I have been following my own money advice for many years and have learned many lessons along the way about teaching kids about money.  Over the next few posts, I’m going to share my “Top 3” to help when teaching your own children about money.

Tip 1 –  Keep it concrete

Money is an abstract concept to kids. Child development researcher Jean Piaget found that children only begin to think logically about abstract propositions after about age 11. Adolescents also struggle with the abstract because the anatomy of reason and decision in their brain is in such flux.

That means we must make the money lesson for our children—regardless of their age—less abstract. The most concrete money lesson I know is allowance—not the sort of allowance that rewards children for chores, but the sort that puts them on a budget. By giving your child a monthly allowance and agreeing to a plan for how your child will use the money—to spend, save, donate and invest—you assign the responsibility for managing the money to your child. Most importantly, allowance transforms ‘your’ money into ‘their’ money, which allows for their hands-on problem solving.

A couple years ago, both of my daughters ran out of allowance money in the same month. Their allowance covered their clothing, toiletry and school lunch expenses. My younger daughter started making her lunch and scrounging through every purse and pocket for change. She took her change to the bank (without my help) and converted the change into a $20 dollar bill so she would “not spend it easily.” My older daughter’s solution was to ask me for money—I said no—and then borrow from her BFF.

Our kids each have very individual money personalities. Allowance is not only a very concrete way to help kids deal with the abstract concept of money, but also a way to help us see our child’s money personality very clearly so we know what we are working with.