Kiddos and Family Money: Do’s and Don’ts

After seasonal giving, hosting, and all the other expenses that come with kiddos out of school, there is a day of reckoning.  So many of us “pull-out-the-stops” where spending is concerned.  We want our kiddos to have whatever their heart desires, but it comes at a cost.  Family finances become foremost in our thinking about February.

Along with the family budget, maybe you are thinking, “I wish my parents had taught me how to do this better.”  Or, “I want my kiddos to be more aware of what things cost and get a handle on what they expect.”  Learning about money from the early developmental years is important and doable.  Even preschoolers can learn about money and to take age-appropriate responsibility in what they expect.  When kiddos want the moon, it is important to learn how expensive the moon is.

Several parenting experts have made suggestions about how to teach kiddos about money.  My professional favorite is the concept of Practice Money from Parenting with Love and Logic by Jim Fay and Foster Cline.  Practice Money is not allowance; it is based in real-life consequences.  Allowance is money that is given to kiddos, often without any effort in return.  Practice Money is for practicing how to manage money.  Kiddos get $1 for each year of life, in cash, every week.  One half goes into savings, the rest is theirs to spend however they want.  However, there are demands on that money.

Adults exchange their time and effort for money to pay for life´s expenses.  Kiddos must as well.  Each person has responsibilities to the family – cleaning house, making meals, managing dishes, garden work, washing laundry  – according to their age and ability.  Just like real life, if your kiddo doesn’t have time or the inclination, they must “pay” you or a sibling to do their work for them.   Let’s say your kiddo consistently forgets lunch, band instrument, homework, and calls you to bring it to school.  What is your time worth and what is the cost of gas for your car?  That gets deducted from their cash when Practice Money is dispensed, with an invoice detailing their expenses for the week.  Kiddos get advance notice what a service will cost so they can decide if it is within their budget.

All of this sounds a bit complex, but it is really a simple process that mirrors real life once you get it going.  The most important parts are 1) transparency from the beginning of how the process will work, and 2) consistency of application.  Get the book from the public library or purchase it from Book Bug in Kalamazoo to learn more about Practice Money.  Here are a few do’s and don’ts from the authors:

  • Do help your kiddos understand what their practice money can do;
  • Don’t give in and bail them out if they don’t have enough money (remember, your boss won’t!)
  • Do talk about value vs. cost and how to shop for value.
  • Don’t tell kiddos, “I don’t have money for that.” Ask, “Do you have the money for that?”
  • Do help kiddos understand how to save and budget for big ticket items (a book at school, a computer game, an app, money for their track phone)
  • Don’t manage their money for them (except for saving, which is required). Let them decide where to keep it and how to spend it.  Lost money is its own consequence.
  • Do model how you decide where family money is budgeted.
  • Don’t tell kiddos how much money you make, it confuses them, and it isn’t their business.
  • Do make money managing a family project and they will learn responsibility.


Dr. Susan Carter is a child psychologist and registered play therapist in private practice in Kalamazoo.