Feeling confused because you don’t know the best way to teach your child the value of money? This post will teach you 3 easy ways they’re guaranteed to understand.
Starting conversations about money with your kids can feel scary, but doing so will set them up for lifelong success. I’m personally grateful my parents started teaching me the value of money when I was 7 years old because it gave me the confidence to pave my own path as an entrepreneur and pursue my purpose.
My parents instilled many core principles in me about the value of money. For example, trading time for money, the value of material things to effort, and what it means to work for free. If your kids are anything like me, they’ll love the confidence that comes with learning and understanding the value of money.
This post is all about 3 easy ways you can teach your child the value of money.
3 Easy Ways You Can Teach Your Child the Value of Money
1. Understanding Time & Money
Have you ever heard the phrase: “Time is money”? Well, it’s absolutely true. For every hour you put into your job, you know exactly how much money you’re getting out of it. You understand the painful labor that went into producing every single dollar.
One possible way to teach your child the value of money is by paying them an hourly rate for doing their chores. They may soon realize that they can prolong their efforts to be paid more because they spent more time on it.
This is actually not what we want, but it gives them valuable insight into how certain people view the world. You probably want to raise kids with strong work ethic so I would suggest something my parents tried with me and I would say instilled a strong work ethic.
They paid me $1 a day for doing my chores. A flat rate. Why would they do this? I think it was to motivate me to get my chores done as efficiently as possible.
The money I earned was tied to the completion of my tasks, not my time. Therefore, it didn’t matter if I spent 45 minutes completing my chores or 10 minutes – I was still getting one dollar.
This taught me to value my own time and problem solve to figure out how to complete tasks efficiently. Although, it came with a catch.
If I didn’t do my chores one day, they would deduct a dollar! They weren’t here to pay me a salary and spoil me, they expected me to be accountable for my own responsibilities and there were consequences if I didn’t – just like in the real world.
2. Material Value to Time
Talking about the real world, they would not tell me what to do with my money I earned. They taught me the principles of budgeting by having envelopes for saving, spending, investing, and charity but let me allocate it however I wanted.
With my spending money budget, it was up to me to decide what was worth spending my hard earned money on. For example, when I was 8 there were a pair of pink cowgirl boots I really wanted. They cost $40.
How many days did I have to work for a $40 pair of boots? Well, $1 a day would mean $40/$1 = 40 days. Little 8 year old me would then ask myself, are these boots really worth 40 days of chores?
Maybe, maybe not. It’s discretionary and those are the “problems” you want your kids thinking through. How much time do they have to put in, in order to buy the things they want?
It’s really important for them to relate their time spent earning to the material value of things or else they will never understand the value of money. Each dollar earned needs to have some sort of time effort tied to it for them to feel the labor and pain of spending money.
This taught me to make smart decisions with my money from a young age and avoid spending money on stupid toys or things that weren’t really worth it. It taught me strong work ethic and delayed gratification – I promise it will do the same thing for your children.
3. Working for free
The path of an entrepreneur is a brutal one where there is a lot of time and money (same thing) spent before the money flows back in. I’m in the thick of this grind right now and I would’ve given up already had my parents not taught me the value of working for free in pursuit of a greater goal.
They instilled in me that I could do more than trade my hours for a set amount of dollars if I believed in myself and took calculated risks.
Working a job to learn skills and provide for your basic necessities is a very smart move. I’m doing this right now, but have a long term goal to eventually own enough assets that pay for my necessities and lifestyle.
I believe in freedom that comes from owning assets like businesses, real estate, and anything you own that puts money in your pocket without you trading your hours for a set amount of dollars.
The set up of an asset is long and brutal, often trading lots of time for no immediate money. This is where work ethic, discipline, responsibility and delayed gratification come into play.
Once the stabilization period is over, systems are created, and teams are put in place, you are no longer trading your hours for set dollars.
At this point, your growth can be exponential with no one telling you what to do, how to do it, where to do it, who to do it with and you get my point. You’re free to pursue your purpose and produce prosperity in your life and in the lives of those around you.
Key Takeaways
You can teach your child the value of money by doing these three things:
- Set up an allowance system. Here’s an allowance chart I created in case you want to start today: Allowance Chart
- Give them envelopes and teach them the basics of saving, spending, investing, and charity. Then step back and let them make decisions. Here’s a savings goal tracker I created for your kids: Savings Goal Tracker
- Encourage them to work on their passion projects, even if it means working for free for a while. Only after they do their chores of course! Here’s a mini one-page business plan to help your kids start thinking like entrepreneurs: Kid Friendly Business Plan & Profit Tracker
If you’re looking for some free resources, here’s a Needs Vs. Wants game I created to help your kids think through the difference between essentials & nice-to-haves:
