The Easy Way to Teach Your Kid About Money — and the Right Way

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Children start to understand abstract concepts as they grow out of their toddler phase. Money is one thing kids have trouble with the most, so as the parent, you have to play an active role in teaching them fiscal responsibility. There are two ways to approach the issue.

The Easy Way

The easiest way to teach your child about money is to start early. The earlier you begin to instill good money management habits, the more likely they will stick with your kid throughout their lives. Starting with simple concepts will also make the subject easier to teach, taking some of the burden off your shoulders.

When teaching your kid about money, emphasize three essential principles of money management:

  • Giving: helps your child understand that giving helps others
  • Saving: encourages them to set aside their money for later
  • Spending: once you spend your money, you can’t get it back

Start with a jar or piggy bank so your child can collect money and see/hear it building up. This money will be their first allowance. If you want to use this tool to its fullest potential, consider using three piggy banks for each principle.

As your child gets older, afford them a small commission to instill the third principle thoroughly. Every time they complete a chore, give them a predetermined amount of dollars. Commissions are better than allowances because they enforce that you have to work to earn money. If your child responds exceptionally well, they might seek new ways to make money outside of their commission.

Piggy banks and commissions will positively reinforce the three principles and teach your child the responsibility of having their own money, albeit in small amounts. It’s certainly not “easy” for parents to pull off because every child can respond differently, but this method puts as little pressure as possible on the teacher and the student.

The Right Way

Parents often say “Do as I say, not as I do” as a joke, but it’s no laughing matter when it comes to money management. You need to practice what you preach.

The right way to teach your children about money is to lead by example every day. You might give them a jar or piggy bank and teach them good saving habits, but they will only take those teaching moments to heart if you apply the routines to your own life.

Begin with an organic approach and include them in financial discussions. Even if they don’t participate or ask questions at first, they will quickly learn that money is an integral part of adult life.

The questions will come eventually, and then you don’t have to force anything upon them. Your child will simply draw their own lessons from your actions and attitudes. You can use many moments throughout the day to demonstrate good money skills:


  • Daily financial transactions: Bring your child to the store and show them how you pay for things. Consider letting them handle your cash and cards under your supervision.
  • Impulse buys: When you see a new item you like, refrain from buying it until you can afford it. Similarly, when your child begs for a new toy, don’t entertain them.
  • Opportunity cost: As you shop with your child, demonstrate that by purchasing item A, you can’t buy item B. Spending always has a limit.
  • Comparisons: Never compare your money situation to another person’s. Your child will pick up on this habit and feel discontent with themselves.
  • Responsibility: Familiarize your child with bank accounts and credit cards, and set them up with their own account when they get older.


All these moments will slowly accumulate until they become habits for you and your child. Visual tools like piggy banks certainly help introduce the concept of money to children, but they don’t provide enough stimulation to create a lasting impact.

As they get older, teach your child about more sensitive topics, like debt and taxes. They need to know the consequences of heavy spending and the measures they can take to solve the problem.

Many parents struggle to introduce their children to the rules of our indifferent monetary system. It’s completely normal to want to preserve your child’s innocence. However, you aren’t doing them any favors by sheltering them from reality. Payments, taxes and debt are par for the course in adult life, and your child should get used to hearing about it.

Make Every Day Count

Money has a major impact on your daily life, so naturally, you have to teach your child about its management every day. Don’t hide the truth, and be sure to start early. Your children will quickly grow accustomed to hearing about and dealing with money and find themselves better prepared when they need to make their own financial decisions.

The best way to expose your children to sound money management habits is by practicing them yourself day in and day out. You will improve your own financial situation and set your child up for future success.



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