Early financial literacy
July 24, 2021 9:16 AM   Subscribe

My 6-year-old is going to make $100, how could we use this to start his education about money?

My 6-year-old is going to participate in a research study (non-invasive, he breaths into a tube for 2 minutes and benefits to science and society will be high), and our family will receive $100 compensation for it. I'd like him to have the $100 and use it to start learning some financial literacy. We discussed him using some of it to buy something or opening a bank account or...not sure. I'm not against using this moment to start giving him an allowance for doing chores. Giving some or all to charity would be fine too.

How have you done this before? If you opened a bank account, what did that look like and what type of bank did you go to (large, small, coop, your own bank)? Should this be an opportunity for us to talk about him getting an allowance for chores? Should we consider using it as an opportunity to show he could do chores for neighbors for pay? Books, videos, websites welcome too.

One note, we aren't Christian, and I'm aware of a lot of Christian financial literacy (i.e. Dave Ramsey) advice in the US. I do not want anything to do with this.
posted by Toddles to Work & Money (12 answers total) 4 users marked this as a favorite
We use Greenlight for our kids’ allowance and it’s fine. It lets us automatically split their allowances into spending/saving/giving, which was our priority. Good on you for thinking about this early!
posted by chesty_a_arthur at 9:23 AM on July 24 [1 favorite]

When I was a kid, we had a board game called the Allowance Game. Despite this being an overtly educational board game, my brother and I would choose to play it.

Do you use YNAB or similar for the family finances? With YNAB, he could have his own budget or just his own group of categories. That's probably only useful if he will get an allowance on an ongoing basis.
posted by hoyland at 9:41 AM on July 24

Check out the financial literacy badges for Daisy and Brownie level Girl Scouts. There's a lot of excellent age appropriate content in there.
posted by phunniemee at 10:24 AM on July 24 [4 favorites]

Personally I think six is a little young to get much out of an online bank account or a visit to the bank (which is not something I've done for years myself, much less something someone who is currently six will do often as an adult). And I love YNAB but it has a learning curve that defeats adults, much less six year olds.

I like encouraging him to donate some of it, but once he's done that, encourage him to think of something he'd like that costs more than what he has left (e.g. this thing?!). Then pay interest yourself. Call it the family bank. Keep it in cash so he can see it grow. Pay a generous rate each week (10-20%?) so he can see it grow fast. He's probably a little young to get the idea of compounding, but he should get the idea that deferring gratification pays rewards.
posted by caek at 10:50 AM on July 24 [1 favorite]

When I was about that age, my father produced from his wallet and showed us a $100 bill. I thought that meant we were rich, that we were going to live like Willie Wonka, or whatever my ideal was at 6, from then on. That was in 1973, so it was more than it is now, but, still It may be a bit hard for him to understand both how much money that is, and also, how little money it is. That alone is kind of a useful start to financial awareness.
posted by thelonius at 11:15 AM on July 24 [4 favorites]

My parents had certain chores that were expected, because it's not realistic for someone to pay you for making your bed.

But if it was a chore they would normally hire someone for (yard work, deep cleaning, filing, stuffing envelopes), they would pay me for it if I did a good enough job (they didn't have to closely supervise me the whole time or hire someone to redo it). I'm sure I was older than 6 before I could do those things well enough to be paid.
posted by Former Congressional Representative Lenny Lemming at 11:18 AM on July 24 [3 favorites]

I mean, 10% to savings, 10% in giving, 80% to meet his needs is a perfectly fine lesson. The fact that he's 6 and his needs are Lego and... whatever six year olds are into in 2021... is irrelevent. I do think that this is a great opportunity to add an allowence so you can continue to reinforce the model. I love the idea of Greenlight, it's much more in tune with how modern spending and saving work now and will work for his digital future.
posted by DarlingBri at 12:11 PM on July 24 [3 favorites]

Around that age I made my kids boxes with separate areas. One was labelled "spend now/short term purchases", one was "save for later/long term purchases" and one was "share". Share is charity/donations or buying things for others (birthday presents etc). Since they were kindergarten age I have given them their age in allowance each week. This is not dependent on chores (instead we have a weekly system to assign chores). In those early years 50% of their money went to long term and the other 50% was split between short term and share. The long term was eventually deposited in bank accounts and as they grew older I made it a rule that if they didn't ask me for their allowance on the weekend I didn't give it to them.

