How to teach your kids about money

Teaching kids about money is so important. I am forever grateful my dad taught us about money, budgeting etc. He gave us pocket money which we worked for, we were involved in deciding how much different chores were worth, what chores we had to do and he even showed us the family budget so we saw what expenses there were and how far his wage needed to stretch.

Of course, it didn’t stop me from being a demanding prat at times, expecting them to buy me things or take us on extravagant holidays/send me on an exchange student program etc. It did help me manage my money better when I started to earn it.

I am now in the position where I am teaching my kids about money. They understand that money gets you stuff, but that is about the extent of their understanding at the moment. Since I am still in the teaching process, I don’t feel I can really share how to teach your children about money. I can share what my parents, did and what others have done. What works for some might not work for others, but you need to teach your children, because most kids learn their money/spending/saving habits from their families.


1.)  Teach them money needs to be made – You cannot spend money you don’t have and to get money you need to earn it. You can teach this by explaining what you do for work or how your family gets money.

2.)  Have an allowance – Growing up we had to earn our pocket money and it was not through doing chores that were expected such as making our own beds or keeping our rooms clean (ha! I was not so good at that one). We had to do things like mow the lawn, wash the car, chop wood – yes we had a wood fireplace and I remember chopping wood with the axe around 9 years old. I was younger when I mowed the lawn. Kids are fully capable of learning how to do all these things. I believe we are too soft a lot of the times on our children, or we just don’t want to teach them because it is quicker for us to do it ourselves.

When you pay the pocket money, pay it in change instead of a single note to help encourage them to split up their money for savings, spending and maybe a long-term goal such as university/a car etc.

3.)  Open a bank account and show your children how they can and should save their money. Encourage them to save 50% of their income. I posted before about my motivation wall and in that post there is a graph I drew to track our debt repayment. A visual like this, combined with a bank balance can be a great way to teach children about saving money.

4.)  Be open about money – discuss what you do with yours, budgeting, why and how you save, why and how you spend etc.

5.)  Set goals and encourage your children to set goals. I have posted about goal setting before here, here and here. For a child they might want to save up for a new bike or gaming console, which can seem small to you, but is huge to them. Help them break down how much they need to save and how they can do it, plus set sub goals along the way, such as $20, then $40 then $60 until they reach the amount they need.

6.)  Teach at the supermarket – if your kids come with you when you do the groceries, use it as an opportunity to teach about money. You can work out if certain items are good value or not, whether you have enough money for things, how to plan your shopping before you even go so using a budget, a shopping list, menu plan etc. Often, when we are young helping with these sort of things and having a say over what meals the family eats can be fun and exciting. When kids enjoy things, they are more likely to absorb the information, so make it fun and incorporate them and their opinions into these sort of decisions.

7.)  Encourage your kids to make money

Aside from doing chores around the home, when we were old enough we got a catalogue run, our family had garage sales and we were encourage to find ways to make money. There are so many things kids can do to make money, it is simply a matter of how much do they want to do it and what can be done where you live.

I have quite a few ways kids can make money listed in my book, but also have this post about things I did to make money as a kid up until now.

8.)  Let them make their own mistakes

As hard as it can be to watch our kids spend money on a piece of junk, they need to learn by their own mistakes sometimes. If you have taught them about money and discussed why it might not be the best purchase (in a non-condescending way), but they still want to buy it, it’s their money and their choice. You need to learn when to step in and when to step back.

9.)  Teach them to avoid debt

It is so easy to get into debt these days. Teach your children about debt and why it should be avoided. Once they have a basic understanding of money, you can begin to teach them about it. An easy way to do this is if there is something they really want you can use it in an example.

Say there is a toy and it is $100, but they only have $10. That means there is $90 needed. They could borrow the money, but it will cost them. Pretend they borrowed the $90 and there was a 10% interest rate charge on that money.  Pull out real money to demonstrate this as it is more effective. So 10% of $90 is $9. Now, if they pay it back in time, it will be $109 they paid for something worth $100. That doesn’t sound like a smart move. But if they don’t pay it back in time, they could end up paying a lot more than $109 for the toy.

You get the idea. Use visuals, real money and a toy are a great way to do it. Explain how much harder they will have to work to get the extra money to pay off the debt. This sort of method is a great way to reinforce savings and how you can earn interest on your money, instead of pay interest if they handle their money well.

10.) Have regular discussions about money

Teaching your kids about money is not a one off event. It is a continual discussion throughout their lives. Their needs, desires and understanding change over time, as does what you can teach them and your financial situation. Be open and willing to share your knowledge and experience with your kids.


Another thing my dad always did was he had numerous books we could pick up and read at any time. He encouraged it, and encouraged discussing them. I was 13 when I read The Richest Man In Babylon and I doubt I would have ever read it had my dad not had it on our bookshelf.

You are the one who is supposed to teach your child about money. Don’t leave it to the schools. How did you teach your kids about money or how did your parents teach you about money?

5 thoughts on “How to teach your kids about money

  1. Great post! I find the hardest thing for me to do is #8. It is so hard for me to see my son mess up and know he will have to deal with it later. I’m still learning not to rescue him. BTW…Found you through the Ultimate Blog Challenge!

  2. Well this is really important and I can say that parents should definitely be aware how to teach their kids how to hold and spend money so when they grow up, they will be more familiar and wise with it..

  3. It’s been a good thing to teach our children to be thrifty and how to save money for their future. But as much as possible I don’t give my daughter even a penny. She’s only 3 and I don’t allow her to hold money in any amount.

  4. We recently started giving our 4 1/2 year old daughter pocket money for doing her jobs. She has three main jobs that she does, making her bed, setting the table and packing up her toys at the end of the day and she can also earn extra for other jobs she does. She earns 5cents for each job and at the end if each day before she goes to bed we tally up her days pay. We use a calendar and put a sticker on for each job that she does and then on Saturday we add up the stickers and she gets paid in 5cent coins for each job. We chose these jobs as we thought it was something she was capable of doing and things we thought were important. It seems to be working so far as she chooses something she wants to save up for, usually a toy around $10 in value and this gives her incentive to do her jobs. Sometimes we still get tantrums when she doesn’t want to do something and we just explain that if she doesn’t do it she won’t get her money for that job. My question is should I be giving her different jobs then the chores of making her bed and tidying up? These are things I would expect of her as she gets older but now I am happy for it to remain just a job for money.

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