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4 Tips for Teaching Kids about Money


Lifelong financial responsibility begins at a young age. Wise parents start teaching their kids how to handle money from the time the children are old enough to understand budgeting principles. A few basic guidelines are often enough to help children understand how to manage income and savings through adolescence and into adulthood.

Follow a Budget

Kids should be taught how to manage money before they begin to handle it. Starting with an allowance or casual earnings from lawn care and babysitting, they should know what to do with their income before they receive it. An effective plan typically allocates a certain amount for discretionary spending, such as fifty percent. Another portion should go to savings, perhaps short-term and long-term. Many families encourage kids to give a third portion of their earnings to charity for religious purposes or charitable contributions. As kids grow into their teen years and get part-time jobs, the budget can be adjusted accordingly. Some parents train their children to take on more personal financial responsibility when they get a job, such as paying for a cell phone plan or car insurance. This gives teens a taste of real-world finances.

Make Responsible Purchases

While children should be able to buy fun things with part of their earnings, it is up to parents to teach them how to make wise purchases. Frivolous playthings that break easily or cause mischief should be discouraged. Creative activities like art projects or building kits are a better use of children’s earnings. Parents can also use shopping ventures to teach children about the advantages of discount shopping or coupon use. Learning to become frugal while young can become a useful lifetime habit.

Watch Savings Grow

Establishing a passbook savings account or a youth-oriented limited investment plan is a great way to help children learn to save money on a regular basis. Watching savings grow from ongoing contributions and possible interest feeds their excitement and encourages additional savings in the future. Periodically checking the balance for interest or dividends makes the sacrifice more meaningful and teaches character values like patience and persistence. Many kids who learn the joys of saving money while young grow up to become savvy financial managers.

Help Others

As children begin to appreciate the empowerment that comes with effective money management, it is important to balance monetary control with the goal of sharing with others in need. This may include options such as donating to a place of worship, giving to a local charity, or assisting a community cause like a family in need after a natural disaster. When kids can physically visit real places and literally hand over their hard-earned money to a meaningful cause as opposed to simply mailing a donation, they begin to understand the importance of giving to others who may be less fortunate or have a special need.

Conversely, children who are handed money randomly and allowed to spend it as they wish often face more challenges in learning how to manage money as adults. Prudent advice from parents and grandparents to kids at a young age provides children with valuable knowledge that will serve them for years to come.

Parents who set a prudent example of good money management provide added support to their children’s understanding of finances. Talking frankly about age-appropriate money issues such as bill-paying and credit cards will ensure that children learn what they need to know from a responsible adult rather than a careless friend. Money is a serious subject that children need to learn over several years’ time. The better prepared they are for the real world of finance as adults, the more likely they will be able to successfully navigate the economy.



  1. Leading by example is the number one way you’ll end up teaching your kids to behave responsibly when it comes to money. I suppose this probably applies to many other areas as well, if you really think about it!

  2. I LOVE this! Its so important to teach our kids and I echo Money Beagle– gotta lead by example! We are blogging about digging ourselves out of $600k of student loan debt. Both of us were fairly financially illiterate before we started our journey and so we really hope we can pass on our tips, tricks, and newfound behaviors to our son. Thanks for the post!

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