Choose the Right Currency to Teach Kids Financial Responsibility

Parenting has compelled me to do and say things I never imagined would be necessary. There was the “We don’t feed our sister dirt,” lesson of 2008, and then 2010’s challenge to think on my feet when my son got the mail and exclaimed with glee, “Look! Someone sent us some little pillows!” They were free samples of feminine products. No big deal.

Similarly, when the childless me dreamed of one day teaching my children about money, it didn’t seem like it was going to be all that complicated. “Spend less than you earn.” Bam! “Don’t raise a kid that onlookers describe as spoiled.” It seemed that simple.

And then along came easy credit and her sister debit, advertising that targets kids, an information age that drives parents to seek best practices in ALL topics, a technology age that makes consuming easy, the threat of identity fraud even for children, the Joneses and their exorbitant expenditures to satisfy their children’s whims, the dangers of raising an “entitled” generation. It’s a freaky reality. How do we raise financially responsible children? This question resulted in my collaboration with Dr. Christine Carter and an article in Money.com, but here are some additional lessons I learned along the way.

Screen Time as Cash?
A few years ago, my oldest posed a challenge when I realized he didn’t really care about money. At first, I thought maybe he didn’t understand the concept of needs and wants, apparently we were meeting all his needs well so he just didn’t have a reason to make independent purchases. Then I discovered – shocker! – he wasn’t keen on working for money unless I offered him a large sum.

After considering his outlook for a while, I realized I had to expand my definition of currency for him. It seemed if basic lessons on budgeting and earning/spending were going to be taught, I needed to deal with an asset he really cared about. You know what mattered to him? Screen time.

So I began managing his screen time, using it as the reward for work rather than an entitlement. Budgeting screen time resulted in some “A-HA” moments for my son:

• “This resource can be earned as long as I’m willing to work for it.”
• “This resource is expendable. Once I use it, it’s gone.”
• “This resource should be protected and not wasted away.“

He began managing this resource with more intention, so we moved on to the big Kahuna of resources, money. This time things were different because he had learned the basics with a currency he couldn’t afford to run out of.

Homework Passes
My daughter has a brilliant teacher who offered another alternative currency – Homework passes. She gave each student 4 passes for the semester. A child exchanges a homework pass, signed by a parent, for the privilege of not turning in a particular piece of homework. My first reaction to this new academic tool was befuddlement. How are these going to teach my kid to work hard at studies? I shrugged it off, assuming the teacher knew best.

The brilliance of the homework pass became evident the first time my daughter decided to use one. It was a normal day, no illness, no after school activities to make us short on time, no special friends over, she wasn’t even in a grumpy mood. She just “didn’t feel like doing that piece of homework.”

I sat there, torn between the desire to correct her thinking and a hunch that she needed to let her figure it out herself. I couldn’t keep my mouth shut, and out came my helicopter tendencies. “Are you sure you don’t want to save that homework pass for a time when you really need it?” That statement reflects MY inner sense of scarcity, the one that results in finding a three year-old box of Sees Candy in my pantry because I was “saving it” for, I don’t know, a visit from the Queen? But thankfully, my daughter considered my suggestion and quickly dismissed it.

“No, I just don’t feel like doing that homework. I’m going to use the pass.”

That’s when I conceded to letting her learn the larger lesson; a homework pass is an alternate currency and will train a child just as well as money. Maybe, someday towards the end of the year, she will regret spending all her passes because she really needed one.  Or, maybe she will end the year with a pass left over that she can use that last week of school, just because. Who knows? Either way, the lesson will be ALL HERS. And she will emerge financially wiser as a result.

So if you are having trouble with money lessons with young kids, consider dealing in an alternate currency to teach some basic principles. Your efforts will be effective as long as the asset is meaningful to the child as a reward and can be limited in quantity. Then, once the child is ready, you can start again with a financial allowance system that works.

Looking for more suggestions on setting an allowance for your children? Click here to read 8 Tips Make Allowance Lessons More Effective.