As your kids earn money they will have many ideas on how they should spend it.  We taught our kids to divide their money into 4 categories to learn to be responsible and how to manage their money.

Kids have money given to them for many reasons, a birthday, holiday, allowance, baby sitting jobs, doing their chores, and so on…  They also have many ideas of what to do with that money.  They are influenced by friends, commercials, magazines, and what they see in stores.  Kids need guidance on how to manage their money and the younger they receive this guidance, the better off they will be. 

We provide guidance to our kids about what they should do with their money at an early age.  But, we also allow them to make most of their own decisions on how they spend their money.  Sounds crazy, huh?  But, with the proper guidance, our kids learned how to make the right decisions and spend their money wisely for their age (at least most of the time). 

We instruct our kids to divide their money into 4 different categories…money they can spend now; money to save for larger expenses or special trips to the mall; money to donate to a charity; and money to invest for the future.  That’s right, we have our kids at a very early age realize the value of money they were either given or earned and we teach them not only to think of what they want right now, but to think of the bigger picture. 

First we have them separate money that they can spend immediately on candy or toys or smaller priced items.

Then, we talk to them about saving X amount of dollars each week so they can buy higher priced items or toys in a 3 or 4 weeks.   

We also make them aware that there are others less fortunate, and we need to always find ways to help others.  Our kids get a great deal of enjoyment donating their money to help others and donating clothing and toys, as well.  This has taught them an invaluable lesson in life and we are very proud of them for how generous they have become.

Lastly, our kids also put a portion of their money into long term savings so they get a sense of saving for the future.  Not just for a new toy 4 weeks from now, but an investment that helps them in the long term.  This is the toughest lesson to teach, because there is not much long term thinking at their age but eventually, they managed to get the concept just the same.

As stated, we instruct our kids to divide their money into these 4 categories and they are able to manage their money in all aspects.  We know that this will help them as they get older and have to make much bigger money decisions.  And, they are having fun learning this very important lesson!

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