Want to teach your children the value of money? Here’s a system that could work for you.

I walked into the bathroom and found the bottle of shampoo I had purchased the day before. It was lying on its side as the contents ran slowly down the drain. In my daughter’s bedroom, I found a wet swimsuit mildewing in the corner. In the wastebasket next to my son’s desk was a notebook half full of unused paper.

For the umpteenth time, I found myself saying, “Our kids just don’t appreciate the value of money!” I didn’t know what to do. My fear was that, left untaught, our children would escalate their waste and deepen their financial dependence on their parents as they grew older.

Then one day my husband, Maurice, enrolled in a class on adolescent behavior. One of the sessions dealt with a concept the teacher called “sharing the family income.” He said that to learn to ride a bike, you need to practice riding on one. Likewise, to learn money management, you have to have money to manage. That made sense to Maurice. He explained to me that the idea is to give each child enough money to take care of his or her needs. It then becomes the child’s responsibility to take care of those needs, rather than having parents do it.

This was not the first time I had heard this idea, but I had always brushed it aside, thinking that we really couldn’t afford to give our children that much money. Only because Maurice was insistent that we at least give it a try did we implement it in our family. I have since discovered that we spend no more with this plan than we were spending before, but our lives are much less stressful, and even our younger children are learning how to manage money.

We began by having a family council and showing our children (at the time ranging in age from six to fifteen years old) just how much income we had for family living expenses and what it was used for every month.

We then asked them to itemize their projected needs for a month (our younger children needed some help in this area), telling them to incorporate a clothing allowance into each month. We reasoned that even if they didn’t need their clothing allotment every month, they could save it toward those times, like the beginning of the school year, when they might need more than their allotment. We told our children that they would be responsible for personal items like shampoo and deodorant, as well as for their clothes, shoes, and entertainment. The amount of money they came up with had to be approved by my husband and me, and it was subject to change if we saw the need.

We give our children the predetermined amount of money every two weeks on my husband’s payday. We try to be prompt and consistent in distributing these funds so the children can learn to budget and plan ahead appropriately.

A few months into this plan, we discovered that our youngest child was not quite ready to manage all the purchases for which the older children were responsible. So we lowered the amount we gave him and made him responsible for everything but major clothing expenses. That worked better.

We were amazed at how much simpler our lives became. Whenever our children started the old “I want …” routine, we said, “That’s nice. Can you afford it?” It was wonderful! We no longer experienced “guilt trips”; the decisions were theirs.

Our children became more frugal than they had ever been. Some started clipping coupons for items that they needed. They began paying more attention to sales and less attention to brand names. They also began looking for quality and durability, and when they found a good buy, they discussed their purchases with each other. They became much less likely to waste things; we no longer find shampoo running down the drain or unused paper in the wastebasket, and very seldom do we find wet clothes mildewing in the corner. At the same time, we have seen our children’s self-esteem rise, almost in direct proportion to the rise in their ability to manage their money wisely.

This doesn’t happen overnight, of course. Children make mistakes. For example, one son was thrilled when we began sharing our income with him. Despite all our talk about saving for clothes or activities, he thought of his money as an allowance for pleasure. He spent everything as quickly as he got it.

At the beginning of a school year, his shoes were in rough shape. He needed new ones, but he didn’t have enough money. He tried to borrow, first from us and then from his brother and sisters, but we put a stop to that. Then he tried playing on our sympathy: “What are people going to think of me?” When that didn’t bring results, he worked on our pride: “What are people going to think of you?”

We were tough. He wore ragged shoes until he could afford some cheap new ones. The shoes began to look old and ragged long before their time, but he wore them until he saved enough to buy a good pair. He never made that mistake again. Because we did not remove the consequences of his actions by giving or loaning him money, he learned not only to save money for the future but to buy quality merchandise.

After a few months, some of our children began asking for advice about possible purchases. We found their greatest dilemma was trying to differentiate between a want and a need. We found some good suggestions in an Ensign article by Sally Hancock Seils. She suggests asking several questions: “What is the worst thing that will happen if I don’t buy it? What is the worst thing that will happen if I do buy it? Will I regret this purchase tomorrow?” (Aug. 1987, p. 55; emphasis added.) These are good questions for not only children but also adults to ask.

Realizing that we could not generate enough family income to meet all of our children’s needs and wants on our limited budget, we encouraged them to find part-time jobs outside our home. In this way, they have been able to pay their own car insurance, fund school trips and activities, and save for missions and higher education. They have also become more appreciative of what we do for them because they understand better the relationship between time, effort, and money.

As we have encouraged our children to pay their tithing, showing the younger ones how to figure out how much they should pay, we have had the joy of watching each one discover that when they pay their tithing, they are better able to make their money stretch to cover their needs.

We have also found it important to involve children in housework. Beverly Neuer Feldman notes that “when you let children accomplish small chores, you provide pure, unadulterated ego gratification: they feel capable and essential to the well-being of your family.” As they grow older, they gradually develop the self-discipline to complete “not-so-fun” jobs. This self-discipline also aids them as they work outside the home and as they manage their own finances. (See “Raising Money-Wise Kids,” Reader’s Digest, Nov. 1991, pp. 147–50.)

After several years of watching our children learn how to manage money, we have seen them develop self-discipline, the ability to differentiate between wants and needs, and the ability to recognize quality. I believe the more experience children have practicing these principles, the better equipped they will be to face the world as financially responsible adults.

[illustrations] Sculpted by Aaron Cole; photography by Matt Reier

Shirley G. Finlinson, a homemaker and freelance writer, serves as first counselor in the Young Women presidency of the Sharon Park Fifth Ward, Orem Utah Sharon Park Stake.