Financial Training Wheels for Kids

Most of us learn to ride a bike with the help of training wheels.  Training wheels take over for the hardest part (balancing) so we can focus on the easier stuff like peddling, steering, and braking.

The falls tend to be a little softer and controlled too.

Parents are financial training wheels as kids learn about receiving, possessing, spending, and saving money without the risk of making big, permanent financial mistakes.  

Receiving money: Money doesn’t grow on trees but it seems to grow out of birthday cards from Grandma and ATM machines! Teaching children how money gets your hands is a critical piece of information. 

Take a moment to explain how a business or job translates into money for your family and your necessities.  The ATM is not a magic act but is giving you back money you put into the bank (even if it was by direct deposit).  The credit card swiped at the cashier is a detailed bill that arrives once a month with a much larger amount that has to be paid.

Kids get money as gifts, allowances, pay for chores, pay for grades, or outside jobs. Each family has their own philosophy on how kids get money and the purpose of that money. 

There are pros and cons for allowances, chore-wages, and pay-for-grades systems.  We’ll explore different aspects of each in future blogs.

Physically caring for money: Things that have value need to be taken care of in order to be there another day. You provide reminders that the bike needs to be locked up or kept in a garage so someone else doesn’t take it.  Money also needs to be kept safe. 

For younger kids, a special piggy bank, box, or change purse in their room is just about right.  Setting up a Parent Bank is a fun way to learn about checking accounts. I learned about this idea when Grandma sent us Parent Bank colorful checkbooks when the kids were in elementary school.  

A teenager can be a joint owner of a bank account in town.

Spending money:  The easy skill that comes naturally. Children are marketed to from the time they are born and have no limit to their ideas on what they'd like to buy.  Children under the age of 3 alone are a $20 billion market!) 

When kids save and use their own money to buy an impromptu candy bar or a special toy, they pay closer attention to the relationship between price, sales tax, and how many of those bills and coins are given up for an item.

Saving money:  Ah, the tough one. The one skill everyone works to master over a lifetime. Saving small amounts of money over a period of time forces delayed gratification.  Saving up their own money gives more pride, appreciation and value to that new game, clothing item, or renting the DVD of their choice at Redbox.

Lessons on training wheels: When children make mistakes by losing money, buying a toy that doesn't live up to the advertisement, or not being able to go with a friend to the movies because all the money was spent on something else earlier in the week, home is still a safety net.  They won't go hungry or be homeless. You are available to help them look back and figure out how to make some changes to avoid the same mistake in the future.

The training wheels come off. We are in the process of raising the financial training wheels at home with our college kids; they are responsible for more and more of their personal living expenses.  Soon, the training wheels will come off completely as they graduate college and live off their own paychecks (crossing fingers!).

I’m having déjà vu of that little boy in the photo riding a green bike on the sidewalk in St. Louis. Hopefully all the money skills and lessons from childhood will kick in - they will balance all the responsibilities of adulthood with the same smile and confidence of riding their first bike.

 How about you?  What were your lessons while still in the safety net of your childhood?  What money lessons would you like your kids to learn before heading off to college or on their own?