35 - Teaching Kids (Under 12) About Money

How do you teach your kids about money without it becoming a chore? In this episode of "Making Sense of Your Cents," Daniel and Shanna break down the "Three-Jar System" for kids under twelve—an easy, visual way to introduce the concepts of spending, saving, and giving. We discuss why giving your kids the freedom to make small "money mistakes" now is the best way to prepare them for bigger financial decisions later. Plus, we answer common parent questions about chore-based allowances and the "24-hour rule" for impulse purchases, and we share our actionable tip: The Match Program—a simple strategy to supercharge your child's savings and show them the power of growth. Tune in to turn those kitchen table conversations into lifelong habits! 

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Transcript

Shanna Browning 0:01

So, Daniel, last week I'm at the grocery store. Grocery stores. And I watched a scene play out in the cereal aisle that I think every parent has experienced, right? A little boy was absolutely melting down because his mom went and buy him a specific box of cereal that had his favorite cartoon character on it. I mean, it just happens.

Daniel Hill 0:21

Oh, the classic serial aisle standoff. I've been there. I love that. You've been there. We've all been there. And you can feel every eye in the store on you while your kid is screaming, making a scene over $5 worth of sugar-coated flakes. It's a very public kind of stress.

Shanna Browning 0:44

Oh, it is. And it is so stressful. The pressure's terrible. But what struck me was that the mom actually paused. She took a breath and she said to him, You have your own money in your piggy bank at the house.

Daniel Hill 0:58

Wow.

Shanna Browning 0:59

If you really want to buy this, then you can buy it with your own money. And you know what? That that meltdown, that screaming, that tantrum stopped instantly.

Daniel Hill 1:09

Wow. What a powerful moment. Yeah. It shifted the power dynamic. It wasn't mom says no anymore. It was, do you value this enough to spend your own hard-earned money on it? I'll tell you, we went on we went um on a on a family trip here a month or so ago, and my kids had birthday money saved up. And we let them take their birthday money. And when we stopped at a gas station or convenience store, they used their money to buy their snack. That's awesome. And their drink. And I tell you, it really made them stop and think, do I really need this? It was a huge, like I said, it was a huge power shift.

Shanna Browning 1:53

Yeah. Yeah. That it's their money at that point. And so I think that's the way we're talking about this. I think that's the easiest and the earliest lesson in value, right? And so it's that earliest lesson to so today we're going to talk about that, how to start those conversations with your kids under 12. And really any conversation. Yes. You know, any age at this point. Um, I have nieces and nephews from 24 to two years old. So we always had these conversations, right? And so we're not going to talk about stock portfolios or retirement plans. We're going to make it easy. We're going to talk about simple real-world choices that lay the foundation of a lifetime of smart habits.

Daniel Hill 2:43

Welcome back to Making Sense of Your Sense.

Shanna Browning 2:47

I'm Daniel Hill, and I'm Shannon Browning. And today we're going to talk about I love this, raising little money managers.

Daniel Hill 2:55

Yes.

Shanna Browning 2:56

If you've ever wondered how to teach your kids about money without it feeling like a boring math lesson, then this episode is for you. We're going to break down simple systems that help kids understand that money really is a tool for choice, not just a way to get what they want right now.

Daniel Hill 3:12

So, Shannon, the big question we're going to start with is how do we teach kids about money when they don't even have a job? And you know, it starts with the concept of this the three-jar system. Yep. And you don't have to use jars, you don't have to use, you know, you can you can use whatever, but I like the idea of jars because it's very physical, it's very visible, and every jar is clear. Yep. So your child should have three clear containers or jars that they can see into.

Shanna Browning 3:49

And my nieces and nephews have that from the my brother has six kids, and so they uh these range 15 to 2, and that's exactly what they do. And so they're labeled spend, save, and give. Those are your three jars. And it's so simple, but it teaches the three most important things that money does. Yeah. And it's just what it says the spin jar is for that little toy that they want right now. The save jar is for something bigger, like a video game or a new bike. What are they wanting? And then the give jar, well, that's for helping others. And it teaches them that money impacts the community. Oh, I love that.

Daniel Hill 4:26

And you know, we're all about giving back to community. So this hits this hits home.

Shanna Browning 4:32

Several ways.

Daniel Hill 4:32

Yes. The magic here is that it gives the child agency. Now, what do we mean by agency? When they get their allowance or maybe money from their birthday or a holiday, they get to decide how to split it up. You aren't forcing them to put it all into savings, you're giving them the freedom to make a mistake.

