Teaching Young Children about Money Skills
I have three children ranging from ages 8 to 11. I believe that Financial Education will be one of the most important skills they will need to learn and I already know they WILL NOT receive in school. Financial Education is taught in one's home.
Because my children are young, I am using a simple quote, “Give a man a fish and you feed him for a day, teach a man to fish and you feed him for life”. I am sharing with my kids the method that my father shared with me. I need to teach them the foundation of their money skills at this young age before they are teenagers. Otherwise, they will become dependent on me, an employer, or a government to parent them for the rest of their lives.
THE THREE JARS
Ancient Chinese legend tells of a magical tree that sheds gold coins from its branches when shaken. The tree was grown from a very special seed given to a peasant farmer who was required to water it with his own sweat and blood for it to reach maturity. Then tree would then grow new coins to replace those fallen to the ground.
Dating back to China’s Han Dynasty, ornamental money trees continue to be popular at the Chinese's New Year's and signify a long life of perpetual prosperity. Contrary to the magical story associated with money growing on trees, the implied meaning is that wealth and prosperity are gained through hard work, sacrifice, and tireless effort.
In the Three Jars method, kids learn to manage money as soon as they can count to three, while also learning some important lessons about philanthropy. At its simplest, a child is asked to divide their money into three jars labeled either Spend, Save or Share. Future money is likewise divided into three jars. “It’s a fantastic concept because the areas are all ones that children can grasp at an early age,” Professor Russell tells SBS Life.
The Spend jar contains money put aside for short-term expenses, such as sweets, movie tickets or the latest must-have app, cheap toy or do-hickey, teaching kids that living expenses are normal. My kids love to spend on things like candy, video games, and trips with friends. Children get used to handling money and make these purchases themselves.
As a parent, the spend jar is also a "Mistake Jar". I want my children to learn from their mistakes with their money when they are young and NOT adults having to regret them. For example, my oldest son bought himself a video game. The movie came out of his Spend or Fun jar. After a while, he decided he didn't like it anymore and returned it. But, because of the time period of use, only got 80% of his money back. I suggested that he borrow the game from the library for free, but he insisted he wanted to buy it. He now has learned from that mistakes and now borrows a game first.
The Save jar is money set aside for longer-term, big-budget items such as a new bike, tablet device, or games console. Get kids to set a target amount for the Save jar, or set a timeframe for building up a sum to be taken out and put into a bank or investment account. Training children to save for a purchase helps them avoid the lure of later relying on credit. Some parents even adopt an incentive system like paying interest on the Save jar balance to encourage greater savings to focus. My son really wants another item but doesn't have enough in his Save Jar. As a parent, the save jar is the "Think Jar". I hear him say look into his jar sad and say "I can't buy it." This is when I sat with him and ask what he wanted. He told me and gave me the price. I want to teach him a "HOW CAN I?" mindset. He does his regular chores around the house. He does not get an allowance for this because this is teaching responsibility. But, I told him that he could get extra money for extra jobs depending on the size.
When kids get money from their parents each week regardless of their performance, their parents become like a money tree – a mythical source of endless cash.
The idea behind the Share jar is that some of your money is not yours to spend or save – but is there to re-invest back into your community, donated to a charity or a worthy cause. Tithing is important in my family. I was given the mindset, "When you tithe, are you giving 10% of what is your to the Lord, or are you keeping 90% of what is already His?" Giving, if it is introduced early, is something that you learn and don’t question. From an ethical and moral standpoint, it is important to learn to give, even if you don’t get anything back. This is probably the hardest and most important jar to teach. Sharing toys is even difficult to teach in my family. But, learning to be thankful each day for what we have no matter what it is, will have a great change in our life.
The Fourth Jar
My two sons are now old enough that I have introduced them into the adult world of adult financial education. The fourth jar is the Invest Jar. I call this the "Pay Yourself First" Jar. Too many people in the world pay their bills, then share, save what is left over. Since that amount is usually zero, nothing is ever invested. The Fourth jar could perhaps be used for interest-bearing deposits or even to invest in shares or as seed funding for their own enterprise.
My boys did not know what to do the first time they filled this jar. There was not much in there, but they were very excited when I share with them that I was opening funds in their names with money from their jar. They love to go into their account to see that the amount has gone up without having to physically work. Now, ideas are going into their head on how to use this jar. One of my sons is a dog walker and he enjoys investing his earners. His goal is to invest in a gumball machine to put at the church. I am impressed with the idea, and if the pastors will allow this, I might give them a loan for a quality machine. Their Jar and profits from the machine will go to maintenance the machine. With the flow of people in the church, he could create his first source of CashFlow and can pay off his first loans, and the rest being profit. Without using any of his own money, his idea could become a source of infinity return as long as the machine is allowed to stay there.
In Conclusion, when we are teaching children about money, we must keep the language positive. Recognize your strengths and weaknesses when it comes to money. Research shows that pocket money has to be used with some control and monitoring from the parent in order for the outcome to be most effective in being taken through to adulthood. Be aware of your role modeling in general with money and how money is talked about in the household.
PS: The FOUR JAR Method can be used for anyone. For adults, an Investment ‘Jar’ is more important than Saving. This will create a source of income while at the same time fighting such things as inflation and the dangers of currency.
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