What Am I Teaching My Kid's About Money?

Experts tell us that most parents struggle to teach their children about how to handle money, because the parents themselves may not have been instructed in the subject.

Which, in turn, will become a vicious cycle: Parents who cannot manage their budget fail to teach children how to do it.


These same parents may be excellent at teaching their children to be careful with strangers and to use good manners but when it comes to money, they just assume that kids will pick it up with time.

Just the opposite approach is required, the experts tell us.

Start Early

Start early teaching your children about saving and spending. According to psychologists, money habits are fixed by the age of seven. So it is essential to start as early as possible, really as soon as they can count. Talk regularly and often about money.

Many parents use the “piggy bank” approach. Children are given some money or perhaps a regular allowance and it is put away in a locked container. When the child wants to spend some, a leger should be kept taking into account the spending.

When children clamor for something they want, a new video game, or a trip to the movies, reference should be made to how much is left in the Piggy Bank. It should become clear that, with the sum they have in hand, they cannot buy everything they want. They can, however, save up for things.

While your child will naturally ask for the latest game console, making them understand the difference between needs and wants will help them make sensible spending decisions from a very young age.

Teach Needs Vs. Wants

The key to teaching children about money is the ability to say "no." This should start at an early age. By not giving into every request and by sticking to a set amount of spending (like when using the piggy-bank method), it becomes clear to the child that funds are limited so choices have to be made carefully.

Some experts propose explaining to children that earning the amount of money they want for a videogame or a toy takes a certain amount of time. Use the example of a postman, policeman, or another job your child will understand and explain that it may take two or three hours for such a worker to earn enough money to pay for what the child is asking for.

One expression that should be avoided is, “we can’t afford this…” This is an abstract notion for children and it suggests all kinds of things they might be afraid of.

Let Children Make Choices

If children are given a fixed sum of money per week, to save in the “piggy bank” or spend, it is important that parents allow them to make their own choices.

Too often, a parent feels compelled to try to advise their children about what to do with their money – what parent doesn't yearn to advise their children? But parents should not give into the temptation. It is important that the child experience the real emotions that are related to spending and saving. Let them make all the mistakes they can. It is far better that children make mistakes now versus when they are older and the consequences are far more serious.

Children should experience the good feeling of earning something they want, and the challenging feeling of not getting what they want. When there is not enough in the “piggy bank” to fund a purchase for a much-desired toy, do not make up the difference, unless you intend to treat the extra money as a Christmas or birthday gift.

Connect Spending Money To Your Daily Life

It can be of great help, in teaching children about money, if you connect spending and saving to your daily life. For example, you go shopping several times a week. If you can take your children with you, and show them how much different items cost then show how you pay, it provides a vivid lesson of a mature approach to finances.

The traditional assignment of household chores with a small payment attached to each one can make a significant statement about earning money.

 Each time you connect spending and saving to daily life, you help your children understand the control of spending and how it is necessary to cut out some things you might like to buy but do not actually need.

 All of these approaches to teaching children about money have one thing in common, they all involve using concrete examples. Money is not an unlimited abstract quantity, but rather a means to be used with care and discretion.