Tips for teaching kids about money

Although most parents want to protect their children, it is important that we teach our children about integral issues that will affect them for the rest of their lives. The more that children know about topics like finances and money, the more prepared they will be to make smarter choices when it comes to financial management. Talking to your children about money is essential in order for them to learn the value of a dollar and the importance of savings. If you are having difficulty broaching the topic of money with your children, here is a list of everything kids need to know about money.

The truth

The most important thing your kids need to know about money is the truth. If you are in a difficult financial situation, it is important that you remain truthful with your kids. Chances are children will recognize any tension or stress that their families are under. As a parent, it is your job to explain to them the reasons behind these tensions so that they can understand what is going on and so that they can learn to help.

Concrete terms

Kids need to learn about money in concrete terms. Younger children in particular may not yet be capable of grasping abstract concepts live “savings” or “credit.” Therefore, it is important that parents explain finances to their children in concrete terms. Answer all of your child’s inevitable questions about the family’s situation and overall security. Let them know that less money for the family means that you’ll have to be more creative financially. You may have to make some sacrifices, but you won’t go hungry or lose your home. Be sure to reassure your child that no matter what changes are necessary, they will still have you.

You can also teach your children about money by providing them with visual and tactile examples. For instance, if you want to teach your child about saving, allow them to accumulate change. At the end of every week or month, count the change and see how much his or her “savings” have grown. Being able to see their coin collections grow will provide children with a concrete example of an abstract concept like savings.

Want versus need

A fundamental aspect of financial management that children need to understand is the concept of “wants” versus “needs.” Your child may think that he or she needs a toy, but it is crucial that you teach them the difference between desiring a luxury item and actually needing something such as food to survive. Ask your child to make a list of things that they need and make a separate list of things that they want. Go over the two lists and help them to understand when some items are misclassified. Let them know that you will make it a priority to cover every item on the “need” list as a family. Only after all needs are met, will you be able to work towards obtaining the “wants.”

The value of a dollar

Another important concept that your kid needs to know about money is the basic notion of the value of a dollar. Kids may be able to understand that some things are more expensive than others, but they may not be able to understand the amount of effort that is required in order to earn and accumulate money. Do not make the mistake of buying everything that your child wants on a whim. If he or she wants something that isn’t on the “need” list, teach your child what he or she can do in order to earn money and pay for these “extra” luxuries. It is never to early to start an allowance for your child, just be sure the amount that you are doling out is age-appropriate, and that your child is doing something to earn the money. In other words, create a system that allows your child to earn a certain amount when he or she accomplishes different tasks around the house. For example, doing a load of laundry would earn them $5.


As your children get older, you can also increase allowances for the purpose of learning how to be responsible for paying expenses. For example, if you pay your teen’s cell phone bill, find a way for him or her to “earn” enough to cover the bill. Let them know when payment is due. If they are unable to pay the bill, their cell phone service gets cut off. This will teach your children the importance of budgeting. It will also teach them how to prioritize so that they learn to pay bills first before being able to spend any additional funds on other purchases or activities (like going to the movies).

How good it feels to be financially independent

Many parents do not recognize how important it is to teach their children about financial independence. However, every kid needs to know how good it feels to be able to earn and manage his or her own money. If your child is doing a good job managing his or her own money, and is old enough, consider encouraging him or her to get an after-school or summer job. Once kids start working for money and have to answer to someone other than a parent, they will likely begin to look at finances in a whole different light. Recognizing how difficult it may be to earn just a couple of dollars will give them a new perspective on what items are worth spending money on and what items are not worth spending on.


Aside from learning the value of a dollar, kids also need to know about savings. When you are teaching your children about money management, it is crucial that you include lessons on growing money, and not just spending and bill paying. Explain to your children why savings are important. If you have a financial advisor, taking your kids with you to a meeting so that they can understand the basic mechanics of savings plans. It is important that children recognize the cost of things like retirement and the mechanics of 401(k)s, stocks, bonds and other investments.

Regardless of your financial situation, it is important that you teach your kids about money. Whether your family has plenty of funds to cover the next seven generations, or whether you are struggling to make it by from paycheck to paycheck, it is crucial that children understand the mechanics of money. After all, money makes the world go round.