier. She was reading the dollar amount of each book and picking out a few words from the titles. Predictably, she asked:

Can you buy some of these books for me?

And my parent antennae shot through the roof: THIS is the money opening I didn’t even realize I’d been waiting for! She was ready, enthusiastic and fully understanding that these books cost money, that she wants one of these books and that her parents have money that could be traded for these books.

In my ideal dream parenting world, I prefer to plan ahead for a scenario like this; however, it was clear to Nate and I that the moment was now, so we figured it out on the spot. My husband replied:

No, but you have your own money you can use.

Kidwoods bolted upstairs to grab her wallet and proceeded to count out her money (still $6.05). She leafed through the book flier, circling everything she could afford. A perfect self-taught lesson in comparison shopping and not exceeding your means.

But wait! Another crises ensues:

Advertised in the book flier is a book about unicorns that comes with a UNICORN CHARM BRACELET. Kidwoods’ eyes grew wide, then crinkled in bereavement as she noted the price: $7.

She again turned to me and asked:

Do you have one more dollar I could have?

The vaunted unicorn book AND BRACELET!

The money lessons just keep on giving! It was time to introduce the concept of doing a job to earn money. I told her that I did have a dollar but wasn’t going to just give it to her. Instead, she could do chores around the house to earn money.

She brightened and enumerated all the chores she already does: cleaning her room, making her bed, folding her own laundry, clearing the table, cleaning up her toys. I explained that those are not the type of chores I’m talking about. Those are things she does as a member of the family, not things I’m going to pay her for.

If she wants to earn money, she’ll need to do something for the household, separate from her own maintenance (which is what I consider all of those tasks to be–I’m not going to pay my kids to clean their own rooms, for example, because that’s something I expect them to do as members of the household). She then leapt off her chair yelling:

I am ready to do a chore for money!

Yikes, I had to think of some chores real quick! This would’ve been easier if I’d thought about it in advance, but again, the moment was right, so we seized it.

My husband and I came up with the following:

  • Empty all the trash cans in the house: $0.50
  • Sort and fold other family member’s laundry: $1
  • Organize the tupperware cabinet in the kitchen: $1
  • Peel sweet potatoes: $1
  • Organize the kitchen junk drawer: $0.50
  • Organize the kitchen cabinets containing the drinking glasses and coffee mugs: $1

Kidwoods did a great job organizing all of our tupperware!

She perused the list and ran into the kitchen to start organizing the tupperware. I must say, she did an impressive job. After earning her dollar, she ran upstairs to sort and fold the family’s laundry. She wanted to do more, but it was dinner time (thank goodness because I was running out of chore ideas… ).

My goal with these tasks is to create a menu of options for her to choose from, all at slightly different price points. I want her to begin assessing the difficulty of the task–and the resulting payment–in making her chore selections. These will all be jobs above and beyond her regular slew of chores, which again, I expect my kids to do as part of being people in the house.

I need to brainstorm more chores-for-money since we’ve decided they need to be:

  • Tasks she can do on her own. It kind of defeats the purpose for her if a parent is standing there showing her what to do. It was empowering for her to organize the kitchen cabinet all on her own and she clearly took a lot of pride in how well she did. She even presented me with two orphaned lids lacking their containers.
  • Things that actually need to be done. At six, she can sense a faux task from a mile away, so it needs to be stuff that’s legitimately helpful.

Once I come up with this list of chores, I’ll make a chart outlining the jobs and their prices so that she can elect to do a chore-for-money anytime she wants. If you have any good chore ideas for a kindergartener, please let me know!!! Also I need to go to the bank to get more $1 bills…

Give Them Purchasing Power

Working hard on her price list (note her pile of cash on the table with her)

Thanks to doing chores for the past three days, Kidwoods is up to $11.05 and the kitchen is looking VERY organized. She perused the book flier afresh, calculating which things she could afford and which things she wanted. I’m almost certain she’ll end up with that $7 unicorn book, but I think it’s a valuable exercise for her to deliberate between the different options and prices.

She noted she’d be able to buy three books priced at $3, but that she isn’t actually interested in those books. Thank you, annoying book flier, for this perfect money lesson!

For kids, there’s something deeply appealing about doing an adult thing for real.

It’s clear to me she’s engaged and fascinated by this world of money because she’s an active participant in it. She sees that she has control over how much money she earns and how much money she spends. Without me even mentioning the concept of saving, she said she didn’t want to buy something for $11 because then she’d have no money left and she wanted to have some money leftover. I tried not to look too pleased at that revelation.

Establish Your Family’s Money Philosophy

Your family’s money philosophy needs to undergird lessons about the mechanics of money because the mechanics of money are very simple–it’s just math. It’s the mindset, trauma, emotions, experiences and fears we entangle with money that make financial management such a fraught issue.

