Kids and Money – It is Never too Early to Start

Baby Sleeping

It is never too early to start saving for your kids, and it is never too early to start teaching them how to manage their money. The value of saving is something most people didn’t learn until it was too late. Which brings me to today’s story… I have to preface the story by saying something about my oldest son. He has a memory like an elephant and a bed full of stuffed animals that he has collected over the last 3 years. He is also obsessed with Spiderman. Tonight he got to put on his Spider Man PJ’s, and underwear. To which he replies “Now I am all SpiderManned up Daddy,” my response “good for you.”

The kid loves his stuffed animals and refuses to sleep if anyone of them is missing. He will gleefully account for all 10+ items in his bed before turning in and heaven forbid he be missing one. Tonight my wife is putting him down to bed and he says “Mommy how come I don’t have a Spider Man toy/doll.” My wife told him that he has plenty of animals in his bed and doesn’t need a Spider Man. In typical three year old fashion he adamantly insisted on her getting him a Spider Man.

Now parents who find themselves in this situation could take it one of several ways. The first option of course is to just say no you don’t need any more toys. You could also give in to the demands and promise to purchase a Spider Man, possibly adding in only if they are good this week. A third way would be to calmly explain how anything in excess is not good and that possibly if you give up some of your existing toys you could then discuss purchasing a new Spider Man toy. There isn’t anything wrong with any of these choices, and I am sure there are several other options, my wife’s solution was perfect.

My wife told him “If you want to get a Spider Man toy you will have to save up your money and buy yourself one.” Little Man’s response was simply “I am too little to buy things mommy.” Of course he isn’t too little which my wife quickly explained and countered with “But I don’t have any money” which isn’t entirely accurate as he currently has well over $150 in his piggy bank (don’t ask).  My wife made the first allowance pact at this point, seems a little crazy for a three year old to have an allowance but I think it is smart to start early and teach our children that if they want something it isn’t free. He will now earn $1 for every night he remembers to feed the dog, payable on Fridays. If he wants the toy he can purchase it when he has enough money.

I think it was a great way to handle the situation, big pat on the back to the old lady for that one, now for the next lesson we will have to cover the importance of saving some of what we make for bigger purchases and our futures, but I think that can wait a little while.

What do you think? Is 3 too young to have an allowance or is it a good way to teach kids about money?


1 Financial Samurai March 2, 2010 at 10:22 am

Hmmm. … if I got allowance at age 3, I’d be a multi, multi-millionaire by now due to compounding and investing! Go for it! 🙂

2 Kyle March 2, 2010 at 10:32 am

Add that to the fact that he is getting a “secret allowance” behind the scenes too and he very well may be..

3 Joseph| March 2, 2010 at 10:31 am

Great post!
It is a biblical principle too
Proverbs 22:6 “Train up a child in the way he should go: and when he is old, he will not depart from it.”

4 Kate Ashford @ HerTwoCents March 2, 2010 at 10:51 am

I don’t think it’s ever too early, although I’ve heard conflicting things about how much allowance is appropriate. I spoke to an expert once who recommended a dollar a week for every year of age. So in theory, a 3-year-old would get $3 a week. I’m wondering how far that would get anybody, though, in terms of actual Spider Man toy buying power. In any event, it’s an excellent idea to start teaching the concepts of saving and spending and the idea that you’re not just going to hand him everything he wants.

5 Revanche March 2, 2010 at 4:13 pm

I’d like to point out that at the age of 3, your son is already better at negotiating than most people are as adults. He doesn’t hesitate to ask for what he wants, which many adults are loathe to do. In this case, he gets the other person to offer solutions to the obstacles/objections/arguments he puts up instead of simply shutting him down. Of course, clearly Mom knows what she’s doing too and is teaching him a valuable lesson about earning what you want. Kudos to both!

6 Money Reasons March 2, 2010 at 7:07 pm

You got me beat! I started my son at 5 years old, and my daughter at 4 (my son insisted that since he got an allowance, so should his sister… I caved on that one). Initially I planned on starting both at 5 years old.

Great story, we should have linked to each other page earlier in the day! Both are similar, but also different enough… I think we could have added “cross site value” 😉

7 LeanLifeCoach March 2, 2010 at 8:52 pm

Ditto Revanche – Great point!

Kudos to the wife! It is never too early to teach kids. What you haven’t seen those commercials with kids learning to read at 18 months?

I’d go ahead and step it up to saving too. My kids learned they should always save 20% before they learned their table manners…. we’re still working on that!

It does make a difference.

8 Jason @ MyMoneyMinute March 4, 2010 at 12:39 pm

Not every 3 year old can comprehend it, but you’re doing the right thing. I would add some sort of work/benefit reward rather than a straight allowance. That teaches him that money has to be earned. Not sure what all a 3 year old can do, but even stuff like picking up toys or “helping” clean up dinner can be good chores to reward him with an allowance.

9 Jason @ One Money Design March 4, 2010 at 10:28 pm

Kyle, great story. Normally, I would think 3 would be too young for a child to understand earning and spending. But in this case, he seems to be a bright young lad. Why not give it a shot is my thought. I suppose providing little financial nuggests of guidance and coaching to children can never start too early. He may not quite comprehend it all, or he may do quite well. Either way, you gotta start sometime. Great job to you and your wife!

10 PT March 6, 2010 at 1:21 pm

Cute story, Kyle. Get some work out of that little SpiderMan. 😉

I like the 3 jar idea as well. Teach him that with his allowance he needs to give save spend.
.-= PT´s last blog ..Question of the Week: Who Does Your Car Service? =-.

11 Christina March 6, 2010 at 11:58 pm

I opened an account for my daughter, she’s just 2 actually but I really plan to teach her to save and know how to spend them wisely when the right time comes, probably at age 5. I thought it was an odd move to start an account for a 2 year old baby girl but then your article somehow proves me right.

12 Tom @ Canadian Finance Blog March 10, 2010 at 12:35 pm

Your wife has a great idea Kyle! My son is only 5 months old, but once he’s able to start asking for toys, candy, etc. he’s going on an allowance. Even if it’s very small, he’ll learn about money management and we’ll be able to end any of him begging for things before it gets out of control.
.-= Tom @ Canadian Finance Blog´s last blog ..A Quick QuickTax Online Review =-.

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