I disagree vehemently with a hands-off approach that passively says kids will learn to save on their own without explicit structures put into place by parents. This comes from me spending every paycheck to zero until I was nearly 40. Yes, some kids are just natural savers, like the one above who wants to be a millionaire. But many of us will spend whatever we have available to spend, always. I never had impulse control with money modeled to me, and while intellectually I knew I needed to save (I'm as book smart as they come), it me we translated to action. I have no habit of self-denial.

We do 2 things: we talk a lot about budget and finances. Our kids know how much things cost. They see us making financial choices in front of them.

Two, structure the behaviors with money that we hope will become habits. One is the YNAB principle of giving every dollar a job. We don't use percentages b/c that message for your allowances. So for a 7 year old, we say 2 dollars are for saving and 5 are for spending. We figure $20 spending a week is pretty high.

We let our kids do whatever they want with their money. I don't think they'll really get anything out of us telling them how to allocate it. I have one child who puts every penny in the bank- he wants to be a billionaire one day!- and the other who spends it all on Legos. I try not to even comment on what a good choice Child #1 is making because I think it's lesson they each have to learn on their own. I agree with the point that if you give a child $10 but tell them they can only spend $3, they'll start seeing it as they're only getting $3. I think dictating how allowance is allocated defeats the point of giving an allowance.

We have no requirements on how they use their allowance (except to limit junk food purchases). Our thinking on this was shaped a lot by the book "Bank of Dad". Basically, he makes the point that kids aren't stupid -- they can figure out that if you are telling them their allowance is $10 but $8 goes to various things that you are requiring, then their allowance isn't actually $10. It's $2. So, just give them the money THEY get to control and don't mess around with the other stuff. But, we do give them a generous interest rate for saving. 11 yr old DS still tends to blow his on crap while 10 yr old DD rarely spends it and has built up quite a big stash.

For charity, we talk about where we donate money, they donate outgrown clothing and toys to charities, they participate in community service activities through our church. DD (the saver) occasionally chooses to make a cash donation to an animal charity. DS hasn't voluntarily given cash to a charity, but has on his own purchased the occasional birthday or valentine gift for his sister, which means more to me given their often contentious relationship.

Anonymous wrote:Do you give 20% of YOUR GROSS to charity?

22:09 here. We don't save 25% and donate 25% of our income, so I'm not trying to instill exact percentages in my kids. (I also don't charge them for rent or food. Kid finances are different than adult finances.)

Do you give 20% of YOUR GROSS to charity?

We do: $1 for themselves, $.50 for savings (unspecified, but meaning longer-term), $.50 for charity. My kids are older elementary and enjoy thinking about what sort of organizations they'd like to give money to once they have $20 or so.

Don't understand why you'd have them slot their allowance for college. If you need to make a point, you say that the don't get as much as they think they should have because YOU need to put in their college fund. I do more of "this is your spending money. Check gifts go in the bank"

Why make them give to charity? I don't know if they will see it as giving freely to something they believe in if its a chore. I always resented being forced to give at church, though I also hated church. Do you have a plan for them to choose a charity or is it something at school?

Can they do the math on that and keep track of it? (My kid is not yet 6 and can't do that kind of proportional calculation, but maybe yours can.)

Anyway, I would keep your goals within their cognitive ability to track what's going on. I think at this age, teaching the idea of spend vs save is important. Do they go for instance gratification, or do they delay the gratification for several weeks and save up for a desired item? Once they have that concept, then maybe the notion of nominating a small amount for giving is appropriate.

I would not have my kid save 30 cents a week (or some other nominal amount) for college. That's not a realistic assessment of what college costs, for starters. Maybe once they are teens and have jobs, they can start to contribute to a college fund?

I do 70% spend
20% save
10% charity

My kids are still same age as yours, OP so I haven't done much with this. But I just heard about this book and am looking forward to reading it - The Opposite of Spoiled.
http://www.amazon.com/The-Opposite-Spoiled-Grounded-Generous/dp/0062247018

Anonymous wrote:In my experience, the best way for a kid to learn about something is to have control of it, and the opportunity to make and learn from mistakes. Given that, I don't tell my kid how to spend his allowance.

I mostly agree, although we do have them put $1 each week in a "giveaway" fund; it piles up, then they choose something to spend it on, like buying toys to donate at the holidays, etc.

How much are you giving them? We didn't give our kids much at that age so divvying up $1 here and $.50 there would have made it pretty difficult. We tried to do the charity thing but eventually gave up on that. Both kids do a lot of service, and have independently donated to various causes so they seem to have gotten the message.

Honestly we let them do what they wanted with their allowances. That seemed to be a better life lesson. If they used it all up on something then they wouldn't have it when they wanted the next thing. If they went out to lunch every day instead of having school lunch, then they might not have money for the movies. They've both ended up being quite responsible with money.

In my experience, the best way for a kid to learn about something is to have control of it, and the opportunity to make and learn from mistakes. Given that, I don't tell my kid how to spend his allowance.

Sons are 6 & 7. Trying to figure out what is best to teach them about money. What has your family done?