I’m going a little bit out of topic this week with a Dividend Dad article (the first one I wrote was back in May!). Since money is a very important topic, I think it is also important to discuss how we teach money management to our children. After all, if they learn that before they earn some real money, they will definitely become better investors than us ;-).
We are already in the middle of September and this means that school has started for many of our children. My oldest, William, just entered “real school” and has started first grade this year. Since he was already familiar with numbers from what he learned during his pre-school year, we thought of showing him the importance of money and savings this year.
Creating a program that is fair, easy-to-understand, easy to manage and fun… whoa!
This was our biggest challenge; we wanted to show him how cool it is to earn money and save it. We didn’t want to simply give him a few bucks per week and let him spend it at the dollar store the very same day. This is how we (read my wife!) got the idea of building a “challenge board”. If you have young children at home, I’m sure you will like this system as it allows your kids to earn money instead of receiving it without being a real pain to manage for the parents!
Step #1: Setup the challenge board
We posted the challenge board on the front door of the refrigerator (isn’t it the ultimate communication tool for the modern family?). The challenge board shows the 7 days of the week and has a few rows to include challenges. The goal is to give your child 2 challenges per week and he has to complete them on a daily basis throughout the week. We actually write the challenges along with adding a picture right next to them so my son can keep track of what he has to do (he is learning how to read at the same time…).
Step #2: Select the challenges
Challenges can be anything. We decided to focus on what we find important or on what has been a real parent challenge recently ;-). For example, we asked my son to attach his shoes with laces at least once a day and be polite (no warnings allowed). The next week, we asked him to do his homework with a smile and to set the table. As you can see, they can be small tasks or personal challenges.
Step #3 The reward
As I mentioned before, I wanted to have something pretty simple in place. Therefore, my son can earn 2 gold pieces (from a pirate kit at the dollar store) per challenge per week. If he doesn’t achieve his challenge one day, he earns 1 gold piece and if he fails twice in the same week, he doesn’t earn anything.
In order to earn real money, he has to gather at least 4 gold pieces in exchange for $2. So if he behaves during the whole week, he is able to gather $2 per week.
Step #4 What we do with the money
He put his money into a piggy bank at the moment as we told him that if he waits long enough, he’ll be able to pay himself a Wii game (a used one at $19 obviously!) or other type of toys. Then, it gives us the opportunity to show him that if he is patient, he will be able to buy things that will last longer than the ones bought at the dollar store!
Thinking of entering into the investment world next year
We have been using this system since the beginning of September and so far, my son is pretty motivated by it. We were actually able to do a similar challenge board for my daughter, Amy, who’s 4 years old. They are both pretty enthusiast about it.
Next year, I’m thinking of adding the possibility for them to invest into “dad’s bank” which could give them an interest. It would obviously be much higher than what we find on the market at the moment as I don’t think that earning 1.25% on $10 is very sexy ;-). I’m not exactly sure how we will add the dad’s bank yet but we have a year to think about it and setup a nice system so my children understand how great it is to invest and receive interest!
Have you tried anything similar to this system? How do you show money management to your children? I’d like to get your thoughts on that as I want to make sure we are heading in the right direction with our system!