Proverbs 22:6 “Train up a child in the way he should go and when he is old he will not depart from it.”

Our children are always watching us, whether we realize it or not.  There is a Native American saying: “Tell me, and I’ll forget.  Show me, and I may not remember.  Involve me, and I’ll understand.”  Our children are going to model our handling of money.  The most important thing we as parents can do is to straighten up ourselves and show them what we are doing and why we are doing it.  Jump Start says that 94 percent of children learn their money management skills from their parents.  

We need to teach our children intentionally about money.  There are four main areas that our children need to learn.

1. Work
2. Saving
3. Spending Wisely
4. Giving

Each of these categories is handled differently for each age group.  Our children need to understand that work is how money is made.  There has to be an emotional and intellectual connection between work and money.  Because of this I don’t like to use the word “allowance.”  Instead, pay “commissions.”  Life will not make an “allowance” for you, but it will pay you what you earn.  Work, get paid; don’t work, don’t get paid.  Work, eat; don’t work, don’t eat.  2 Thessalonians 3:10.

Saving is how you control some of your circumstances and how you can buy big purchases since you don’t want to teach your children to borrow money.  Goal setting is very important when you are saving.  If you involve your children in this goal, it can be a fun learning experience.  

Spending is done differently when you are spending money you earn.  It’s also one of the rewards of discipline saving and working; it can be a celebration of a goal reached.  When spending occurs in this way the child’s self-esteem is maximized, because he did it.  There is a sense of accomplishment, of a job well done.

Giving is precious to watch when children are young and fulfilling to watch as they grow into adulthood.  Giving makes kids less self-centered.  Giving brings your kids depth of character.  Those who never give become shallow, self-centered, and miserable adults. 

3-6 years old

When I was suggesting that kids work to earn commissions, I’m not talking about Hitler’s boot camp for money.  Those of us who have little ones know the definition of cleaning the room is that we do everything except the one or two toys they actually put in the toy box, but the small child gets all the credit for cleaning the room.  Give them small chores at this age with which you assist and them give them all the credit.  “Commission” needs to be paid on the spot.  They need to have instant “atta boys” and money for work.  This allows them to make the emotional connection and they are more willing to do the chore next time.  The same goes true for saving.  Keep the goals short.  When they save for the small toy, they get to buy it.  They’ll get a tremendous sense of pride.  When children are small, use a clear container for saving their money, so they can register visually the saving going up, and the spending bringing their balance down.  This age typically can’t do percentage systematic giving.  Let it be spontaneous.  Just let your child grab some cash from his jar for Children’s Church.  He will beam.  

6-13 years old

The temperament of the child will dictate what he or she can do in relation to money.  Since you pay your child only if he works, you need a tracking system.  Try using a dry-erase board placed on the front of the refrigerator to list the chores and how much will be paid for each one.  At this age we suggest $5 per week for five chores: simple things like clearing dishes, feeding the dog, keeping the room clean.  These are things you would expect anyway, but paying a commission for them gives you teachable moments about money and work.  Some chores should be done with no pay because you are part of the family, but if they are all done that way, there are no teachable money moments.  Little Jack doesn’t “feel the pain” of the movie ticket if the sweat of his brow isn’t associated with money.  Once the work is done have a pay day.  At this age, pay day should be once a week.  

Whatever their age, it’s never too late to start teaching kids how money works.  We need to love our children enough to lead them well.  We’re not always going to be perfect, but we should always look for an opportunity to teach them.  

Dave Ramsey is America’s trusted voice on money and business. More than 1.5 million families have attended Financial Peace University in more than 30,000 churches nationwide. He’s authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. The Dave Ramsey Show is heard by more than 5 million listeners each week on more than 500 radio stations. Follow Ramsey on Twitter and on the web at daveramsey.com.

Publication date: December 31, 2012