Make Money Work for You

3 Tips To Help Raise Financially Responsible Children

Teaching children how to be good with money in a consumerism and instant gratification world is challenging, but not impossible. It’s about creating opportunities for them to learn how to think with an abundance money mindset and to learn and practice the basic money management skills. Here are three tips to help you get started.

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Use a Money System
A money system is not only a teaching tool, but it also shows children they need a system to make their money work for them.  Create a system for them that includes the basic skills and habits: learning, budgeting, saving, spending, investing and giving. The system also needs financial goal setting and tracking, as well as mental strategies to help develop an abundance money mindset.

Provide opportunities for the child to make their own financial choices and learn financial responsibility from the consequences. The 6G Money System is all inclusive and easily transitions from jars with fun labels and compound interest fairies, to bank accounts and investment portfolios. For the younger child, label six clear jars with the following:

GOALS
GRATITUDE
GET
GROW
GUARD
GIVE

All income goes into the GET jar. Immediately, transfer half into the GROW jar and half into the GUARD JAR. From the GUARD jar, they decide how to allocate to short term saving, spending, and giving. In other words, they decide how to budget their money.

Encourage them to set financial goals and ‘keep them safe’ in their GOALS jar and to write down things they are grateful for and pop their notes into their GRATITUDE jar.

When the child is ready for banking, their GET and GUARD jars become their everyday and short-term savings accounts. Their GROW jar transitions into their investing portfolio and theirGIVE jar becomes their philanthropy mission. Their GOAL and GRATITUDE jars evolve into whatever they choose. Over time and with practice, this system will help children lay a solid financial foundation for themselves from which they will be able to make educated and informed financial decisions as adults.

Show them Compound Interest in Action
Compound interest needs time and patience to work its magic on our money. Children have time, but we cannot expect them to be patient for the next 20 or so years to see the effect of interest or compound interest on the money in their GROW jar. Move over tooth fairy. Enter the Compound Interest Fairy. All you need for the younger child is their GROW jar and some coins, whether real or pretend. Fairy wings are optional, of course. While they sleep, the Compound Interest Fairy visits and adds money (interest) to the money in their GROW jar. To keep the child’s attention, let the fairy visit weekly or fortnightly until the GROW jar is full. (Remember, compound interest is interest upon interest.) Explain that when they leave their money in their ‘grow’ jar, the Compound Interest Fairy puts more money into their jar. If they  choose to take money out of their GROW jar, the Compound Fairy won’t visit.

Show the older child examples of compound interest in action. Ask them, “If a genie appeared and gave you a choice of $1,000,000.00 today or 1 penny that doubles every day for thirty days. What would you choose?” After thirty days the $1,000,000.00 will still be $1,000,000.00 but the penny would be worth $5,368,709.12. It’s important to add that the chances of this  happening in real life are remote but it shows what happens when you choose to save and invest your money, rather than spend it.

When children understand the power of compound interest and that it’s possible for their money to multiply and grow for them, they feel motivated to save some of their money rather than spend it all.

Teach Children They are the Boss of Their Money

Financial responsibility is about making educated and informed financial decisions while fully understanding the short, medium and long term implications. Here are ten questions to teach children how to consider the implications of a financial decision before they make it.

• Do I need this?
• Do I want this?
• Is this in my budget?
• What information do I still need?
• Do I understand the fine print?
• What is the opportunity cost of this choice?
• Is this decision ethical, legal and moral?
• Are there other options?
• Is this in line with my financial goals and values?
• Is this an asset or a liability?

Raising a financially responsible adult takes time, patience, fun
and consistency but the rewards are worth it.

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Laurel Makowem


Laurel Makowem is a Certified Financial Education Instructor and founder of Mothers Teaching Money, a business and movement helping parents raise
financially confident, responsible and independent adults, regardless of their own financial knowledge or situation. Her mission is to demystify financial literacy through the Millionaire Mindset Money System, a comprehensive holistic financial education system. She provides fun online courses, workshops and products for children from 4-18 years.
Laurel can be reached at mothersteachingmoney@gmail.com.