While TV channel surfing one recent evening, I came by another episode of Oprah that had Suze Orman as a guest.  As you may remember, I’ve written about Oprah and money before where Suze spoke to Oprah about the grotesque amounts of debt that most North Americans are holding today.

Why did Oprah catch my attention this time again?  No, not because of her new hair style, but because the topic was about money and kids.  In particular, it appears that this teen generation has a bigger sense of entitlement than previous ones.  Why is that?  Suze explains that with the booming real estate/stock markets (economy) in recent years when kids were 8 – 10 years old, parents were free spending as times were good.  Now as those spoiled children are teenagers, they feel that money is no object and whatever they “want” they should have regardless of the cost.

How can we reverse this trend?  What can we do to teach children/teenagers about the value of money?  Here are some suggestions that I learned from the show.

Kid Money Lessons:

  • Kids follow what you do not what you say – If parents are free spending without regard to how much something costs, then children will pick up on that.  If parents are responsible with money, then it is shown that  kids will learn from that.  Suze Orman considers this to be the biggest money lesson for parents.
  • An allowance must be earned – Suze Orman believes that children must earn their allowance through doing chores around the house.  Specifically, she recommends to pay the child by the minute based on minimum wage which works out to be around $0.10 – $0.15/minute of work.  If the work is done well, then give the child a raise.
  • Should a teenager have a credit card? – This would depend on if the teenager has shown that he/she is responsible with money.  It is suggested that as a requirement for getting a credit card that the teenager must pay the credit card balance in full 2 weeks before it’s due.
  • Don’t reward kids with money – Getting good grades etc. should not be rewarded with money, it should be rewarded with quality time with the parents.  Only work should be compensated with money.
  • Teach kids to separate needs and wants – Kids want everything!  The best thing to do is to teach kids how to prioritize their needs and their wants.

For those of you who have kids, what are you doing to teach your children about money?  I know that a lot of you have very young children (like me), have you thought about money lessons for your kids?


  1. Houska on November 4, 2008 at 8:42 am

    Agree with some of this, but emphatically not all:

    Kids follow what you do, etc: Fully agree, and it goes further. Where possible include the kids in the decisions the family makes about money. If they observe the parents just spending and making what look like random decisions, hardly surprising that’s what they do too.

    Allowance must be earned: Partial strong disagreement. Doing chores is part of being part of the family, not a remunerated job. My wife and I do not pay each other for sweeping the floor, doing the dishes, or taking out the garbage, nor should we pay our kids. Kids should be able to earn *extra* money beyond the basic chores, however – if they paint the fence rather than the family hiring a handyman to do it, etc.

    Credit card for teenagers: Not there yet, but think it is a good idea. However, the expectation should be the same as for the adults – pay it off each month. Not 2 weeks early as suggested (why be more stringent with the kids?) but on time

    Don’t reward kids with money. Of two minds about this one. Don’t want to set up implied contracts for money in return for doing things well, but recognizing doing something great with a gift or a monetary contribution towards something the kid is saving for seems to us a lot healthier than paying for work which should be a standard part of being in the family.

    Teach kids to separate needs and wants. Fully agree, and the best way is to include them as early as possible in the family’s discussion of their needs and wants and expense prioritization.

  2. Andy @ Retire at 40 on November 4, 2008 at 8:52 am

    I agree with you, that the kids (almost just after my generation) has not had a very hard time of things. Yes, there has been the Iraq war but in general this didn’t affect us at home (in the US or Britain). We haven’t had famine, we haven’t had a massive disease nor have we had a big recession (not that we know how this one is going to turn out). We consider ourselves worthy of what is really our lucky situation.

  3. MultifolDream$ on November 4, 2008 at 9:48 am

    About the credit cards I would say that the teenager should understand that this is a just a payment method which offers some convenience during the transactions and not life on credit.
    I do not agree with “don’t reward kids with money”. There are so many examples that show the opposite in life and the kids can see this. After all I’m not sure I want my kids to be workers for somebody else all their life.
    … and in the title you have Orpah …

    • FrugalTrader on November 4, 2008 at 10:16 am

      Thanks for the comments and spell check guys!

