It’s never too early to start your children on the road to financial freedom. Although the dollar amounts involved may be tiny, children who learn to control a small amount of money have a significant head start in adulthood over those who have no financial training. It’s not the dollar amounts that matter; it’s the life lessons learned that make the difference.

As a financial advisor, I’ve seen the advantage kids have when parents take responsibility for teaching their children about money. I gave a great deal of thought to the principles I wanted to build into my kids’ "financial DNA" before they hit adulthood.

The four pillars of money management

In teaching money management, it’s critical to begin with the end in mind and to ask yourself, What core principles do I want the kids to learn? For my own children, these are the four pillars my wife and I decided to establish as the foundation for their approach to money:

  1. Generosity – the habit of giving back
  2. Saving – the habit of setting funds aside for the future
  3. Freedom – guilt-free spending (when appropriate)
  4. Thrift – spending wisely and with an understanding that we can’t have everything we want, and don’t need everything we see

To teach these four pillars of money management, we encouraged each child to practice the 10/50/50 rule.1

How the 10/50/50 rule works

First, our children were expected to set aside a tithe – one tenth – to give away. (At the start, we made sure their income was an easy number to deal with, to help make money-management principles simple to understand.) If they received ten one-dollar bills, at least one dollar needed to be set aside to be given back to God, whom it all came from in the first place. The remainder of their income was divided in two:

  • One half was placed in their "long-term savings tin" and could only be spent with our permission. When the children grew older, this money was deposited into their savings and/or investment accounts.
  • The other half went into their "spending tin." They could spend this money at their own discretion, with no permission required. This half later became their chequing account.
  • If they chose, the children could put extra money into their long-term savings tin, but adding extra did not eliminate the requirement to obtain our permission to spend it.

Impact over time

By starting at a young age, the 10/50/50 rule became our kids’ automatic approach to money management, even as they obtained their own jobs and transitioned from using savings tins to bank accounts.

At first, as with everything, we had to be involved every time they received money. We would count off the dimes, quarters or dollars with them and divide it – first carving off a tenth and then splitting the remainder 50/50. But as time went on it was easy to back off. The math wasn’t difficult and we trusted them to do the right thing, periodically asking them for confirmation that they were keeping on track.

The 10/50/50 strategy allowed the children to take ownership of their giving and their saving, and honed their decision-making skills.

It gave them the freedom to spend if they chose, and gave us greater freedom to say, "We’re not paying for that particular item; if you want it, you’ll have to pay for it yourself." It was interesting to watch how this approach evolved as the children grew older, got part-time jobs and developed bigger savings goals such as paying for a portion of their post-secondary education.

Focus on giving and saving

A positive yet unintended side benefit of this approach was that it taught our kids not to be legalistic about money management. At times, particularly when they were older, the money didn’t divide easily by 10 and then two. Rather than making change to get everything down to the penny, we would encourage them to give extra and/or save extra, taking the emphasis off spending and focusing instead on giving and saving.

As a side note, we did not pay our children an allowance. They earned money by doing chores, but were paid only for work that went above and beyond their regular household chores. Most of their responsibilities were considered "doing their part" in sharing the family’s workload. We paid them only for extra work, such as shovelling snow or raking leaves.

There are many ways to teach your kids about money, and our approach may not be what you’re after. Our three children aren’t all adults yet, so we’ll have to wait a while longer to see if the end results are truly what we hope for, but the beginning signs are good. I share this with you in hope that it will inspire you to think about how you want to teach your kids about managing their finances.

Arnold Machel is a chartered financial planner in White Rock, BC. Questions and comments can be directed to him at [email protected], or visit his website at

1. I call this the 10/50/50 rule, but any mathematician would correctly point out it’s actually a 10/45/45 rule. I found that our kids easily understood one tenth and a half at a very young age, so I chose to call this the 10/50/50 rule.

Arnold Machel is a chartered financial planner in White Rock, BC. Questions and comments can be directed to him at [email protected], or visit his website at

© 2011 Arnold Machel. All rights reserved. Used with permission.

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