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How To Teach Your Kids About Money

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Too many adults these days have clearly missed fundamental lessons about personal finance. In the U.S. the average household has $15,799 in credit card debt. According to the FDIC, 43% of American households spend more than they earn.

I suppose living beyond your means can be pretty fun, certainly more fun than living on a strict budget, depriving yourself of things you want. That is until the credit runs out and you can’t keep charging your debt to new cards.

Then you end up with collection agencies after you, face possible foreclosure, and cause tremendous damage to your credit. This isn’t the future I want for my children.

Pink Piggy Bank On Top Of A Pile Of One Dollar Bills

Guideline For Teaching Your Kids About Money

As parents, we have an obligation to our children to prepare them for a successful adult life by teaching them the skills needed to make good choices—morally, physically, and financially. Financial lessons are not hard ones to teach, you just need to have a clear idea of what you want them to learn. Here’s a guideline to help you focus on some concrete ways to cover the fundamental money knowledge every child should have.

  1. Pay them an allowance. If you want your kids to understand that they will have to work for a living, make them earn their allowance. Personally, I don’t like to pay the kids for things I consider to be their personal responsibilities (e.g. making their beds, putting their laundry away, cleaning their rooms). Instead, they earn their allowances from the tasks that contribute to the proper running of the household (e.g. vacuuming, dusting, weeding, mowing the lawn).
  2. Set up a savings account. Many banks offer special savings accounts for children that incentivize saving. I know some parents offer personal perks to their children to encourage savings, like matching contributions to the account.
  3. Make them pay for luxuries with their own money. Kids cannot learn the value of money if they never have to part with theirs or if they aren’t forced to budget and make choices. As adults, we don’t get to have whatever we want and sometimes can’t afford things we need. We have to figure out how to allocate our funds so that we can pay for the things that are most important to us. The sooner children learn this, the better their financial habits will be for the rest of their lives. If they have an expensive item they’d like to purchase, help them establish a budget and savings plan.
  4. Involve them in your shopping trips. At least once in awhile, let your children help you with your shopping. Explain to them why you choose one product over another (e.g. because it is less expensive, worth a little extra because of quality, not your usual but is on sale today).
  5. Encourage charity. Just as your kids won’t learn to budget until you teach them, they won’t learn to be charitable without your guidance. If you donate money at church, encourage your kids to add a small amount to your contribution.  Before birthdays and holidays, I have my kids go through their belongings and choose 3 items to donate so we can make room for the new things they will be getting.
  6. Let them make their own financial decisions. No matter how much you disagree with your child’s spending choices, don’t try to change them. Would you rather your child make a bad $5 purchase now or a bad $5000 purchase later in life? Allow them to make mistakes while the stakes are low that way they will make better decisions when they are older. If they seek your advice however, by all means weigh in and enjoy this brief period when they are listening to you!
  7. Teach them to reassess their finances on a regular basis. Teach them early the importance of evaluating their savings and spending to help them develop these habits. When they’re little, have them practice making change. As they get older, when you sit down to pay bills or balance your checkbook, encourage your child(ren) to take stock of their finances and review their budget.

12 thoughts on “How To Teach Your Kids About Money”

  1. I like the idea of matching contributions to our children’s savings account. It would totally inspire them to make more deposits to get that parental counterpart.

  2. My kids are so funny! They come coupon with me so when they are out and about with anyone else, they tell them to go look for clearance sections, sales, and ask if they have their coupons!

  3. Really great points. We started talking about money with my kids as soon as they could understand (18 months!?). At three, they now pay the clerk. We make things age appropriate but I don’t think there’s anything the matter with letting them know that things cost money. We focus on the “extras” and not the necessities (food).

    Besos, Sarah
    Blogger at Journeys of The Zoo

    • Experts do recommend that you start these lessons early. Wow! 18 months? That’s impressive. Although I believe my daughter would routinely ask, “Can we get this Mommy or is it too ‘spensive?” when she was barely 2. I don’t think she had much number sense at the time, but she did somehow comprehend that we couldn’t buy whatever we wanted. Kudos to you for teaching your kids early!

  4. Some great ideas there. I love how banks even have teen options now that you can oversee as a parent. I wish they had programs like that when I was a kid!

    • No kidding! I’m jealous of the perks on my kids accounts because their CD’s earn double the interest with no minimum deposits and short terms. I am glad that the bank provides incentives though so I don’t have to be the one bribing them to save.

  5. What a great post. I know this is extremely important to instill in our children. Bill Gates knows its value. It helps them along the way to understand that they might not always have mom and dad to fall back on in life.

  6. My oldest is almost at the age of starting with chores. He already likes to help around. This summer he will start earning some money for whatever chores he is assigned. Those were all great tips…kids and grown ups should follow them!!

  7. I certainly agree with this! My son is 15 and is pretty responsible however he does want instant gratification on pay day. He is learning to budget and save but he is also learning hard lessons when he wastes his money. I think it is crucial to teach children about money.

  8. Agree with this! Our daughter has her own piggy bank and if she needs something, she’ll use her own money. Kids need to know the importance of money.


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