Shanna Browning 4:58

And there is the most important part of this process. If they spend all their money on a chip toy that breaks the next day, that is a fantastic low-stakes, very learned experience that they won't forget.

Daniel Hill 5:14

Right.

Shanna Browning 5:14

They will not forget that. If they spend that spin jar and then realize they can't afford the treat that they wanted later, that bigger treat they wanted later, then they've learned their lesson about opportunity cost that they'll remember for the rest of their lives.

Daniel Hill 5:29

Absolutely. And it removes the emotional no from the parent. You know, parents don't inherently like saying no.

Shanna Browning 5:38

Neither do ants.

Daniel Hill 5:39

Parents don't like being the bad guy that says, we aren't buying that. You can simply ask them, Did you bring your spending money? Yep. Did you bring your spend jar? And it turns a parental battle into a personal decision for that child. They become the manager of their own little economy. Like you said, you know, a little money manager. That's what that's what we want them to be.

Shanna Browning 6:06

And I love it. I think the biggest mistake that parents make, or those of us that are aunts or uncles or grandparents, whatever that is, the biggest mistake that we make is trying to make the kids perfect with money. Oh, yes. And are we perfect with money as adults? No. No, right? And so we don't we can't expect them to be either. So we don't, we don't not want them to make their mistakes, but money is a trade-off.

Daniel Hill 6:32

Exactly. Every time you buy something, you're not buying something else. Right. That's the core of the lesson. And when we take our kids to the store, we should be narrating our own choices. You know, you could say something like, We're picking this brand of paper towels because it's a better deal, which leaves us extra money for the fresh fruit you like. My kids are notorious for telling people, my mom never pays full price for anything. And it's because she shops for everything on sale. And she's instilled that into our kids. And they realize you don't have to buy the most expensive item. Now, there are some things that you don't skimp on. I'm not skimping on my peanut butter. Exactly. Exactly. There are some things that you don't trade off just because maybe the brand is better. Yeah. Um, or you just like the brand better, but you compensate that in other areas. Like, like I said, I love it. It's when you buy something, you're not buying something else. Yeah. Like you said, a trade-off.

Shanna Browning 7:39

I love it. I love it. I love it. And I think that's I'm I feel like that's what's teaching them that right there is that money is finite, right? There isn't an endless supply of money. There's just not. Even for us as adults, we have to set a limit. That's why we have budgets. Right. And so showing them that you're that you prioritize certain things like a healthy dinner or a family vacation helps them understand that money is just a way to reflect what you care about as a family. You're teaching so many lessons in that moment. Right, right.

Daniel Hill 8:12

And and I'll add this don't be afraid to let them work for it. Yeah. It doesn't have to be a complex, high-pressure job. Maybe it's helping with yard work, um, sorting laundry, cleaning the car. It's not about the labor, it's about the connection between effort and result. They learn that money is an exchange for value. Now I will say, you know, my kids, they all have chores around the house. We don't pay them to do their chores. That's that's part of them being a part of the family, you know. But but if they go above and beyond on something or they do something that's maybe not asked of them, they see a need around the house and they take it on themselves to do it, we might incentivize them, you know, after as a reward. Hey, you know, I saw you do that. Here's here's a dollar or or something. And it kind of builds into them, you know, there are certain responsibilities that you do because you do them. And there's other responsibilities or other things that you can do to enhance that.

Shanna Browning 9:20

I love that. I mean, I think that right, you're not rewarding them for doing what they need to be doing around the house. Right. I mean, that's part of it. It's a it's your job to do that. So I think that's fantastic that you're you're putting that into um, here's a little extra because we noticed what you were doing. And so that that matters. That definitely matters. We definitely uh definitely live in a kind of a buy now, have it tomorrow world. And it's hard for us as adults, let alone a kid. Let alone a kid. And so how do we slow them down?

Daniel Hill 10:52

Well, the 24-hour rule is great for kids. If they want something, we say, okay, let's wait until tomorrow. But if you still want it, then we can see if you have the money for it.

Shanna Browning 11:09

Yeah. And honestly, even as an adult and a kid, it's surprising how often the want disappears after 24 hours. The impulse passes. And it that's it right there. The impulse passes. And and it teaches them that they don't have to react to every feeling they have. That's a life skill that goes way beyond money.

