Back to the Future: Using Ledgers to Teach Kids Money Management Skills

Photo (cc) by peagreengirl

A couple of years ago, I conducted a fun experiment to find out just how much my kids knew about money: I invited them to apply for a free loan from the Bank of Dad.

Of course, that required the obligatory loan interview. To recap: The scientific results showed my kids had a lot to learn about personal finance and money management.

As a parent, those are crucial topics I want them to master by the time they start their own lives. So to help get them there, I taught them the art of bookkeeping.

What is bookkeeping, exactly? Well, besides being the only word in the English language that’s spelled with three consecutive sets of double letters, it’s the act of chronologically recording income and expenses to understand how much money is available at any given time.

For managing personal finances, a single-entry system such as a checking account register is all you need. I taught my kids to use a slightly modified system that’s no more complicated but better geared for their needs.

Today, most of us do our bookkeeping on spreadsheet software, but I insisted my kids go old-school. They use a good ol’ composition book (the kind you used in junior high) as a ledger. Here’s how it works…

Instead of getting a fixed allowance each week, my kids have a list of chores. Some must be done daily, others less often. Each chore has a “wage” assigned to it. For example, making the bed is worth a quarter, pulling weeds is worth two bucks, and so on.

Every time the kids complete a chore on the list, they enter the activity into their ledger book in black ink. Then they have the entry approved by either me or Mom, and we sign our initials. The signature not only ensures quality control – for example, is the bed really made or are the covers just thrown over the top of the bed? – but it also guards against phantom entries being recorded into the books.

My kids have their own ledgers they’re responsible for. Each composition book is divided into six columns as shown in the example below…

To avoid any disputes between employer and management, a list of their chores and the corresponding pay for each task is listed inside the front cover of their ledger books.

The ledger gives the kids an up-to-the-minute accounting of their current financial situation. When the kids are ready to make a withdrawal, they write (in red ink, of course) the amount of money they want in the ledger’s debit column. The kids are then promptly paid by the Bank of Dad and are asked to sign their names on the ledger sheet to verify that they received the money.

To encourage saving, the kids are given a 25 percent bonus on the last day of each month on the net money saved for the month, after withdrawals. Of course, this bonus is recorded in the ledger as a “Savings Bonus.”

The kids are also permitted to withdraw more money than they currently have in their account. In essence, I’m permitting them to take a loan from the Bank of Dad. To discourage going into debt, the kids are charged 25 percent interest on their outstanding negative balance. The first interest payment is applied on the last day of each month, starting with the first full month their balance is “in the red.” Depending on when they take out the loan, they could have as long as 60 days to get their balance into positive territory before having to make an interest payment.

And that’s all there is to it. You can modify and make any rules you want in starting your own ledger project for your kids.

My kids eagerly accepted the use of ledgers and have since become adept at simple bookkeeping. The best part of this system is that, because bookkeeping requires nothing more than basic addition and subtraction skills, it can be done by kids as young as 6 or 7 years old. If you’re like me and want to take an active role in their personal finance development, I urge you to give ledgers a try!

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
3 Ways to Downsize Your Life to Save Money, Time and Stress
3 Ways to Downsize Your Life to Save Money, Time and Stress

Downsizing can cut the bloat in your finances — and give you more free time and less stress.

33 Home Upgrades That Cost Less Than $100
33 Home Upgrades That Cost Less Than $100

A little money goes a long way with these imaginative projects. You can do most of them yourself.

The 5 Worst Home Upgrades for the Money
The 5 Worst Home Upgrades for the Money

These home improvement projects basically never pay off.

7 Surprising Benefits of Staying Fit in Retirement
7 Surprising Benefits of Staying Fit in Retirement

Improving your overall physical health is just one reason to stay active after 50.

Prepare to Pay More for These 31 Drugs in 2021
Prepare to Pay More for These 31 Drugs in 2021

More than 700 prescription medications have seen price hikes so far this year. Here’s a look at the worst.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Vacuums from this brand can last a half-century, if not longer — and they’re hot on the resale market.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

36 Things That Will Be Obsolete Soon
36 Things That Will Be Obsolete Soon

The writing is on the wall for dozens of things we have grown up with.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

8 Federal Income Tax Breaks for Homeowners
8 Federal Income Tax Breaks for Homeowners

Some of these deductions and credits are available to a wide swath of homeowners.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

17 Surprising Things You Can Sell for Extra Money
17 Surprising Things You Can Sell for Extra Money

You probably don’t realize these items are worth decent cash.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

10 Types of Retirement Income That Are Not Taxable
10 Types of Retirement Income That Are Not Taxable

There are lots of things Uncle Sam can’t touch — so long as you play by the rules.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

6 Reasons You Should Stop Hiding Cash at Home
6 Reasons You Should Stop Hiding Cash at Home

Stashing money around the house is anything but harmless.

These 5 States Are the Most Expensive Places to Retire
These 5 States Are the Most Expensive Places to Retire

If you expect to have modest retirement income, you may want to avoid spending your golden years here.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.