Financial Literacy–It Starts at Home

It’s never too early to teach kids and young adults lifelong money skills.

Key Takeaways

  • Consider giving kids a weekly stipend of one dollar-times-their age—but with some responsibilities attached.
  • Experts say that age 12-to-14 is a good time to start a capitation program for your kids.
  • Young adults should have basic budgeting and money skills before heading off to college.

In this first of four posts about financial literacy, we’re going to explore kids and their relationship with money. Psychologists tell us that as early as age 4, kids can understand the concept of money. We want to get children started on comprehending paper money and things  they’ll be buying the rest of their lives.
To that end, a couple from Lake Forest, Illinois came up with a new twist on the old fashioned piggy bank. It’s called the “Savvy Pig” and it has four slots for depositing money. There’s one slot for donating, one for spending, one for saving and one for investing. For instance, you can give your child one dollar a week for each year old they are—i.e. four dollars a week for a four year-old. The child decides how much of their weekly allowance to allocate to each slot in the Savvy Pig. They get used to paying for things at the store, handling the money and giving it to the cashier. To incentivize children to save and invest, you can offer to match them dollar-for- dollar for anything they put into the investment slot. It’s like a 401k match for corporate employees. This teaches children important lessons about delayed versus instant gratification.

Incentivizing adolescents

When kids reach age 12 to 14, we can get them into a “capitation” program. That’s where they receive a fixed dollar amount—for example, every month—and learn to set a budget. Dr. John Whitcomb, who wrote the book, “Capitate Your Kids,” grew up in India as the son of missionaries. He and his sister were sent off to school and they were given a certain amount of money each month on which to live. Dr. Whitcomb never forgot those lessons and it gave him great budgeting and money skills.

Incentivizing young adults

Suppose you give a young adult in your life $100 to $250 a week? It may sound like a lot since you’re still taking care of all the basics. But, now the young adult is responsible for anything they want to buy or need. It could be clothing, iTunes, games, going to the movies or putting gas in the car. Whether it’s with cash, debit card or a combination of both, you want young adults to learn to budget before they head off to college and out into the world. We want them to have a grasp on the concept of money, both financially and emotionally.


If you’re retired or soon to be retired, we have a dinner seminar coming up called Taking Charge of Your Wealth: For Those Who’ve Retired or Are About to Retire. It’s an entrée to National Financial Literacy Month in April and will be very educational. For more information, go to the Events page or our website and then scroll down to “Seminars.”

For additional information on this topic, check out our March 2013 quarterly newsletter.

Hope to see you next time as well as at our seminar. Enjoy. Gary  | 1-800-480-7913


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