Daniel Hill 11:32

And for the save jar, help them visualize the goal. If they're saving for a $20 to $50 set, put a picture of that set right on the jar. Every time they put a dollar in, they can see they're one step closer. And it turns saving into progress.

Shanna Browning 11:52

I'm gonna do that for myself. I mean, honestly. So it's all about making that abstract concept of money we of money feel real, right? And so it's visual, like you said. We put a picture up. And so when it's just a number on a screen, that's not real to a kid. It's just not. But when they can touch the coins and they can see that jar filling up, it becomes something that can actually matter, which is why I think cash will always be around. Yes. I don't feel like cash is going anywhere. No. So I I think it's this concept we're talking about right here, the visual of what we're doing.

Daniel Hill 12:31

So, Shana, we get, and I know you get a lot of questions because this is your heartbeat.

Shanna Browning 12:37

It is.

Daniel Hill 12:38

From parents who are worried about their kids' habits, what's one of the big questions that you get?

Shanna Browning 12:44

Well, just what you alluded to, right? Should I pay my child for doing chores that they're already supposed to be do they're doing by cleaning their room? That's a classic debate.

Daniel Hill 12:54

And as as we already touched on it, everyone has to contribute to the household they live in.

Shanna Browning 13:00

Yep.

Daniel Hill 13:01

Because they live there. That's just being part of the family.

Shanna Browning 13:05

Yeah.

Daniel Hill 13:05

But if you want to give them anything, give them bonus jobs, tasks that are extra, that aren't their daily responsibility. And that keeps the lesson about extra effort equals extra reward.

Shanna Browning 13:18

Yep. And I think that's a great way to do that. And so the other one is so my kid's too young to even count money.

Daniel Hill 13:23

Is it too early to start? It is never too early to start with the concept of choice. Even a three-year-old can understand the difference between we can have this now or we can save that for later. Keep it simple. It doesn't have to be about accounting perfectly, it's about the habit of thinking before spending.

Shanna Browning 13:49

And so I think I think that right there is also such a big so as as an aunt that's got these kids, right? These nieces and nephews, I've always looked at that. Um, that when they're born, I start them a savings account. Right. And so instead of their one year, they don't care about a toy at one year, they want the box. Right. Right. I'm I'm building that savings account for them. And it's a good way to get them started. So when they start doing these things right here with jars, or if I give them money for Christmas, they're gonna put that in that savings account or put it in that jar. It's however they're learning that lesson on themselves. You know, so I think that I think exactly what you just said, it's the concept of choice. Right. So I think that's great.

Daniel Hill 14:37

This has been a fun it's been a fun episode. I feel it can really help a lot of our listeners. And so what we're gonna do is we are gonna give you your actionable tip for this week.

Shanna Browning 14:52

So for this week, it's the match program. Match your child's savings by 10% to show them how their money grows.

Daniel Hill 15:02

Now, how many of you have an employer that has a 401k match program? Which we've talked about. This is a prime example of that. Think of it as a parental 401k. When your child puts money into their save jar, you add an extra 10% from your own pocket. It shows them immediately that saving money earns them more money. It creates excitement around the save jar that they just won't get from the spend jar.

Shanna Browning 15:35

And Daniel, my goodness, it's a game changer. It's a game changer. Watching that jar fill up faster than they contributed makes them feel like I'm a financial pro. Right. So it's the best way to get that money conversation out of the way before they're even teenagers. Yeah, yeah, it's huge. I love it. I love it. And you know, Daniel, I think this might truly be one of my favorite that we've done so far because getting kids to see money, especially at a young age, as a tool instead of just a magic plastic is such a gift.

Daniel Hill 16:09

Oh, it really is. It's not just about math, it's about confidence. And for all you parents out there, take it slow. Have some fun with the jars. Don't stress if they spend it all one in one day. That's exactly when the real learning starts. That's exactly correct.

Shanna Browning 16:30

And so next week we're gonna switch gears to something that's a little less jars of coins and a lot more see the big picture. So we're gonna break down, oh goodness, life insurance, basics, term life versus whole life.

Daniel Hill 16:43

And you know, it's a topic that can really feel overwhelming, but we're gonna strip away the jargon. We're gonna make it simple. So hit that subscribe button so you're ready for next Tuesday.

Shanna Browning 16:55

And thank you for hanging out with us and listening to this conversation about taking these steps to build a future for your little money managers.

Daniel Hill 17:04

Absolutely. We'll talk to you next week. Now, go out and make some sense of your sense.