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how to teach kids about money

How to Teach Kids about Money

In this article I am going to share my best advice for how to teach kids about money. Financial literacy for kids is such an important lesson for them to learn!


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Why Is It Important to Teach Kids about Money?

Teaching kids about money is one of the most important things we can do as parents to help them to be successful in life. Money touches nearly every aspect of our lives, and learning to manage money well is an essential life skill.

By teaching kids about money you can help them to avoid the pitfalls of living paycheck to paycheck, overspending, amassing a lot of debt, and making poor financial decisions.

And on the positive side, it is important to teach kids about money because this can help them to be in a strong financial position throughout their lives.

When kids understand the fundamentals of personal finance, they can make decisions that will bring them financial peace. They will not be stressed about not being able to pay their bills or make their payments.

They can also make decisions that will help ensure that they build wealth later in life. For example, as they avoid debt, they will have more disposable income. With that disposable income, they can invest for retirement. As they invest for retirement, they are more likely to have long-term financial well-being and success.

By building wealth over time, you can retire with confidence, knowing that you live in comfort later in life. You will have the financial resources to take care of your needs, to travel, to give and to serve others, and more.

When you teach your kids about money, they will be able to follow these best practices outlined above to find financial success and ultimately reach financial freedom.



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What Age Shoul You Teach about Money?

Ideally, you will start to teach your kids simple ideas about money from your good example from birth. As soon as they can start to understand what money does, how it is used to make purchases, for example, then they are old enough to learn at least the very basic principles about money.

So, at 2 or 3, you can start to teach kids that when they want a toy, that costs money. You can teach them that when you go to work, that is where money comes from. And you can teach them that as a family you have only a limited amount of money, so you have to make good choices about how to use that limited amount of money. That means you cannot purchase unlimited things; they probably cannot have (and probably should not have :)) all the toys that they want.

As your children get older, you can teach them about the relationship between work and money by assigning them to do chores and rewarding them with an allowance (or commission, as Dave Ramsey calls it).

You can begin to teach them perhaps as early teenagers the importance of avoiding debt and saving for retirement. And teach them the amazing power of compound interest to show them why debt is so debilitating and why saving for retirement early is so important.


12 Important Tips for How to Teach Your Kids about Money

Being a parent is awesome—for a lot of reasons. But one of the reasons that being a parent is awesome is that you have these wonderful little sponges. (At least until they become teenagers, or so I’ve heard—but even then I think they listen to and take in a lot more than most parents probably think they do.) And you can influence and teach and raise these wonderful children to be the amazing people you know they can be. And that is your responsibility as a parent!

It is your job to be an influencer while you have the ability to influence—before it (potentially) becomes too late! So here are 12 principles of financial literacy for kids that will help your children to be successful with money.

1. Teach your children the financial values that you want to pass on to them.

If you have strong financial values that have helped you to begin to be successful financially, pass them on to your kids! If you don’t yet, first study and identify your own core financial values, and then teach them to your children. Here are several that we plan to teach to our children (by word and example) as they grow up (click the links below for information on each topic):


2. Teach your kids sound money principles by example.

A second important way to promote financial literacy for kids is to teach by example. Even more than talking about your financial values with your children, you need to teach them good financial principles by example. As you teach your children about money, practice what you teach. For instance, don’t talk to them about the dangers of credit card debt, and then cave in and buy a new living room set (on credit that you didn’t budget for to go with the new carpet that you had saved up for.

Kids are smart, and not only will they generally notice the inconsistency between what you teach and what you do, but they’ll often call you on it! Like my kids call me out when I do something wrong—and they’re kindergarten and preschool age!


3. Be as transparent as you can about money.

Of course you don’t want to worry your children unnecessarily if you are currently in financial dire straits or anything like that, but don’t be afraid to talk about money often. If things are financially tight, explain the situation to your older children—in a way that won’t freak them out—so that they understand the situation and have realistic expectations.

Tell your children how much you can afford or are willing to contribute to their college ESAs or 529 plans or to their college tuition and other expenses. Let them know if you’re willing to help pay for a car for them, and why or why not. All of these things are excellent insights or lessons for them for later in life.