      Personally, I think kids could use some money rewards for doing a job well, however, I’m still in the research phase as the young one is only old enough to tear money apart. :)

  4. guinness416 on November 4, 2008 at 11:42 am

    Now let’s not get all “kids these days ….”

    I don’t know. There are A LOT of families of my acquaintance where siblings handle money completely differently to each other, regardless of how much or little financial education the parents provided. I had young parents, and I’m not sure it would have even occured to my folks to think about the stuff above (they were probably learning it themselves). We all turned out different but generally fine. Certainly I got plenty of cash rewards and no credit card education and was a responsible student/teen.

  5. Sam Li on November 4, 2008 at 11:50 am

    I’m a father of two, the old one is 15 years old the other one is 2.5. I have traditional family values. I put my family above anything else. One of the essential things is helping each other as family members – NOT FOR MONEY! By paying to your child for help inside of the house you screwing up his mind! Child should have basic family values otherwise you going end up in a hostel in a case when you will get older and won’t be able to support you self. I’m not planning to be a liability to my children but you never know what life prepared to you. “Want To Make God Laugh? Tell Him Your Plans”. By introducing typical employer-employee relationship with your child you are killing entrepreneurial spirit at the root. So the question is what do you want for your child, do you want him to grow good employee or do you want him to grow successful businessman? Do you want him to work for all his life or do you want him to provide job to the others and have a good living from it? I encourage my teenager for whatever business adventure he is trying to get into. At this point he built a website for the gamers and earning money trough advertisement programs. The money should come from outside of the family in order to make the family wealthier, meaning everyone in the family.

  6. Geoff on November 4, 2008 at 12:14 pm

    I think any conversation about managing and living with money should also include what money is, and where it comes from (i.e. our money originates from debt).

  7. DAvid on November 4, 2008 at 12:18 pm

    On the credit card — Debit card use is still not as prevalent in the USA as Canada, however, for a youth wanting a cashless form of payment, it may be the better teaching tool. Should the account become overdrawn, it becomes the (cold-hearted) retailer breaking the news before the expenditure, rather than Mom or Dad after the financial hole has been dug. I believe this to be a better means to teach money managment than starting with a credit card. The youth can graduate to the credit card when they show the appropriate responsibility.


  8. Scott on November 4, 2008 at 12:43 pm

    I don’t have kids but I do remember when I was a kid (whew! still young enough to remember!). In my house it was Chores = Allowance all the way. And the really hard, one-off tasks (like cleaning out all the kitchen cabinets) were paid for in silver dollars! Didn’t have any value to me when I was 12, I just thought they were cool to have!

    Subconsciously, this work = money way of life probably had an underlying effect on my adult life and the manner in which I deal with finances. But it would seem to me, especially in today’s economic climate, that fraud and greed (not honest work) = even more money. Just ask any high ranking banker.

    I love Sam Li’s non-use (disgust?) of the employer-parent/child-employee ideal! Teach the kid how to use his/her brain and how to hustle (for lack of PC term). Teach them how to be an “owner” instead of just another drone following orders. Also agree with doing “chores” simply to help others. It’s almost a more realistic approach. No one pays me any more to clean my own bathroom or wash the dishes or mow the lawn!

    The “no money for good grades” can be kind of a gray area. After all, aren’t good grades rewarded with good scholarships and good jobs and good salaries (i.e. money) in the long run? So why not give the kid a little taste of reality, all in the pursuit of higher education?

  9. nobleea on November 4, 2008 at 1:07 pm

    Pay them by the minute? Now that seems a little extreme. You’d have to have them punch clocks to track it.
    Pay em by the task. Then they’ll learn how to work efficiently, rather than per unit time, which creates a dogging it attitude.

  10. Gates VP on November 4, 2008 at 2:46 pm

    Don’t reward kids with money – Getting good grades etc. should not be rewarded with money, it should be rewarded with quality time with the parents. Only work should be compensated with money.

    Umm… don’t we want this the other way around?

    In High School, good grades are rewarded with money for University. In University good grades are rewarded with free schooling, TA jobs and higher starting wages in the work world.

    If you’re going to place high rewards for kids, shouldn’t it be in scholastic pursuits? Especially in the knowledge worker economy. Use the carrot or the stick, whatever you need, but I don’t see my 30 year old “future kid” being angry at me for trying to help him be too smart.

