Financial Literacy for Kids – Start Early

As a financial planner, I often hear clients comment that their teenage, or even young adult children, have a limited understanding of savings and investments. Usually, our advice is to sit down and talk to them about the basics of financial responsibility, or we may recommend a book or two. However, the best advice is to start long before your children are teenagers or college age. I’ll share with you what I have done with my own family, maybe you can relate to it.  

My wife and I both work outside the home. We have three daughters, currently aged 13, 9, and 6, a dog and a cat.  As you can imagine, my home life is quite chaotic. There never seems to be enough time for all the things that need to get done and many times it feels like we are just hanging on. But, believe it or not, it used to be a lot worse.  

Back then, it seemed my wife and I were constantly after our three kids to remember and execute on all the before and after school tasks they needed to get done. Did you make your bed? Did you pick up your clothes off the floor? Why didn’t you empty your lunch bag from yesterday? And on and on it went, often with impatient tones, scoffs, and temper tantrums.  

One day I decided to bring my work home with me and implemented the Jar Challenge! I went out to the store and bought nine plastic jars with plastic lids, poked a hole through the tops, and labeled them. The two older girls received four jars and the youngest received one. The jars of the older girls were labeled “Fun,” “Savings,” “Charity,” and “Taxes.” Then I created a chore list of all the things the older girls needed to do in the morning before school and in the afternoon once they got home from school, Monday through Friday. I brought my girls in to the living room, presented them with their new jars and lists, and explained the rules of the Jar Challenge. They were to complete all the actions on the list for the week and if they did (or close to it) we would give them each five dollars. Of those dollars, one had to go in the Savings jar and one, and only one, had to go in the Tax jar; the other three could be allocated as they saw fit.  

To my surprise the girls were ecstatic. They absolutely loved the idea of checking things off a list and receiving money for it. The only question they had was: Why one dollar towards taxes? To which I replied: that’s the way the real world works; after all, you have shelter, food, education and other services - and those aren’t free. They didn’t much like the answer, but they understood it. Oh, and by the way, the little sister, 3 at the time, just received a quarter for the week if she didn’t annoy her sisters too much.  

My wife and I experienced a wave of calm over the house, at least for a few short hours straddling school, and the girls were giddy with delight to continue playing their new game. A few lessons my girls are learning from the Jar Challenge, apart from the necessary evil of taxes, are the importance of saving for their future, the value of money when spending on frivolities, the benevolence of helping the less fortunate, the feeling of accomplishment of completing tasks, the feeling of accountability of making their own decisions, and the consequences of not following through on commitments, to name a few. Interestingly, the oldest turned out to be a spender with charitable tendencies and the middle turned out to be a saver. Since the initial rollout, the oldest has opened a joint savings bank account with her mother, and has turned from spender to saver, and the youngest now has her own set of jars and chores to complete.

I strongly believe educating kids early about money – saving, investing, priorities, etc. – will pay dividends in the future as their financial literacy grows.  

Meet Angel Irazola, Senior Financial Planner »

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