My kindergartner is obsessed with getting a Nintendo Switch. He recently started watching videos on his Kindle Fire of some guy playing his Nintendo Switch. Unfortunately, all we hear about are games such as Mario Odyssey. This is the first time he’s been passionate about purchasing, so we are using this as an opportunity to teach him about money. Teaching money to a five-year-old isn’t easy, though this post goes over the strategy we are using to have money lessons sink in at a young age, hopefully.
Our children will likely grow up much better off than my wife or me when we were younger. However, with all the positives that come with their situation, there are some negatives, such as a lack of appreciation and entitlement. I want to give my kids a great life, but I don’t want to spoil them. That’s why we’re trying to get an early start to teach financial literacy in our house. The following are a few examples of how we’re teaching our kids about money.
How We’re Teaching our Kids about Spending, Investing, and Giving
Our five-year-old receives an allowance of $5 per week to complete his chores. His chores include making his bed, feeding the cats, and cleaning his room. Every day that he doesn’t complete a chore, he is supposed to lose one dollar.
We aren’t as hard-nosed with this approach as it sounds. There are plenty of days when we help our son with his chores or look the other way if his room isn’t perfect. There are other days when we ask him to feed the cats, and if he refuses, we take a dollar away. The point isn’t to strictly enforce the process at this point. It’s more to help him connect between doing work and making money.
At the end of the week, he puts $3 in the spending jar, $1 in the investing pot, and $1 in the giving jar. The jars are made of clear plastic to see the money adding up. At this pace, it may take him a while to save up for a $300 Nintendo Switch, but with a birthday coming up, he’s planning to ask all of his family and friends for money to put towards his goal. Having a tangible goal is vital for young children, especially a goal they are excited about.
How We’re Teaching Stock Investing
Before our oldest had a savings goal of an expensive Nintendo Switch, his birthday and Christmas money would add up to a relatively significant sum of money. So every year, we have purchased a share of stock or two.
We purchased two individual stocks via the Robinhood app with his savings. This wasn’t his decision, but he also didn’t push back against the decision. Honestly, I’m not sure he knew exactly what we were talking about. The Robinhood app was surprisingly easy to set up and even easier to purchase the individual stocks. There are no fees to use the Robinhood app either.
I don’t think he is anywhere near ready to grasp the concept of stocks fully. However, I sometimes comment, “you are a part-owner of Under Armor.” Hopefully, these comments will start to make more sense allowing him to make the connection between everyday products and the stock market.
Even though he hasn’t shown much interest in the stocks yet, he will ask to “see the numbers” occasionally. He currently has about $500 in his stock “portfolio.” It’s amusing to think of my five-year-old having a stock portfolio. 🙂
We will use his money from the investing jar to purchase additional individual stocks in the future. We may even roll the dice with the small-cap or penny stocks since we’ll likely be throwing less than $50 at new stocks. While I am more of an index fund investor, it would be more challenging to get him excited about investing in VTSAX (Vanguard’s total stock market index fund). As he shows interest in products or services, I will ask him if he’d like to be a part-owner in X company. Again, I don’t expect him to make the connection at his age fully, but hopefully, it makes sense in time.
How We’re Teaching Generosity
When our oldest was three years old, we were at our Aunt’s house and had completed an Easter egg hunt earlier in the day. Our son ended up with six or seven quarters that he planned to bring home for his jars. But instead, he donated his shiny new quarters to a better cause.
Our Aunt went on mission trips to Uganda every few years and showed him a small piggy bank. She explained that the money would be used to buy food for children in Uganda who are hungry. I was so proud as we watched him put his quarters in the piggy bank without being asked. He wanted to give his money, so the children had food to eat.
I had recently paid my oldest to help haul some trash out to the dumpster. I explained that he could sometimes make extra money by helping out with side jobs. He’s been excited by this and occasionally asks to help out around the house. For example, his younger sister, 2, helped him pick up toys the other day. Without saying anything to him, he took a dollar out of his spending jar and gave it to his sister for helping him out. It was an incredible moment.
I’m not sure if his actions have been the result of some of the things we’ve been teaching him. However, it is a positive sign that he’s starting to grasp some of these concepts even at a young age. We will continue to do our best so our kids grow to be generous and give back to those less fortunate.
How Are You Teaching Kids about Money?
I’m hoping that we can ensure our children are financially literate when they grow up by being intentional. We still have a long way to go in this parenting thing, and every stage so far has had challenges. I know it gets more complex once they begin approaching the teenage years. Regardless, all we can do as parents is our best and hope to raise money-smart kids who aren’t spoiled little brats!
Mark is the founder of Financial Pilgrimage, a blog dedicated to helping young families pay down debt and live financially free. Mark has a Bachelor’s degree in financial management and a Master’s degree in economics and finance. He is a husband of one and father of two and calls St. Louis, MO, home. He also loves playing in old man baseball leagues, working out, and being anywhere near the water. Mark has been featured in Yahoo! Finance, NerdWallet, and the Plutus Awards Showcase.