4. Teach your children the value of money.

As you teach principles of financial literacy for your kids, help them to understand the value of money and how much things really cost—appropriate to their age, of course. Show your children your monthly budge when they are old enough to understand it. Take them grocery shopping and clothes shopping with you sometimes so that they get a feel for how much things cost. (My sweet five-year-old thinks we can buy a new-to-us van with the money in the coin cubby in the car. :))

Explain the amazing power of compound interest when they are old enough to understand the concept, and also explain the idea of delayed gratification. Help them to understand why it’s often good to pass on something now in order to get something even better later. Instill in them a to-the-core understanding of what it means to be content with what you have and not always want more.


5. Teach your children how to do a simple budget.

Another crucial skill to teach your kids about money is how to budget. Teach your children the importance of a spending plan, and explain to them how to use one. Help them to understand that a budget is simply a document where you decide how you are going to spend your money each month.

When creating your spending plan, make it a zero-based budget. That means that you figure out what you income is going to be for the month, and then before that month begins, you plan how every dollar will be spent so that there is no money left over. You don’t want money left over in your budget because it will fly away like feathers in the wind.

As part of teaching your children to budget, also teach them the importance of comparison shopping (doing price as well as product comparisons) to find not only good deals but good value. For example, they might find a toy at the dollar store for $1, but it might break after a few hours of use. Or they could spend $10 for a new toy at Target that could last a year or more. Or, they could spend $2 at a thrift store or on eBay for the same toy, gently used, that was $10 new at Target, and get the best value of all.

Learn more about creating a budget.


6. Teach your children the connection between work and rewards.

I know it is a sometimes hotly debated topic, but consider giving your children the opportunity to do chores to earn money. We haven’t started paying commissions (the term we like to use instead of allowance—taken from Dave Ramsey) yet, but I there’s a good chance that we will once our children are a little older. I definitely like the idea of teaching the correlation between work and monetary compensation, and I don’t want our children to think they’re on the family dole by just getting money for toys and things because they breathe, so it feels like a good approach. But we’ll see how it goes when we get to that bridge.

And same with paying children for earning good grades. My parents did do that some of the time with us, and I think for some of my siblings it probably did encourage them to put in more effort than they otherwise would have. I’m the type that strived for straight A’s regardless, so for me I don’t know that it made much of a difference—but the extra money was nice. 🙂

If you’re on the fence, maybe give it a try and see how it goes. You can always change your mind or adjust your approach later—nothing has to be set in stone. But whether you do or don’t pay commissions, do teach your children the very really connection between hard work and dedicated effort and financial compensation.

If you do pay your children for their work, make sure you teach them how to budget (well, either way, you need to teach them how to budget) so that they will learn how to spend their money wisely and save up for larger purchases and just overall manage their money well (and ideally not be still living in your basement when they’re 30 :)).


7. Teach them to be generous givers.

Another important thing to teach your kids about money is the importance of giving—not just money, but time and energy and kindness as well. And teach this to them by example. If you attend a church, let them see you paying tithing and giving offerings. When you donate to your favorite causes, tell them that you are doing it and why you are doing it.

If you choose to give directly to those in need in your community (perhaps by giving items they need rather than money), ask your children to go with you when possible. When they start to earn a little money for themselves through chores, lemonade stands, or their first pet-walking or grass-cutting business, show them how to pay tithing themselves and ask them to give a portion of what they earn to a cause that they care about.

Also find opportunities to serve together in the community as a family—by volunteering at care centers, hospitals, soup kitchens, shelters, and so on.


8. Make learning fun as you teach your kids about money.

As you teach principles of financial literacy for your kids, make it fun! There are a lot of things about money that are just fun and interesting all on their own—such as the amazing power of compound interest. But even the subjects that you think might be a little dry, such as learning how to do a budget (unless you’re kind of a nerd like me), can be fun if you get a little creative with it.

For example, let’s say you’re working go get out of debt. In addition to teaching your children why they should avoid debt and the challenges that being in debt brings (having to pay interest, potential loss of your possessions, and so on), you could put a big thermometer on the wall that they can color in as you get closer to reaching your goal.

