8 Responses

1. Pinyo

   19|Sep|2007 1

   I think as soon as they know how to talk, can comprehend “have” and “don’t have”, and develop “want” emotion. I read a story on a blog where the mom gave her kid $2 for french fries. They walked pass ice cream stand and the mom asked her kid to decide. The kid decided not to spend $2 on ice cream and waited for the french fries. I thought it was a great story. Don’t remember where I read it though.

2. Andrew

   19|Sep|2007 2

   I plan on teaching my son (who is only 8 months old right now) about finances when he’s about 4 or 5. I think I’ll start with simple things like how to save and how to give money. When he does “good” things, my wife and I will give him real money. As we add more and more complexity to his finances it will continue to use real money. By the time he’s in high school, we hope he’ll be very used to saving and giving real money and will understand that the more he saves the more he ends up with (we’ll match what he saves and/or give him some interest rate that we agree on).

   I think a token economy has the same failings that you cite. I also think that it doesn’t truly teach them the value of money. I think simple things like giving him $5 and taking him to the toy store and letting him pick what he wants to buy. It’s really my money, but he’ll begin to realize that real things cost real money. Then when he’s slightly older and he’s “earning” the money, he’ll already have the initial concept in his head and then he’ll understand that real money takes real work to come by.

   I think real money from the beginning will help my wife and me create building blocks as we teach him (and our future children) about finances.

   Just my two cents anyway.

3. paidtwice

   19|Sep|2007 3

   I guess I’d say I have just started teaching my three year old about money, and we use real money. lol

   How does the piggy bank have a good rate of return?

4. David Robarts

   20|Sep|2007 4

   I think that both a token economy and real cash have their place. I picture a token economy working within the home with children being “paid” to do chores, but also being expected to “buy” privileges (and perhaps have a recurring room & board bill). Even with the home economy operating on “tokens,” kids could receive an allowance and be taught to put away part of it into a savings account (I remember going to the bank with my 10% savings as a kid).

   I don’t understand why you think a token economy is more likely to teach kids to “hoard for a little while and then spend everything in one go.” Please explain more about how you see a token economy operating. I’m also curious about how you might teach about loans to your kids.

5. mark

   20|Sep|2007 5

   Paidtwice- Piggy banks have great rates of return when Dad secretly empties his loose change into them

   David- A token economy teaches kids to be hoarders when you take into account the instant gratification drive that everyone has before they start maturing (That’s why it’s rare to see adults throw tantrums). By the time a child is old enough to really utilize a token economy, their reward could be cash to serve the same purpose. Loans might come into play when they reach middle school age and start wanting to go out places and buy things with their friends. The issue here is that I don’t think I would be able to charge my children interest, and I know for a fact my wife wouldn’t. So they’ll probably learn about loans with student loans and auto loans like most people.

6. Andrew

   20|Sep|2007 6

   The question is whether you want to teach your kids about loans in a positive or negative manner. I would be extremely happy if my children never had a single loan in their life.

   My wife and I are hoping to get our children to the point where they won’t want a loan for anything other than a mortgage. It’s unrealistic to expect them to pay cash for a house (I wish I could), but not unrealistic to expect them to pay cash for a car. Lots of people do that. My wife and I are planning on investing money now so when my oldest son is college-age, we have enough to pay for his college so he doesn’t need loans.

   I think that’s a better solution.

7. Real Estate » Token Economy vs. Real Cash

   21|Sep|2007 7

   […] unknown wrote an interesting post today onHere’s a quick excerptThis is a question for readers who have children. How soon is too soon to start teaching children about money? When you do start, which is better teaching them with play money (token economy) or real money? Why? … […]

8. mark

   21|Sep|2007 8

   Thanks for the Additional insight Andrew.