A recent BYU study finds experiential learning is best for children to develop financial responsibility. This study confirms the allowance experience I wrote about in my book, The No-Cash Allowance. Such a strategy works for parents and homeschoolers as a shared-family experience taking place in the home.

As a mom I believed it was my responsibility to teach my kids about money. I wanted them to learn more from having an allowance than I did. When I gave my kids money with responsibility and the control to manage it by themselves they were managing a child-size version of their future.

My children would own their money, make their own decisions, and learn that money wasn’t all for fun. I did not want to tell them what to do, because someday they would be adults with no one looking over their shoulders. This was going to be real life stuff.

I was so determined to teach them about money that I started when they were in pre-school, in the 1970s. My adorable toddlers were “adults in training” even if they were only three feet tall. As a result, my daughters had 13 and 15 years of experiential learning with their money before they graduated from high school. 

Once out of the nest, they went to college, never called home to ask for money, married, started their families, and now my grandchildren are learning the same experiential way.

Study emphasizes experiential learning

Family life professor at BYU Ashley LeBaron-Black, lead researcher on the study,  said she was surprised at how effective experiential learning was because that method largely hadn’t been noticed in any previous research. 

How effective can hands-on money management be? 

Here’s what my adult daughters wrote about their experience in the conclusion of my book.

When I try to tell people about the no-cash allowance I relate it to experiential education. Instead of learning from a textbook I spent my childhood experiencing the ups and downs of managing money for myself. I learned more from what I did than anything I might have been told. Abby, 15 years managing her own money

The system we used is perfect for helping children make the connection between cash and virtual money. And it wasn’t until later that I understood how the no-cash allowance prepared me to be a good money manager; as a kid, I just thought it was fun. I loved entering and subtracting money in my account book. It also made money more valuable because I had a lot of control over how much I earned and spent. Sarah, 13 years managing her own money

According to research from Cambridge University, money habits including the ability to plan ahead are formed in childhood before the age of seven. In addition, these early habits may be difficult to reverse later in life. Giving kids money to manage before Kindergarten is not too early.

Parents are best for providing experiential money practice

Managing money is a combination of knowledge and practice. Many parents don’t think they are knowledgeable enough about money to teach their children, but they are the best at providing practice. 

Parents simply need to do what parents do best to help their kids learn a new skill. Parents provide the money that allows the child to be responsible as they control their funds. As parents you encourage, commiserate, and praise them as they develop their money skill.

Remember that feeling the first time you let go of the bicycle and watched your child ride away. You know there would be bumps in the future. With money, your kids need to make mistakes so they gain wisdom about money choices. A $10 mistake by a kid is a gentle lesson compared to a maxed out credit card as a young adult.

Download the curriculum guide to see how this plan can help all your kids.

• Real Money: Learning about cash
• First Money: Ages 3–5
• Taking Control: Ages 6–12
• Ready to Fly: Teenagers

Is experiential learning working with today’s kids?

My daughters grew up with the no-cash allowance. Now their children are ages 11 through 18. When I asked them how their experiential learning is helping them teaching their kids about money today, here’s what they told me.

• Our kids don’t ask for money anymore
• We want them to have their own money so they can make their own decisions
• There are no conflicts about spending
• They have money awareness at an early age
• It was what I grew up with and know
• They are comfortable spending virtual money from the account where Mom pays and they subtract like a debit card
• We can negotiate shared expenses with them
• We have good conversations about money

Parents are amazed at the results

Parents, including financial professionals, who use the no-cash allowance tell me they are amazed at how capable their kids can be when they put them in charge of their money. Kids are really smart and can do this if we let them.

I suggest starting by talking with your kids, “This is your money. You are responsible for certain expenses. If you manage your money well you’ll have more to spend for fun. You are in total control. You will make good and bad decisions and sometimes wish you had made different choices. As your parents, we can offer advice if you want it but don’t look to us to bail you out. Learning to manage your own money is important.”

As your kids get older your school may offer financial literacy classes where your kids will gain important knowledge about money topics. However, schools can not provide money for the experiential hands-on practice to develop money management skill. Only parents can do that.

Parents, you are the best ones to start your kids on their financial journey. Let me be one of your guides. Check out these blogs for more about experiential hands-on learning about money.

• Jumpstart kids’ money education in pre-school for success
• Be amazed when you give your kids money power

ANNOUNCEMENT: The No-Cash Allowance YouTube channel will debut next to provide more information about kids and money in this ever-changing financial world. The videos are a great companion to the book.

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