“Money doesn’t grow on trees” is a common saying, dating back to the 1800s.1 We all understand the meaning as, “you don’t just get money without working for it,” and we use it to teach this to our kids. The only issue is, this phrase doesn’t explain where money comes from, it only explains where it doesn’t come from.
It doesn’t help to tell your kids how something doesn’t work, unless you tell them how it does work. So some explaining is in order. We need to teach our kids where money comes from… so they understand why we aren’t dishing out every dollar they ask for.
Money really only comes from five places. Any way you receive money, it will fall into one of these categories. The first three are the most important for your kids to really grasp, but the last two are still important to know.
1. Money Comes From Work
Before kids understand any other place money comes from, they need to know it comes from work. In some form or fashion, there will be work involved to earn money. Teaching kids the value of work is valuable in itself.
When kids are young, they think money comes from the National Bank of Mom and Dad, because that is how money comes to kids at a young age. They either receive an allowance, commission, or are given money when they want to buy something. So as far as they know, money comes from their parents — it’s that easy.
Of course, we want to curb this idea that we are the bank, and that starts with instilling work ethic and grit into your kids. You work, you get paid. You don’t work, you don’t get paid. Let this be the first lesson your kids learn about where money comes from.
Show This to Your Kids
Let your kids work for their money. Create a system that pays them for the work they do, and doesn’t pay them when they don’t work. Don’t just give them handouts, give them money when there is a reason for it, like work, chores, or something else they’ve done to earn it.
2. Money Comes From Ideas
Ideas lead to money. Ideas lead to businesses, innovation, and even investing, which we’ll talk about in the next point.
Ideas themselves don’t produce money, but kids need to know that ideas can definitely lead to money. Don’t squash your child’s will to dream big. They can go on to achieve greatness in many ways. Don’t let any small thinking you may have hinder their big thinking.
Show This to Your Kids
It’s good for kids to keep thinking and getting ideas. It may start with your kids wanting to open a lemonade stand, and later flourish into your kid managing a lemonade stand, and then owning multiple stands. That’s just one example of how ideas can lead to more money, and how kids can have bigger ideas than we often give them credit for.
3. Money Comes From Money
Money has the potential to make more money, but it doesn’t happen automatically. Invest $1,000, and it could turn into $2,000, but it could also turn into $2. This is where risk vs. reward comes in — another important concept for your kids to know.
Money sparks new businesses every day. Some are successful, some aren’t, but money was required to start the business.
Show This to Your Kids
Show your kids how money can make more money. Start with a conservative investment, and let them see how the interest accumulates, even if it’s just a little interest. The “risk vs. reward” idea spans every area of personal finance… the idea that nine times out of ten, the higher the risk, the higher the potential for reward, but not always.
4. Money Comes From People
Money comes from people in many different ways. Charities are funded by people. Churches have money because of the church members. Simply put, some people have money and things because other people gave.
The idea here isn’t to teach your kids to look for handouts. It’s quite the opposite. Teach them some people will only have money because they (your children) gave it to them. Due to life circumstances, location, or a combination, gifted money may be the only money some people ever see.
This isn’t just about the money, but about the needs provided for, and the things given. It’s key for your kids to understand the link between them giving a $5 bill (of their own) away, and someone else getting into an efficiency apartment or putting food in their refrigerator.
Show This to Your Kids
Take your kids to your church, or a charitable organization, and let them give their money. Then, show them what the church or charity does with the money, and link it together with the money they gave. They need to understand their money was at least a small part of making whatever big thing the organization does happen.
5. Money Comes From Luck
Finally, while this typically isn’t the best way to try to get money, it does in fact come from luck sometimes. Think: lottery, gambling, finding money, etc.. Of course, in certain cases that appear to be luck, such as finding $20 on the ground, it could merely be the work of God in your life, but I doubt God helped you win that scratch-off.2
It’s a fact: sometimes money comes from pure luck. Your kids need to understand this, because they’re going to have questions when this happens to other people. It’s not just gambling and lottery tickets, it could also come in the form of an unexpected inheritance, or being at the “right place at the right time.” While I definitely acknowledge God’s work in many of these circumstances, we have to admit luck is a factor — at least, a small one.
Show This to Your Kids
No, you don’t need to go buy a lottery ticket and watch the Powerball tonight. This is something best explained to your kids. Show them how the lottery and gambling works (you don’t have to engage in it to show it to them). They’ll think it’s fun (and funny) when you explain to them how you’re more likely to be struck by lightening or to have identical quadruplets than to win the lottery (seriously, you are).3
The Importance of “Where”
Kids need to know where money comes from as early on as possible. Once they understand it’s something that is worked for and created, they can start to develop their own ideas for how they’ll acquire money.
The idea isn’t that your kids should grow up as greedy money-chasers, always looking to make a buck. It’s that they can apply the concept of how money is earned to whatever they want to do in life. Money shouldn’t be the main factor in deciding what they want to be when they grow up, but with this newfound knowledge, they can at least know how money relates to it.
Will they earn money from a job? Will they own a business? Will they own rental property? There are so many options, but the first step is understanding where money comes from.
Further Book Reading
- Teach Your Child to Fish by Holly D. Reid
- Make Your Kid a Money Genius by Beth Kobliner
- Money Monster or Money Master? by Norma LaFonte
- Moneybags: A Guide to Teach Your Kids About Money by Wendy Gillespie
Footnotes
- KYP Staff. (2019). Money Doesn’t Grow on Trees. Know Your Phrase.
- I’m not saying God wouldn’t or can’t cause you to win the lottery, $10,000 in Vegas, or a scratch-off, but He typically rewards good stewards, not gamblers.
- Bruce, K. (2019, May 15). 24 Things That are More Likely to Happen Than Winning the Lottery. MoneyMiniBlog.