Remember that we adults don’t have to pass our money fears or anxieties down to our kids.

Only two people in this photo are in charge of establishing a money philosophy

We can establish a positive, proactive way of talking about money with our children. It’s kind of like how I’m afraid of spiders but I’ve never told my children because it’s my fear and it doesn’t need to be their fear. Maybe it will be, maybe it won’t, but they don’t need to look at every spider through the lens of “mama is afraid of this, so I should be too.”

Over the years I’ve received hundreds of pleas from parents for advice on how to teach their kids about money and the only advice I can really offer is that it’s up to you.

It’s up to YOU, the parent, to set the money standards in your home.

You, as the parent, have control over what you buy–or don’t buy–for your kids. It’s not up to the kids to dictate how money is used, the onus is on you to establish guardrails for them to follow. I think the overarching key in doing so is to be clear, firm and straightforward. It’s the same as explaining to your children why your family chooses to eat vegetarian, or play soccer, or attend religious services or not… explaining how you use money can take the same format.

How We’re Instilling Our Family’s Money Philosophy

Every family is different and every family will choose to broach money in a different way. With that said, here are a few concrete examples of how we instill our family’s money philosophy in our children, which might–or might not–be helpful to you.

1) I am transparent with my children about buying their clothes, books, shoes, puzzles and toys used from garage sales and thrift stores.

Sporting some excellent garage sale snowsuits

I am matter-of-fact and honest.

I might say something like, “I found these dresses for you at a garage sale today and I think you might enjoy them! They were inexpensive because they used to belong to someone else!”

Kids respond, “YAY dresses!”

The overarching ideas of “used” of “inexpensive” are lost on them at this point; I’m just establishing the expectation and understanding that we value buying second-hand whenever we can.

2) I am firm, clear and brief when explaining why I’m not going to buy something for my kids.

This mostly comes up when we’re in a store together. Recently at the grocery store, Kidwoods spotted a plastic toy and wanted to buy it. She pointed out that it was “only $1” and I could afford it. I agreed with her that yes, it was cheap and yes, I could afford it, but said I wasn’t going to buy it because we don’t need it.

I went on to explain that we already have a lot of toys and don’t need more at this point. She was disappointed, but I remained firm in my explanation. It’s the same approach most of us use in all other aspects of parenting: firm, clear and brief. She didn’t need an entire lecture on environmentalism and why I buy used and the waste stream and clutter and minimalism. That will come later. For now, I’m setting standards around how we make purchasing decisions as a family.

3) “Different families do things differently. This is what our family does.”

This is my favorite phrase for the stage of parenting we’re in because our kids ask so many questions that can be answered by this statement.

The most relevant to money is the classic question of parity with peers:

This other kid got a new bike for Christmas, why didn’t I?

Another kid thrilled with her second-hand Christmas gifts

I can respond that “different families do different things.” I can also explain to Kidwoods that she already has a bike (which I got at a yard sale for $15), that she doesn’t need another bike, that she didn’t even ask for a bike for Christmas, that she received lots of other great things for Christmas…. and I might bring those points up if she presses the question.

But the reason I like “different families do things differently” is that it establishes a shared language for our family and it closes the door to begging for a bike. I’m not saying, “well, maybe you can get a new bike next year,” which would prompt a round of desperate whining in my house. I’m firmly sticking to our family’s money philosophy by using words my kids can understand.

I also love this phrase because it doesn’t imply judgement or that our family’s way is “better.”

It merely points out that our family’s way is “different.” It’s important to me that my kids grow up kind, non-judgmental and not deluded into thinking there is “one right way.” Because there’s not. There are so many different reasons why people manage their money the way they do and it is not my job (or my kids’ job) to judge anyone else’s money choices. When I use this phrase, I’m not saying that our approach is better or that another family’s approach is wrong, merely that they are different. This is an important distinction for me.

There will be COUNTLESS things over the years that we do differently from their peers and I want my girls to understand that different is ok. Because it is. And because we will never all be the same. And there will always be another new bike to buy… but, “this is what our family does.”

4) Introduce frugal substitutions as early as possible.

Outdoor brunching! Kidwoods and I outside at a restaurant last summer

Anyone who just took my free Uber Frugal Month group challenge (which you can sign-up for anytime) knows what I’m talking about!

Frugal substitutions are when you arrive at the same end result for WAY cheaper.

For example: you use an MVNO for your cell phone service because it costs a fraction of the amount but is the exact same service.

