Teaching kids about spending, saving and sharing

Guidance for parents on how to help kids allocate money for financial well-being. 

When kids start receiving some of their own money, either through an allowance, family gifts or working, their natural instinct is to spend it all. However, it’s never too early to start teaching kids that money also has two other important jobs: saving for bigger purchases or experiences and sharing it with others (charitable giving). 

If you get kids into the habit of automatically splitting their money into the three “S categories” — Spending, Saving and Sharing — they may be more likely to stick to that smart money approach throughout their lives. Here’s how to get kids of all ages started.

Young kids (ages 8 and under)

Though it depends on the child, it has been shown that children may not fully understand the value of money until about age 7. By age 5 or 6, they begin to understand the need to pay for items at a store. That’s a great time to start giving them an allowance or paying them a small amount for doing chores. 

Consider the following when you begin to teach your child about money:

• Stick with cash. Even though adults are moving toward cashless money solutions, bills and coins are still important teaching tools for kids, according to Neale Godfrey, author and Executive in Residence at Columbia Business School. Young kids understand money better when it’s tangible and they can hold it and exchange it.

• Give a weekly allowance.  It’s a good idea to give younger kids a weekly allowance. Later, you can switch to monthly allowances. A common allowance rule of thumb is to add $1 or $2 per year of age. Consider starting with $4 to $5 weekly for a 5 or 6-year-old, and work your way up. 

• Use teaching tools. Give your kids segmented piggy banks that have compartments for spending, saving and sharing. You could also label three clear jars with pictures and the words “spend,” “save,” “share.” Whatever you use, it’s important for young kids to be able to easily see their money accumulating. 

There are also a number of online games and apps to help teach kids about money.  

Work on money-splitting strategies. Your child doesn’t need to split their money evenly among the three “S” categories. Let kids choose how much goes into each pot —just insist they somehow divide the money. The goal is to teach children that money is never just for spending.

Develop sharing strategies.  It’s important to let kids choose where their “sharing money” will go. At first, your child may simply want to put their sharing money into the holiday donation pot at the mall or donate to the walk-a-thon at their school. In time, as your child accumulates more money in their sharing jar, you may want to help them choose a charity. You can collect your child’s sharing funds and make a credit/debit card donation in that amount to the child’s chosen charity.

Tweens (ages 9-12)

Kids in this age group should now be getting better at handling money. They’re also more excited to spend it. Continue requiring them to use the three-S money-splitting strategy. And if you’re just starting to give your child an allowance or “family salary” for doing chores, use some of the strategies listed above such as a weekly allowance and using cash.

Parents should also do the following to increase their tweens’ financial awareness:

• Determine how much allowance to give. It’s up to your family to decide how much money your tween can handle. However, a recent U.S. survey found that the average 9-year-old gets $7.94 per week, while the average 12-year-old pockets $10.68 weekly. 

• Use other types of containers to organize money. Tweens may still like keeping their money in segmented piggybanks. However, if those compartments start getting too full, consider using three separate, marked envelopes or individual zippered pouches (such as those old-style, three-hole-punched, flat zippered pencil cases) in a binder.

• Add digital or plastic tools.  Again, it’s a family choice whether to give your child a prepaid card, a debit card that you monitor or digital cash apps like Zelle, Cash or Venmo. However, it’s still a good idea to give tweens at least part of their money in cash. It’s a very concrete learning experience: when the cash is gone, it’s gone.

• Funds still don’t have to be evenly split. Depending on how much your child earns, it may be tricky to split their money evenly into three categories. However, you can try paying your child in multiples of three, so the one-third system works better: for example, $9 a week can be split up into $3 in each jar. It’s also okay for your tween to put most of their money into spending, a little less into savings and the smallest amount into sharing.

• Develop saving strategies. Encourage your tween to save money toward a specific goal — it’s more motivating. They can keep the name of the item or a picture of it in their saving bank section or envelope. You might also set up saving rules, such as: “You can only spend your savings when you’ve named a goal and saved toward it for at least 30 days.”

• Make it easy for them to continue sharing. Kids of all ages are more willing to be charitable with their hard-earned money when they get to choose where it goes. So ask your child what matters most to him or her right now. Help your child research nonprofits related to their key values. Online sites such as Charity Navigator can help you and your child find worthwhile charities. 

• Harness apps and online tools. Tweens love using software-based products that they can access on their tablet, computer or smart phone. Consider searching for apps like ThreeJars that let your child run a virtual (instead of cash) allowance balance with you. You can dole out the money as needed. You might also research kids’ debit cards that let them put money into separate digital categories. You, the parent, should still remain in control of their account. 

Teens (ages 13+)

At this age, your child might start accumulating money from a job or larger financial gifts from family members. You can still insist that they use the three-S strategy. 

Whenever they get a paycheck or monetary gift, have them deposit a portion of their money into two savings subaccounts (many financial institutions offer them, connected to a master savings account), or into digital categories in a financial software program. 

To help them become more financially savvy, do the following: 

• Change allowance payment schedules. If your teen isn’t yet working, consider giving them a biweekly or monthly allowance. The idea is to start getting them used to a paycheck cycle and to making their money last longer.

• Understand that cash may no longer be king. As they earn more money, teens may want to keep a small amount of spending money on hand. The rest they may want to keep safe in a bank account. They can connect to the account with a debit card and digital money-tracking apps like Mint or YNAB. 

•  Consider expanding categories. Instead of having just one spending category, your teen might want to break their money down further to include subcategories like clothes, entertainment, gifts and more.