Getting them to save long term early was a big win. They've both done well with the lessons and have gone from early "long term" purchases of higher priced toys to (recently) my son paying for 50% of a computer build and my daughter paying for fancier cell phone than I was willing to purchase for her.
posted by Cuke at 1:28 PM on July 24 [3 favorites]

Maybe buying some shares of stocks In companies that might interest the kid? My kids loved their Disney stock certificates but they don’t issue them now.
posted by Ideefixe at 1:58 PM on July 24 [1 favorite]

When my kids were that age, they used "The Bank of Mom and Dad" (obviously substitute a name that fits your family). There was a paper ledger and every week I would write in the amount of interest that they earned. 1% a week is probably a good number.

I think at six you can start to pay a small allowance and then maybe offer to pay 50% of the cost of anything that they save up for. You probably want some kind of split - pocket money for now, savings for longer term and share/charity. My kids had a piggy bank in their room for their pocket money, savings went into the Bank of Mom and Dad and at that time, sharing went to religious school as part of a classroom charity program. They could also choose to put their pocket money in the "Bank" and earn interest on it as well.

When they got older, I looked for necessities that they could pay for themselves so they would get the idea that some of our money gets used for the basics. So, like weekly dues for scouting or buying hot lunch at school (bagged lunches from home were free) or clothing beyond the basics. Of course the allowance got larger so they could still save, share and have pocket money as well.

Since he is getting this windfall, I would also take him to a favorite store and allow him to buy something up to $x so he gets a tangible sense that money lets you buy things that you want to have. I would physically go the store so he can touch things, and look at the price tags and decide what he wants.

Finally, I am bigger believer that everyone in the family helps out because they are family - I don't pay for ordinary chores just like I don't get paid for them either. If they are doing a big extra job, I would pay for that but only in situations where I am perfectly OK if the kid says "No, thanks I don't need the money." So, six is old enough to start having chores if he doesn't already and also old enough to start getting a small allowance but in my mind those are separate things.
posted by metahawk at 4:07 PM on July 24 [1 favorite]

My kids (eight and six) have been getting allowance for a couple of years as well as similar windfalls to what you describe. We have a rule that half of money from anywhere goes into long-term savings and have discussed that this might be part of the way they get their first car or something like that. The other half is theirs to spend as they wish, with limited oversight on our part (I don't allow toy weapons, full stop, but $10 worth of candy, fine - it's their money). They have saved up to buy $50 video games and other large ticket toys. And I don't buy toys or candy at all anymore except for birthdays and Christmas. They know that I will cover all the necessities and lots of experiences, and they have to pay for "want to haves". They have gotten much better over time with reasoning out how badly they want something that's in front of them when they're saving up their spend money for a big toy.

We started with a visual jar system, but have since switched to a spreadsheet. We showed them how to read and understand it; it's easy to reference when we're at a store and they want something. I wanted to help cement the idea that money needs to be tracked somehow lest they wind up like my college roommate who did not know 1) that a debit card is attached to your bank account or 2) that credit cards need to be paid every month. I suspect they will not be dealing with cash as much as I did so starting with a digital method early on made sense to us. We manage our own finances this way so it's not too onerous for us and it does seem to give us lots of opportunities to discuss money and how it works.

We also have "minor savings accounts" for them through our bank, attached to one of the adult's checking accounts, and we have educational savings accounts through our state as well. Both of those were very easy to set up online, and for now I can manage it through my own log in, then transfer ownership of the accounts to them when they are of age.

We have not focused explicitly on giving in any concrete way, but they have turned out to be generous with each other and others anyway.
posted by peanut_mcgillicuty at 5:02 PM on July 24

The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money is worth reading.

It's not a great book, in my opinion. It overemphasizes charity to an extent that verges on condescending noblesse oblige, and that overlooks the danger of viewing personal donations by wealthy people that reflect the individual wealthy person's goals, as more effective (or morally better) than doing practical politics in a way that forces us to advocate for change in collaboration with the rest of society (e.g. government taxation and spending!).

But! That vein of thinking notwithstanding, it is a goldmine of very practical tips and tricks for getting kids to become more thoughtful and wise about money, which is why I mention it here. It has a ton of ideas that would be good answers to the OP's original question.
posted by caek at 8:59 PM on July 24

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