How to Teach Your Kids About Money


Teaching your kids about personal finance can seem daunting, but children can understand the concepts of working for money, saving, and buying necessities from a young age. In fact, teaching your children about money as they grow up is a good way to put them on solid financial footing.

Whether your child is 7 or 17, it’s never too early — or too late — to provide financial education and lessons. Use these five ideas to help teach your kids what they need to know about money.

Start Early

The earlier you start incorporating money lessons into everyday conversation with your kids, the better. Many children who don’t get to have conversations with trusted adults understand money in an abstract way. If finance isn’t a topic up for discussion and all kids see is cash coming out of the ATM machine, they’re not going to understand that you worked hard to earn that money.

Talk to your children about where your money comes from and how people work for money. It’s not given, and money itself comes at a cost — you exchange your time and effort to earn it.

The sooner you start explaining that money doesn’t come from trees, the sooner children will start to respect money and treat it as something to be conserved rather than squandered.

Get Kids Involved in Household Budgeting

One of the easiest ways to have your children understand finances is involving them in the household budget. This means involving your child when you plan your grocery list, go shopping for necessities and big ticket items, or discuss family vacations.

This step is crucial because it shows a whole host of connections, like the relationships between buying what you need versus what you want and how decision-making works in your family. It introduces children to the concept that money is not infinite, and families have to set priorities when deciding how to spend their money.

You don’t necessarily need to provide all the details, all the time. But allow kids a stake in the game: involve them in the decision-making process about where to go on your next vacation and how the cost of transportation, accommodations, and other necessities may impact the discretionary money you can spend on the trip.

Use Technology

For children today, technology is a huge part of their lives and shapes how they understand money. Money may not necessarily be represented by tangible paper bills and coins for your kids, but rather debit and credit cards. If you use digital tools to help you manage money, introduce your kids to the same thing.

Apps such as Kids Money will teach children to save for large purchases by entering how much they need for the item, how much money the child brings in (allowance, gift money, etc.), and how long it will take to save that amount. This is a great way to help children understand long-term savings plans. It can also help introduce the concept of delayed gratification.

P2K Money is another free app you can download that introduces concepts like budgeting, savings, and having a “wish list” to track savings goals. P2K is a much simpler app, which makes it easier for younger children to understand.

Encourage Entrepreneurship

If your kids are constantly asking for more money or want an “advance” on their allowance, it’s time to introduce them to side jobs. Tell your kids that working extra will allow them to make more money on their own terms so they can buy what they value.

Depending on the age of your children, direct them to things they can actually do. If you have a younger child, maybe they can help a neighbor pull weeds or do additional chores around the house.

A middle school or high school aged child can babysit or walk dogs for extra cash. Teenagers have even more flexibility, including the ability to start their own business (based on their talents and interests) or picking up a part-time job in the summer.

While not every child will be interested in this step, it’s a good way to show your children that they can change their financial situation by working harder or developing their talents and skills.

Help Them Understand Credit

“Teenagers and credit cards” can sound like the opening line to a horror movie for parents, but it doesn’t have to be that way. Even if you’re only getting started teaching your teen about money now, it’s still possible to teach them how to use a credit card responsibly.

This step requires a little more discussion with your older kids, as you’ll want to go over interest rates, credit scores, and not living beyond their means. One of the best ways to help your teenager understand credit is to give them a secured or prepaid credit card to use.

Continue teaching budgeting skills, but allow your teenager to potentially make and learn from their mistakes. Teaching your child about credit before they go off to college will provide them with the an informed and practical knowledge they’ll need as young adults managing finances on their own.

When teaching your kids about money, it is crucial to let them direct the conversation. Pay attention to questions your child asks about money, the household budget, or investing. Keeping the conversation open and honest means that if your kids have more questions, they’ll understand they can come to you for information.

Raising financially-literate children doesn’t have to be difficult if you follow a logical progression that allows your kids to gradually build their understanding. By starting early with the basics, you’re building a financial platform for your kids to build on to their teenage years and beyond.

Mary Beth Storjohann, CFP® is an author, speaker, and financial coach who takes a fun, no-nonsense approach in working with individuals and couples across the country, helping them make smart choices with their money.

Follow me