Three Money Categories for Kids

Three money categories for kids

It is good for children to understand from a young age where money comes from and how it can be used.

Some books, for example Dave Ramsey and Rachel Cruz’s Smart Money Smart Kids, suggest that a young child aged 5–13 should have three money categories, and all income (rewards, pocket money, gifts) is split between them:

• Give – 10%
• Save – 20%
• Spend – 70%

In Finnish books I have come across a similar split, although for some reason the giving category has been left out. In Terhi Majasalmi and Camilla Tuominen’s Koululaisen Rahakirja (“The Schoolchild’s Money Book”) the categories are:

• Investment account – long-term saving and investing
• Dream account – saving for a shorter-term goal, such as a new phone
• Spending account – for everyday spending

In my opinion, the most important thing about these categories is that not all the money goes straight to spending, and not all of it goes to savings either. Everyone can think about the percentages for each category and adapt them case by case. A child learns patience by saving towards goals, and also learns that part of the money they earn can be spent. Learning to give is important too.