How to Teach Money Management To Your Kids

Written by: David Scott

Teaching your kids good money habits is one of the most important lessons you can give them. This is one skill they often don’t learn enough of in school and yet it’s the one thing every person, no matter what they do with their life, will need. So how do you teach money management to your kids? Here are a few ways.

Create Save, Spend, Give Jars

Teach your kids the value of saving and giving at a young age. As soon as they are old enough to count money (even change), help them learn to split their money between spending, saving, and giving. Using clear jars so they can see the money add up is the best visual you can provide.

This works with monetary gifts your children receive for holidays or allowance you pay regularly. Work out a way to divide the funds among the three jars. It doesn’t have to be an equal division, but just so they can see the funds grow in each jar.

Your child can save for a specific goal, like buying a new bike, or even as far as saving for a car when they are older. The ‘give jar’ can go to your child’s favorite charity. This teaches him/her the value of giving making it a natural part of their life.

Talk about Money with your Kids

Don’t make money a mystery to kids. At each age, you can increase what you talk to them about, letting them in on money decisions from what to buy at the grocery store (generic versus store brand, sale vs regular price, etc.) to showing them how you pay off debt or prioritize your savings goals.

Let kids hear you talk about money with your spouse and even include them in family discussions about money. Don’t make money a taboo subject – the more they are exposed to it when they are young, the more natural it will be for them to manage it when they are older.

Kids can even hear when you make money mistakes. They need to see that we aren’t all perfect, but that it’s important that we learn from our mistakes.

Take Kids Shopping with You

They may not love it, but the store offers many opportunities to teach kids about money. Children learn more by what they see than what they hear, so watching you in action could teach them valuable money lessons.

Talk about your options out loud, pay in cash at the register so they can see you giving your cash to the cashier (realizing that buying something means ‘giving money up’), and discuss what goes through your mind as you’re making important decisions.

Create Spending Decisions for your Child

When your child has money, help him/her with spending decisions. Even if they know what they are saving up for, help him/her see the options available.

Say for example your child wants to buy a bike, show your child how to shop around, compare different bikes, and even compare prices for the same bike at different stores. Let your child see that you don’t just jump in headfirst with large purchases. You do your research and determine which option gives you the best bang for your buck.

Play Money Games with your Child

You can start playing money games when your kids are old enough to talk. Play pretend store and let your child play both shopper and cashier. Show your child how to count money or talk about the decisions you make when you are the shopper.

As your child gets older, you can play actual money games like the Game of Life or Monopoly. While they are fictitious games, they help your child understand the value of money and how it works. They have to make tough decisions in each game to learn how to spend their money wisely so they can win the game.

Offer to Match your Child’s Savings

Just like your employer might match your 401K contributions, you can match your child’s savings contributions.

Let’s say your child earns an allowance or has a job babysitting. You can offer the incentive to save by telling your child you’ll match his/her contributions to his savings account up to a specific dollar amount. You can match dollar for dollar or any increment you decide is best.

This will give your child an incentive to save and help him/her see their money grow because of the decisions they made.

Open a Bank Account

Help your child open his/her own bank account and manage it. You must be the custodian of the account, but you can give your child the reins.

There are many options to open a bank account for your child. Some banks, like Chase, for example, require parents to have an account at the bank for minors to open an account, but other banks, like Capital One Money, are available to minors and parents can have an account at any bank.

With a bank account, your child can learn about interest, the value of making contributions to their savings account, and how to reach specific goals. Some bank accounts even have ‘buckets’ or ‘savings goals’ children can set up and watch their progress online or on an app to reinforce the value of saving.

Final Thoughts

Teaching money management to your kids is extremely important and can be done within your regular daily routines. Just letting kids hear you talk about and deal with money can be all the lessons they need.

When your children are old enough, consider opening a bank account for them and helping them manage their money. Let them make decisions with your gentle guidance. The more the responsibilities are put in their laps with your teachings along the way, the easier it will be for them to manage money in adulthood.

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