It is difficult to advocate for a particular method of teaching children about money because, I would say, a good many parents don't know about it themselves. Rather they know and believe different and incompatible things. Therefore any idea would get some people complaining that it's exactly the wrong lesson. I'll start by dividing the people into groups:
Some view money as ever-scarce, hoarded by lucky, stingy SOBs who pay triffles for long and inconvenient hours. Others view money as the result of work: They'll have enough as long as they work diligently, save for big purchases, and live within their means. Still others view money as abundant, spraying everywhere if the right ideas and resources can be brought together. Some people love the security of a job, others believe that a job is inherently insecure and would rather be self-employed. Some people think you need to work to make money, others think you need money to make money, and still others think it takes other people's money and other people's labour to make a real profit.
Whatever you believe, this is as much as you can teach your children. I am an entrepreneurial person and have fortune-500 experience so I know quite a bit about how money works, but I'm no Donald Trump and can't advise my children on how to make billion dollar deals, although I hope to someday soon. My main focus right now is to teach them how to turn effort plus an opportunity into money; how to recognize value and capture a piece. I definitely don't want to start with teaching them how to simply put in some time or do a "job" in exchange for a wage.
I struggled to find a way to get them into some money, without using the basic yet inherently flawed method of paying them an allowance or payment for chores (payment has been proven in numerous studies to be a demotivator and I don't want my children saying they won't help with the housework unless they're paid). I realized that we had quite a bit of money in our old milk jugs, juice containers, and bottles, each of which get up to 25 cents in refund from the bottle depot. If the children were interested, they could round up those jugs and sell them. After I explained the opportunity I was thrilled to find out that they were indeed interested.
A few weeks ago we went for the first time and the kids got seven dollars. With that seven dollars we went garage sale hunting and the kids were able to get themselves a couple of toys and a cool lamp. It was awesome. That one time was all it really took. The kids rounded up the bottles on their own this week into a box in the garage. They don't really understand their business yet, but they are still very young (7 years and 5 years). It won't be long before they know how much the different bottles are worth. I'll milk this idea until they start taking a lot of interest in prowling around the bus stops and trash cans to find other people's bottles and cans.
The bottle picking business is a perfect, and moderately complex real-life business. Here are some business and money-making concepts the children can learn:
1) It's a bit like fishing, mining or forestry -- The children have a resource in the bottles that they can harvest and deliver to a market. When the bottles are gone they have to wait until more bottles are created. It's a real type of business that the parent can draw parallels to.
2) Children can reconcile a complicated transcation -- At the bottle depot there is a fairly complicated transaction. Much more complicated than a lemonade stand for example. Bottles are classified into many types, each of which carries a different payment. The children should monitor that the depot worker counts and values the bottles correctly.
3) Children can learn to forecast -- If they know how much each type of bottle is worth then they should be able to calculate how much the load will yield.
4) Children can learn to optimize -- There is no point going to the depot with just one bottle. The children can develop a feel for how much is a "good" load and when it's worth it to make the trip.
5) Children are incented to think creatively -- Even though I will stop them from doing it, at some point they will spontaneously realize that a can lying on the ground is worth five cents. Step 2 is they realize that if our house is worth $7 every couple of weeks, so is every house. I long for the day they ask me to drive them around the neighbourhood, or better yet, ask me to help build them a super-wagon to druck bottles away from other people's garbage. Again, I will redirect them to a different business idea at that time, but it will be a wonderful day when they ask.
6) The rewards are perfect -- If the kids don't box up the bottles and ask to be taken to the depot then they don't get money. It's perfect. No arguing about allowance, how much money to pay for how much chore. They know exactly the value of their efforts and they can decide how best to conduct themselves.
What to you think ... Pay for chores? Lemonade stand? How do you teach your kids about money?