Or you could use construction-paper loops that they could tear off each time you pay money toward your debts. This will help drive home to them and help teach them how important it is to you to get out of debt. And then when you reach your goal of getting out of debt, you could celebrate by going to dinner or going on a vacation or something like that.

Or let’s say you want to teach your children the importance of saving money. You could work with them to choose an appropriate goal to save toward, such as purchasing a new scooter or bike. And you could agree to match them for whatever they earn from doing chores, for example. So if they earn $30 from doing chores (and maybe even do some extra chores around the house that you agree to pay them for), then you could go to the store and buy a $60 bike.


9. Use praise and rewards and give lots of encouragement toward desired behaviors.

As you teach your kids about money, give a lot of praise and sincere encouragement. Children (and adults too!) love honest, sincere praise. I regularly tell my children how amazing they are for just being them—but I also slather on compliments for the things they are able to accomplish. I don’t think this will cause an ego problem at all or hurt them in the least.

There are enough things in the world that try to drag our children down that we need to consistently work to build them up. As long as you teach them the importance of being humble through example and through coaching them and guiding them during teachable moments, you won’t have to worry that that praise will give them a big head when they’re older.

And by giving them praise, they will have the incentive to continue to try and to do their best to succeed and to act in the ways that you would like them to.

10. Help your children set financial goals and work toward them as you teach your kids about money.

Setting and working toward goals is an important factor in success. Those who make written goals are far more likely to achieve them. So as another important way to promote financial literacy for your kids, help your children to develop the habit of setting financial goals when they are fairly young (and definitely by high school).

And when it comes to financial goals, you might help them in setting goals to save for a car, college, a mission or service trip, a high school trip, or other worthwhile expenses. And again, you might match them with your own money to support them in these efforts and help them reach their worthy goals. And remember to encourage them along the way to help them stay motivated and on track!

11. Help your children to get their first job and start saving money for college.

Another important aspect of teaching your kids about money is to guide them in getting their first job. Once I started going to high school, I would work after school at my dad’s office that was within a couple of miles of the high school. Until I could drive, I would walk there every day after school.

I didn’t realize it at the time, but this was an amazing opportunity that I had, because my dad was the owner of the company, to spend additional time with him that most kids don’t get to. And much of the time, I was working on the other side of his very large desk—or later, in an office just down the hall.

I learned a lot of character-defining things from my dad—among them, a strong work ethic, a positive attitude and outlook on life, and a determination to keep trying and not give up. And in addition to that, I was able to earn money to help pay for school, the mission that I later served for my church, my gas and fun money, and more.

Don’t think having a job during high school will hurt your kids and make them miss out on too many opportunities. It won’t. Rather, they will be learning important work and life skills that will benefit them throughout their life. (And as an added benefit, having a job will give your children less time to get into trouble—seriously!)

Teach your children that you expect them to help pay for their college (which I think they should, so that they will appreciate it more)—even if it’s just their housing, food, and vehicle expenses if you’re able and willing to pay for everything else. Go with them to the bank to open a savings account, and decide with them how much of their monthly earnings they should be contributing to that account to help pay for college.


12. Teach your kids financial principles often so that they will remember them.

A final important principle of financial literacy for kids is that anything that you really want your children to learn well you are going to have to repeat often. And that is as true for good financial principles as it is for anything else.

Since you will want good money habits to be ingrained in their psyches, be sure to regularly talk with your children about the money values that are important to you and that you want to pass on to them. And if you feel like you have talked about them too much, you might just have talked about them enough.



As they say, more is caught than taught. So if you want your children to make good financial decisions and to be successful with their money, then make good financial decisions yourselves so that they will have a model to follow.

But then also consciously teach your kids all that you can about money, such as good financial habits. Don’t leave it to the schools (if they even teach financial literacy) or to chance that your children will just figure out how to be good with their money. Look around you—chances are, they won’t just figure it out.

If you want them to be financially successful in life, you’re going to need to teach your kids how to budget, how to save their money, how to invest, how to work hard, how to spend less than they earn and avoid debt, how to give, and more. It’s a big responsibility—but it’s also an awesome opportunity.


What are your best tips for how to teach kids about money? What methods do you use? What have you found works particularly well? I would love to hear your tips and advice! Leave a comment below and share your thoughts so we can all learn together!


Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

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