How We Taught Our Kids To Manage Money

November 15, 2015

With two teenage daughters, my wife and I grew tired of the requests. “Can I have money for…” “I need you to buy me…” “I must have…” 

My wife started talking about what we could do to teach them healthy money habits but more importantly, to stop the requests for money! We just couldn’t come up with a solution we liked. One scenario was to give the kids an ATM card attached to their parents’ account. That was way too much flexibility for our tastes.

We have one friend that gives their daughter $200 a month for spending, but she is responsible for buying everything she needs or wants outside of family groceries. If she needs clothes for school, she is responsible for buying them. If she wants a hair product, she would be responsible for buying it. This seemed like too much independence for us.

After discussing this with the kids, we landed on a solution. Each child already has a savings account that they only make deposits into but are not allowed to withdraw from. We call these their long term savings or emergency savings, but it isn’t accessible by an ATM card. I like the concept where they have two accounts and learn to transfer a portion of their money to a longer term savings account but still have access to a short term savings account.

We set up an additional account that was targeted for the kids but accessible through ATMs or a debit card used at most local stores. Additionally, we are able to automatically transfer their weekly allowance and any other money they earn. Each month, we talk about their long term savings goals, their account balances and how much they want to transfer. We then discuss what expenses might be coming up that they need to plan for. This usually centers on wanting to go to the movies with their friends, buying a particular item of clothing, or buying a souvenir from a gift shop.

We have been doing this for the last six months and some amazing things have happened. Our youngest is the saver and much more willing to do without to see her account grow. As expected, she has used her card only twice, and one was just to confirm it worked.

Our oldest had more startling results. She craves instant gratification and when she wants something, she absolutely has to have it now. The whole conversation about wants versus needs goes in one ear and out the other.

Now she needs to check her account, which she can do via an app on her phone, and her account balance is driving the wants versus needs conversation. She has begun to plan for her expenses and make tough choices between another Taylor Swift t-shirt or going to the movies with her friends. I am less worried that she is spending money because I am seeing her thought process change and her starting to value waiting before buying something or realizing it wasn’t that important to have at that moment.

This has worked well for us so far. Do you have any methods that have worked well for your kids? If so, share them in the comments section below.