For my kids, this comes up most often in terms of food. Because we all love food. And my kids–JUST LIKE ME–love themselves a restaurant meal. The pandemic put a damper on that for several years and still does to a large extent. But Kidwoods is onto the concept of take-out. Onto it like a greyhound on the scent of a rabbit. And sometimes? I buy her food when we’re out. And she thinks it’s divine. I make a point of saying how special it is and she agrees and we munch our food happily. But most of the time? I pack our food.

Our most topical example these days: the ski lodge food court.

Kidwoods skis twice a week at our local mountain and the first time we skied, I didn’t know about the food court or the need to bring A LOT of food for a skiing child. So we bought a hot chocolate, a blueberry muffin and a yogurt. Fine, no problem. But, it was $11 of food that I can make at home for much less.

Kidwoods: the happy skier!

For all subsequent ski days, I’ve brought hot cocoa in a thermos along with a lunchbox of food (now double food because the kid ate her sandwich AND my sandwich the first time… ).

Kidwoods periodically asks if we can buy food at the food court and I remind her that I brought food from home and that we can still sit with her friends in the lodge to eat.

She noted that some of her friends bring their own food and some buy food, which was a perfect moment to bust out, “different families do things differently and… at different times! Sometimes we buy food and sometimes we don’t.” This enshrines a level of flexibility and acceptance. I’m not saying it is “bad” to buy food or “good” to bring food, just that these are different approaches to choose from.

The point of this ski lodge exercise isn’t to make Kidwoods feel like she’s missing out; rather, it’s to highlight that there’s often a cheaper way to get the thing you want. She is still drinking hot cocoa and eating a baked good with her buddies after skiing, she’s just doing it for less. I will likely buy her food at the food court at least once more this season because it’s fun and it’s a treat and yes, we have treats sometimes! But treats are the exception, not the rule.

The deeper message of these substitutions isn’t just about saving money, it’s also about:

These are all higher-order concepts I’m unlikely to introduce with Kidwoods until she’s older or unless she asks. But once she asks–once she’s curious beyond my immediate response–I will have those concepts ready to discuss with her. This goes back to establishing your family money philosophy. You need to know what YOU believe about money before you can pass it along to your kids.

Remove the Taboo

Mid-ski hand warm-up in the truck with our homemade hot cocoa

My husband and I have been talking about money in front of/with our kids as part of normal family conversations since they were born. It’s not a taboo topic in our household, so it’s always been a thing we discuss in a kid-friendly way.

That being said, we don’t scare our kids or expose them to concepts that are too advanced. Our kids have no idea what FIRE is or what the stock market is or how compounding interest works. That stuff’s irrelevant to them at this stage. What is relevant is the price of bananas. They look at the bananas, they look at the price, they ask me if I have enough money. They’re getting the basic idea that things cost money and that you have to earn money in order to buy things. The complex topics will come later.

If money is a taboo topic in your house, your kids will pick up on that. They’ll internalize that money is a secret, shameful thing that no one talks about. But if you’re open about money–in age-appropriate ways–your kids will think of money just like everything else you teach them. It’s no different than teaching a child how to fold laundry.

Here’s how that analogy plays out in my mind:

Yes, you will need to fold all this laundry

Parent: This is how we fold pants.

Kid: My friend doesn’t have to fold her pants.

Parent: Yeah, different families do things differently. In our family, everyone folds their pants.

Kid: Could I ever not fold my pants?

Parent: When you’re an adult, you can choose to fold or not fold your pants. What do you think would happen if you never folded your pants?

Kid: I wouldn’t be able to find them when I’m getting dressed. Wow, parent, you sure are the best!

Parent (silently, to self): That went unrealistically well! I should try parenting as a cartoon more often…

…you get the idea. My point is that there’s no cultural taboo embedded in folding pants. The parent is not embarrassed or flustered to discuss pants-folding. See if you can bring that same clear, firm, calm, direct approach to discussing money. Pretend you’re saying “fold pants” instead of “spend money” if that helps.

In Conclusion

Makin’ it rain

I’m not a money expert or a parenting expert. I just happen to have children and enjoy writing about personal finance. I also don’t think there’s “one right way” to teach kids about money. My hope is that this might help guide or initiate your approach to discussing money with your kids.

As my children get older, I’ll have more lessons to learn and share. Next up, I think we’ll have Kidwoods create a ledger book of the money she’s made and spent. Later, we’ll introduce the Parent Bank, at which one can make a deposit and earn interest. Plus, we may do a base rate allowance…. then there’s the concept of donating to charity and buying things for other people… I am SO EXCITED about this, can you tell?!? Potty training was not my thing. Money training? Yes please! I’ll let you know how all of this goes once we do it!

How do you broach money with your kids? What feels tough about it? What feels natural and easy? Got any chore ideas for Kidwoods?

P.S. does this font look any better? Many of you have requested a darker font, so I tried out something new today. Let me know what you think!

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