  11. Dividend Growth Investor on November 4, 2008 at 2:49 pm

    Several people at my work actually do compensate their kids for good performance at school ( getting A’s). Doing well at school should be any kid’s job.

  12. Money Funk on November 4, 2008 at 3:51 pm

    I like Sam Li’s comment about the entrepreneurial spirit. I encourage my son’s want to sell on Ebay or wash windows for neighbors.

    Also, children should not be paid an allowance based on chores. Chores are a necessity to run a household.
    This is kind of a hard case to balance. I do pay my kids weekly. Chores are a given that they will be done. They get paid extra for chores outside the norm. So, what do kids get paid for? I really cannot say. For being my kids? But, they use their money to go to the movies or buy something a ‘want’. I do not provide the extras.

    And credit cards? Neither an adult or child needs one. Okay, one card strictly for emergencies, if you’re an adult. So, there is no need to teach my children about the functionalities of credit cards at this time. Except to note that they are not necessary to fund your life.

    Teach them about savings, investing and compounding interest.

  13. Ramona on November 4, 2008 at 4:29 pm

    We give our 15 year old an allowance – this is to cover his normal mundane tasks like unloading the dishwasher, taking out the garbage etc. A bigger chore gets extra money – think mowing the grass, painting, etc. And we award a monetary amount for A’s & B’s. I know the money for grades is controversial but my thinking is this: school is his job, and we all want to be rewarded for working. Of course the argument is that good grades gets you into better schools, which equates to better pay, but that is a long term goal, and if it has never applied to you, how do you understand that? I also want to help boost him into a higher grade, the underlying feeling in schools now is that a D is a pass. Why work harder? My son knows that he is a B student, with a little extra effort, he gets A’s, and in applying himself that bit extra, there is a reward. Monetary, because let me tell you, “congratulations” does not cut it. As an employee, tell me the next time you go over & above your “job description” for an extended period, does “congrats” work for you? No, you are looking for the next raise, the next promotion, the next perk.

    And big question – does this work? Absolutely! My son is very well adjusted, he studies hard, he is very polite, he helps out, he is the first to hold a door open for someone he doesn’t know. He has a debit card and a prepaid credit card and he is responsible with his money. Does he have any savings? Nope. But isn’t that what your teenhood is about? Enjoyment. There is time for the next step when it comes. And when it does, we will be right there to help him in whatever way we can.

    Experts are great, but real life is better. You need to do what works for you as a family. Not every situation is the same. Trust your intuition.

  14. Mary on November 4, 2008 at 4:41 pm

    At Moonjar we create tools to help families teach financial responsibility to each other. Once the conversation is open and alive it is great to have room for many many differences.
    The allowance question comes up a lot and I believe that allowance is important because it helps young kids deal with money on a regular basis–I do not agree that it needs to be tied to jobs, I believe in some families it is great that kids get allowance simply because they are part of the community and it is a responsibilty to make choices with that allowance.

    We also believe the SHARE piece of money management is a huge piece and one that can lend to family mission statements and children stiving to invest in their communities.

    Please take a look at http://www.moonjar.com as you are looking for ways to teach kids about money and celebrate family. We also offer great classroom kits that any parent could use to take into a class and teach a lesson on Saving Spending and Sharing to benefit the whole class.

    Thank you so much,

  15. Novice on November 4, 2008 at 5:17 pm

    I like the approach my parents took. We never received an allowance and were expected to help with all household tasks. However, in general we were bought the clothes that we wanted (within reason) and other necessities of school life. This also encouraged us to earn money for spending and investing the old fashioned way — with a real job from an outside employer. (And P.S. most entrepreneurs did have at least one job in their history, Buffet was a paper boy from what I understand).

    The concept of being paid for grades does not make sense to me; it’s akin to paying for scoring goals or making saves if you’re a goalie. You are in school to learn; the expectation is that you will do so and do well. Just like you don’t get points for not going to jail, you don’t get points for getting a B or B+ in a class. The reward for doing well in high school is to be able to go to university, where presumably the pay for grades program will come to a crashing end (but the logic behind it doesn’t, so I don’t get it why it would…)

    As a new father I’m very interested in learning how to teach responsible money management.

  16. Paw Doc on November 4, 2008 at 7:45 pm

    Re: Rewards.

