A client shared this exchange with us about a year ago, and it still makes us smile...
Daughter (8): "Dad, I really want the new Baby Yoda toy. Would I have to buy that with my own money?"
Dad: "Yes, that's what we agreed on. Your allowance is for the toys you want in between birthdays and holidays."
Daughter: (after a thoughtful pause) "Eh, never mind. I don't want it that badly." Then, brightening: "But you know what, Dad? I can't wait until I can make my kids buy their own toys."
It's one thing for a young child to grasp the difference between a want and a need. This one took it a step further and cheerfully passed the lesson along to the next generation. Kids will always add their own comic spin to these concepts, and that is part of the fun. What our work with families at OnePoint BFG makes clear is the serious point underneath it: when money conversations happen early and often, children begin showing real fiscal responsibility while they are still young.
That head start matters more than it might seem. Everyone wants to see sound judgment in their teenagers, when the dollar amounts and the consequences grow much larger. The most dependable way to get there is to begin well before the teenage years arrive. You may remember the long-term results of the Marshmallow Experiment from our last article. Research from the University of Cambridge points in the same direction, suggesting that a child's core money habits are largely set by around age seven. These early years, in other words, are prime time.
The encouraging part is how little it takes to begin. What follows are four simple, hands-on lessons made for the five-to-eight-year-old range. They fit inside an ordinary afternoon, they build naturally on one another, and with a little imagination they can be genuinely fun.
Turn money into a game
At this age, your children are already picking up basic addition and subtraction at school, so bring it home with real coins and bills. Pose small challenges and let them work with the actual money in front of them. Ask how many ways they can make a dollar using only coins, or have them count out an exact amount like sixty-five cents, a dollar and twelve cents, or a dollar and forty. Handling the coins turns an abstract idea into something they can see and touch.
Once they have the hang of it, open a little store in your living room. Put a price on a handful of items, hand over some money, and make sure it is not quite enough to buy everything. That gentle shortage is exactly where the next lesson begins.
Explore wants versus needs
Stock your home store with a mix of both, a few treats sitting alongside a few basics, and watch where your kids reach first. Afterward, talk it through together. Money does more than buy the things we want. It also has to cover the things we need, like food, clothes, and gas for the car.
Then run the shopping trip again, this time with a rule that certain needs must be purchased first. Suddenly there is less left over for the fun stuff, and your kids face a few genuine tradeoffs. Those tradeoffs are the seed of budgeting, a skill we will explore in more depth in a future article for the nine-to-thirteen crowd.
It is also a natural moment to explain, gently and without any guilt, which needs you cover as their parents. You are glad to provide for them because they are your children, and in time, as they begin to earn, some of those responsibilities will shift to them. From there you can lay out clear ground rules for which wants you will buy and which ones they will save for on their own. The exchange at the top of this article is one way to draw that line, and where you draw it is entirely your call. If you do want them buying some things themselves, they will need a little money to work with, which leads to the next lesson.
Connect earning to effort
If you want your kids to save for the things they want, they first need a way to earn. A lemonade stand, an allowance, a small job around the house: the source matters far less than the lesson, which is that money is tied to effort and to the time it takes to earn it.
Once you have settled on how they will earn, help them set a savings goal or pick something worth working toward, then map out a simple plan to reach it. Cheer them on, model hard work yourself, and let them feel the payoff when they arrive. Celebrate the win, then invite them to aim for the next one, keeping the effort balanced with plenty of contentment and gratitude along the way. No one is aiming to raise a seven-year-old workaholic.
Divide it three ways: save, spend, and give
Once money is coming in, the habit truly worth building is how to divide it. A simple, time-tested approach is the three-jar method: one jar for saving, one for spending, and one for giving. Sit down together and help them decide how much of each allowance goes into each jar, guided by the goals they care about.
Saving. The saving jar is where long-term thinking begins. Encourage them to look past this week's toy toward the bigger goals down the road, and share a real example of something you once saved up for, whether a car, a first home, or college. How much actually lands in the jar barely matters at this stage. The habit is the whole point, and ten to twenty percent is a good target to aim for.
Spending. The spending jar is for the wants in life. Use it to show that some wants cost more than others, and that reaching the bigger ones means resisting all the little impulse buys along the way. That is delayed gratification in miniature, the very muscle those marshmallow kids were working so hard to flex.
Giving. The giving jar may be the most valuable of the three. Parents often tell us they worry about their children growing up entitled, and few things guard against that better than helping a child look beyond themselves. Let them decide how much to set aside and, just as importantly, how to use it in a way that feels meaningful to them, perhaps a toy donated over the holidays or a pre-packed bag of groceries for a local food shelf. Have them carry out the giving from start to finish, so it feels real.
You can widen this out to the whole family, too. Choose a cause or two to support together, tell your kids what that support will make possible, and volunteer alongside them whenever you can, so they see the difference with their own eyes. Gratitude has a way of following close behind.
At this age, no one is aiming for perfection. The goal is simply to recognize that your children are ready for these ideas, and that everyday life is full of small moments worth leaning into. Handled with a light touch, these lessons can be surprisingly fun, and when something is fun, the knowledge tends to stick.
Every child is unique, and just as the plan we build for you is shaped around your family, theirs deserves the same care. If you would like to map out a plan tailored to your kids, we would love to find time to talk.
Investment advisory and financial planning services offered through Bleakley Financial Group, LLC, an SEC registered investment adviser, doing business as OnePoint BFG Wealth Partners (herein referred to as "OnePoint BFG"). For more information regarding OnePoint BFG including important disclosures, please visit adviserinfo.sec.gov.
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