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Teaching Your Kids About Money

August 17, 2016

Raising financially savvy children involves teaching them a variety of aspects from budgeting to planning, earning and saving.  Besides giving them an understanding of the value of a dollar, teaching children about fiscal responsibility helps prepare them for life in the real world.  Money management is a vital life skill and it is never too early to teach kids about economics.  Many parents wonder how they can teach kids about money.  While many books have been written on this subject, with this report I want to share some key illustrations, stories and some web sites that can be solid references in your teaching journey. 

A real life story.  Steve S. created a unique allowance system to help teach his three children, ages 10, 12 and 14, about money.  He and his wife dole out $5 plus 50 cents per year of each child is (For example, the 10-year receives $10.)  Then each child has a quarter of his or her money deducted for “family taxes,” and they have to put 15 percent into a savings account.  An additional 10 percent goes toward giving.  Each child can then decide how to spend the remaining money. 

“It’s a mechanism for teaching them the value of the dollar so they can decide if they want something or not.” Steve says.  Each child can also use the money to purchase lunch at school, although his children always opt to bring food from home instead.  “I can’t remember the last time a child bought lunch,” he says.  He estimates that in addition to teaching his kids about money, not paying for lunch will save the family about $5,000 per child through graduation. 

A book about how, when and why to talk to kids about money. The Oppositeof Spoiled, by Ron Leiber, is a book that provides a detailed blueprint for the best ways to handle the basics: the tooth fairy, allowance, chores, charity, saving, birthdays, holidays, cell phones, checking accounts, clothing, cars, part-time jobs, and college tuition.  It identifies a set of traits and virtues that embody the opposite of spoiled, and shares how to embrace the topic of money to help parents raise kids who are more generous, less materialistic and to understand the sound use of money. 

Teaching tips.  Day to day, as we live, we can use everyday events to pass along lessons to our kids.  Let me share some with you: 

  • Set an example. Little eyes are watching you.  If you’re slapping down plastic every time you go out to dinner of to the grocery store, they will eventually notice.  Set a healthy example for them, and they’ll be much more likely to follow it when they get older.
  • Show them stuff costs money. You’ve got to do more than just say, “That pack of toy cars cost $5, son.”  Help them grab a few dollars out of the savings jar, take it with them to the store, and physically hand the money to the cashier.  This simple action will do more than just a five-minute lecture.
  • Show opportunity costs. That’s just another way of saying, “If you buy this video game, then you won’t have the money to buy that pair of shoes.”
  • Give commissions, not allowances. Don’t just give your kids money for breathing.  Pay them commissions based on chores they do around the house like taking out the trash, cleaning their room, or mowing the grass.  This will help them understand that money is earned---it’s not just given as well.
  • Stress the importance of giving. Once they start making a little money, be sure you teach them about giving.  They can pick a church, a charity or even someone they know who needs little help.  Eventually, they’ll see how giving doesn’t just affect the people they give to, it affects the giver as well.
  • Give them the responsibility of a bank account. By the time your kid is a teenager, you should be able to set them up with a simple bank account if you’ve been doing some of the above all along.  This takes money management to the next level, and it will prepare them for (hopefully) managing a much larger account balance when they get older.
  • “Help” them find a job. Teenagers have plenty of free time---fall break, summer break, winter break, spring break.  If your teen needs money (and what teen doesn’t need money?), then help them find a job.  Who knew that working was a great way to make money?
  • Teach them the danger of credit cards. As soon as your kid turns 18, they will get hounded by credit card salesman---especially when they are in college.  If you haven’t taught them why debt is a bad idea, they’ll run the risk of becoming another credit card victim.  Start teaching this principal as early as your kid is able to understand. 

Web sites for additional reference material.  Here are a partial list of web sites that you can use to help you prepare to teach your kids prudently and effectively: 


While much has been written about teaching your children on sound money management, this report just attempts to offer some tips and ideas that are practical, useful and are ones that you put into practice without a lot more research.  We continue to be dedicated to educating and serving our clients with extraordinary service, all the while being grateful for your trust and loyalty. 

Blog #90 – Ideas about Teaching Your Kids about Money