    When I was little my parents offered me $100 if I could make it to age 18 without smoking. I am proud to say that I have NEVER even touched a cigarette. I have increased this to $1000 for my daughter. Considering that she is at a very impressionable age right now, I am so proud when she tells her friends that she will never smoke because of the $1000 bill that she will be getting soon.

    “I plan on living forever, so far so good!”

  17. Scott on November 4, 2008 at 10:16 pm

    School & Money:

    Re: Doc: — I got $1000 when I turned 18 for not smoking. Easy money! One thing I would advise, throw some investment books into the deal too; 18 year-old kids do NOT know what to do with $1000!

    Re: Novice:

    “You are in school to learn…”
    More please! To learn what? Oh yes, information that can be applied to a craft (i.e. JOB) when the learning is done. It would be an amazing life if we could all just go around learning all our lives and never have to worry about working! Yee haw! But sadly, school is the primer for the work force.

    “The reward for doing well in high school is to be able to go to university…” Yes it is. And what goes on at University? Oh, yes, more learning! And we all know what learning leads to…working!

    The more you KNOW, the more you are WORTH (presumably).

    You graduate high school, you can work at McDonald’s.
    You graduate university, you can be a manager at McDonald’s!

    “The concept of being paid for grades does not make sense to me; it’s akin to paying for scoring goals or making saves if you’re a goalie.” Hmmm, I’m not sure, but last time I checked the people scoring the most goals (or making the most saves) got paid a hell of a lot more than those average scoring players! They didn’t pay ol’ #99 $45,000 a year and call him “The Great One” just to make him feel better!

    It all comes back to living in a capitalist society — it’s all measured in dollars. You do well, in whatever function, you will probably receive more dollars. That’s just the way it works. So rewarding high grades with money is the natural thing to do.

    And, it had kind of a ‘trickle up’ effect. You extract good grades from your kid with money; your kid wants the money and achieves those high grades; this in turn produces a high scholastic level at that high school; which in turn gives them bargaining power to get more money from the school board; which leads to better programs and teachers; which hopefully delivers an overall elevated education system (i.e. better students and higher grades!). Then again, I know nothing of the public school system.

    Of course the kid is still an “amateur” and doesn’t really qualify for a pay cheque, but there’s no real harm in giving a few monetary “perks” to prime them for when they enter the “pro” ranks.

  18. nobleea on November 4, 2008 at 11:39 pm

    Most families don’t operate in a capitalist fashion though. Jimmy got an A on his test, so he gets steak. Pam only got a C, so she gets spam. It’s more socialist or communist (dictatorial in some households!).

    But I can agree on providing some monetary benefit to reward initiative, be it better grades or more chores than required.

    There is nothing set in stone about it being a monetary reward. Taking a kid to a hockey game or a musical might be worth well more than its monetary value.

  19. sammy on February 4, 2009 at 2:35 am

    Good article posted on MSN: What kids need to know about money.
    Here’s teh link:

  20. Sam X Renick on March 30, 2009 at 11:41 am

    Here’s another article on the subject that should be of interest:

    Teaching kids to be money savvy could avoid another crisis http://online.wsj.com/article/BT-CO-20090316-704406.html?mod=

    And for parents, teachers that want to emphasize reading as well as saving money check out Sammy Rabbit books and music. Both are fabulous at http://www.itsahabit.com They are suggested by numerous personal finance experts including David Bach, Eric Tyson, MSN, Kiplinger, the Motley Fools, etc.

    Sam X Renick
    Changing children & family lives one habit and dime at a time by teaching them to save money, develop smart money habits and make smart money choices.

  21. Kiddy Money Tutor on July 31, 2010 at 10:41 pm

    The argument on whether parents should or should not reward their kids with money can go on forever. After all, we are all different, aren’t we? Difffernt backgrounds, different value, different cultures, different stage at life and just differenet people altogether. The issue of money and kids is a tricky one as it involves parents and their kids and money – it is not that staright forward.

    However, as responsible parents, we can all take away values and lessons that we pick up here and there. Teaching children to save, budget, invest, give and spend money can be, afterall, very rewarding for both parents and kids. Parents would feel great about teaching their kids a very useful life skill, and kids would appreciate their parents’ efforts when they become adults.

    Happy teaching everyone!

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