Help Your Kids Learn The Value of Money From An Early Age
Children are so naturally bright and enthusiastic from the moment they’re born. Channeling their energy, at a young age, works wonders to create teachable moments – for both child and parent. As a financial advisor and mom, I utilized an existing piggy bank concept and I nicknamed it the 3 Piggies went to Market concept so that children, as young as 4 years old, can start learning the actual value of money. Sounds challenging, I know, but definitely possible. I tested it out on my own daughter. And today, at the age of 23, I have to encourage her to spend!
The 3 Piggies went to Market is a concept involving 3 piggy banks. Each is given an important name: The ”For Future” piggy, “For Family” piggy and the “For Fun” piggy. These names begin with the same letter “F” to make it easier to remember, even for us parents! It is a good idea to also label these piggy banks to make it easy for your child. While it is tempting to purchase the cutest decorated ceramic piggy bank, for this concept to work, the piggy banks MUST be clear or see through. Cheap plastic piggy banks work best. This way your child will be able to literally see their money grow.
The key to understanding the value of money is “to feel” what it’s like to have it – to have, save and earn it. This is how a person learns its value and worth. Family dynamics can vary. For example, some families don’t believe in paying their children to do chores. They feel kids should have some responsibility to help their parents. This is great; however, I still encourage a parent to find one small task where they give a small amount of pocket change to the child, so they have control over that money. It’s like giving a child a piece of candy every now and then so they experience it and learn not to eat too much of it. If you never let your child have candy, and then they try a piece at the age 18, they might go overboard – given they never had the opportunity to learn how to control and manage their sweet tooth. It’s learning about boundaries and more importantly their own boundaries.
Gauge the maturity level of your child before you begin. Boys, who often mature a bit later, would benefit by waiting a year or two. They don’t have to “get it”” but they need to focus and listen as you explain the piggy banks, the quarters etc. The 3 piggies didn’t work as well on my son. In retrospect, I should have introduced the concept a bit later.
To start, I encouraged my daughter to make her bed every morning. If she did, she earned a quarter. If she didn’t, she did not receive anything. It is important not to punish your child if they don’t make their bed. They will naturally want to once they realize that money is a good thing to have more of. This is the first step in teaching your child the lesson of earning money. They need to take action in order to receive it. Effort is rewarded. Note to parent: This is not the time to cheat. If the child has not done the work, they don’t get the quarter. If you sneak it in when they are not looking, you’re not helping your child learn the value of earning.
Once the piggies are labeled, sit down with your child. Explain that 4 quarters make a 1-dollar bill. So every 4th time they make their bed, they will have earned $1. Note: don’t pay in bills or 2 dimes and 1 nickel. Keep it simple and use just quarters. Show them that after earning 4 quarters, the quarters are divided accordingly: 2 quarters for the “For Future” piggy, 1 quarter for the “For Family”’ piggy, and 1 quarter for the “‘For Fun”’ piggy. Explain the purpose for each. They will be able to buy something or go somewhere with their “For Fun” money. This teaches your child to save half of their earnings for their future goals. They’ll still have 25% of it for enjoyment, and 25% to spend on giving to others – for sibling birthday gifts, friends or a good cause. Wait for them to accumulate 4 quarters so you can explain this process of dividing their earnings with them each time. Allow THEM to put the money in the piggy bank. We are going through the motions of self-control.
Again, it’s tempting to add coins when they are sleeping so their piggy bank gets full, but again, you’re not helping your child learn important life lessons about finance. When the first lonely quarter goes in, it can make quite a clunk but don’t worry! The clear piggies allow your child to see how long it takes for the coins to add up. This is when they start “feeling” the value of money. Money that is earned slowly = money that will be spent slowly.
After making her bed 165 times over the course of about 5 ½ months, my daughter accumulated approximately $10 in each of her “For Fun”” and “For Family” piggy banks, and $20 in her “For Future” piggy. This amount of time will seem like an eternity for a young child, and the piggy will be far from full. With the $10 saved in her “For Fun” piggy, I asked my daughter if she would like to go shopping as a reward. I wanted to keep her excited so she wouldn’t lose interest. After all, the “For Fun” monies are meant to be enjoyed. She gave an enthusiastic “yes.”
She wandered up and down the aisles of a well-known toy store. She clutched the handle of her little purse with her whole $10 in it. Can you imagine the joy that after 5 – 6 months of making her bed, she now had an opportunity to spend some money? This was a big moment! She was both nervous and excited at the same time. She kept walking up and down, looking and looking. Being 4 years old, she didn’t really know how to read the prices on things, so I offered to help her out. I picked up a toy that had a price tag of $9.99. I let her know that she had enough for this item. (Taxes will be learned at a later time.) She looked at it and responded that it was nice, but she wanted to see if she could get more than one toy for her money. This meant that she would rather have 3 items in her shopping bag than just one for her $10! THIS my fellow moms, was a huge epiphany. My almost 5-year-old daughter was entirely unaware, but it was at this moment that I realized she had learned the value of a dollar! I raised my hands in the air and did the happy dance in the middle of the toy store. My daughter has been the same with her money ever since. So, when I dropped her off at college and we unloaded all her stuff for her dorm, I knew she would be okay.
This is just one small tool that can make a huge impact on your child’s financial future. This teaches them how to have a healthy relationship with their money early on. They’ll learn to respect money, and the time it may take to earn or acquire it. This lesson is virtually painless at this age. It’s far better than letting your child go to college and get into debt with their first credit card – not having developed a balanced approach towards savings. Or if you’ve paid for everything, they may have never learned how hard, or how long it really takes to earn and save money. Now, they’ll be on their way to becoming disciplined savers and hard-working responsible adults.
 | About the Author: Veronica D Vasquez has been a finance professional for over 25 years, and is currently with New York Life Insurance Co. Her mission is to empower parents with simple tips and tricks to teach their children financial literacy – concepts not taught in the classroom. She is a proud single mom of two grown college graduates. |
Veronica D Vasquez
Agent, New York Life Insurance Company
CA Insurance License # 0M67964
801 N. Brand Blvd., Penthouse, Glendale CA 91203
Cell: 626-429-2454 / Email: vv******@ft.com
www.newyorklife.com/agent/vvasquez.com29
