Teaching kids about money from a young age helps them develop smart financial habits, avoid debt, and build a secure future. Many adults struggle with finances because they were never taught how to save, budget, or invest as children.
In this guide, we’ll explore how to teach kids about money in a fun and practical way, so they grow up with strong financial skills.
1. Start with the Basics: What is Money?
Before teaching kids about saving and budgeting, they need to understand what money is and how it works.
How to Explain Money to Kids:
✔ Show real money – Explain the difference between coins and bills.
✔ Teach how money is earned – Discuss jobs and how people work to make money.
✔ Play store games – Let them “buy” and “sell” items using fake money.
📌 Activity: Give your child $5 in coins and let them count it—a simple but effective way to introduce money concepts.
✅ Understanding money early makes later lessons easier.
2. Teach the Value of Earning Money
Kids should learn that money is earned through work, not given freely.
Ways to Teach Kids About Earning Money:
✔ Give allowances for chores – Let them earn money by cleaning their room, washing dishes, or mowing the lawn.
✔ Encourage small jobs – Older kids can babysit, walk dogs, or sell handmade crafts.
✔ Talk about your job – Explain how adults work and get paid for their time and skills.
📌 Example: Instead of giving kids $10 for nothing, let them earn it by helping with household tasks.
✅ Teaching kids to work for money helps them value it more.
3. Introduce the Concept of Saving
Saving is a critical financial skill. Kids should learn to set aside money for future needs instead of spending everything immediately.
How to Teach Kids to Save Money:
✔ Use a clear piggy bank or savings jar – So they can see their money grow.
✔ Set a savings goal – Help them save for a toy, book, or game they want.
✔ Match their savings – Offer to contribute 50 cents for every $1 they save as an incentive.
📌 Example: If a toy costs $20, help them create a savings plan:
- Save $5 per week → Buy the toy in 4 weeks.
✅ Seeing their savings grow teaches patience and responsibility.
4. Teach Budgeting with a Simple System
Budgeting helps kids learn how to manage their money wisely.
Easy Budgeting System for Kids:
✔ Use the “Three Jars” Method:
- Spend Jar (50%) – Money for toys, candy, or entertainment.
- Save Jar (40%) – Money for bigger goals.
- Give Jar (10%) – Money for charity or gifts.
📌 Example: If they earn $10 per week:
- $5 goes to spending
- $4 goes to savings
- $1 goes to giving
✅ This simple method teaches balance between spending, saving, and generosity.
5. Explain Needs vs. Wants
Many adults struggle with impulse spending because they never learned the difference between needs and wants.
How to Teach Needs vs. Wants:
✔ Make a list together – Write down examples of needs (food, clothes, shelter) and wants (toys, fast food, video games).
✔ Play a game – Show them two items (e.g., milk vs. candy) and ask, “Which one is a need?”
✔ Let them make decisions – When shopping, ask if something is a “want” or a “need” before buying.
📌 Example: If they want a new toy, ask: “Do you need it, or is it just something fun?”
✅ This helps kids learn smart spending habits early.
6. Teach Smart Spending Habits
Kids should learn how to spend wisely and avoid wasting money.
How to Teach Smart Spending:
✔ Give them a set amount – Let them manage their own spending money.
✔ Compare prices – Show them how to choose the best deal.
✔ Wait before buying – Teach them the 24-hour rule (wait a day before making big purchases).
📌 Example: If they want candy at checkout, tell them:
- “You have $5 in your Spend Jar. Do you want to use it now or save for something bigger?”
✅ Teaching kids to think before they buy prevents impulse spending.
7. Introduce Banking and Digital Money
As kids get older, they need to understand how bank accounts, debit cards, and digital payments work.
Ways to Teach Kids About Banking:
✔ Take them to open a savings account – Let them see how money grows with interest.
✔ Use a banking app for kids – Apps like Greenlight or GoHenry help kids manage digital money.
✔ Explain how debit cards work – Teach them that it’s real money, not magic plastic!
📌 Example: Show them a bank statement and explain how interest works (even if it’s just a few cents).
✅ Early banking lessons prepare kids for real-world money management.
8. Teach the Basics of Investing
Kids who learn about investing early are more likely to build wealth later in life.
How to Introduce Investing to Kids:
✔ Explain how money grows over time – Use a simple example:
- “If you invest $10 and it grows 10% per year, in 10 years it will be worth much more!”
✔ Use real-life brands – Show them how they can own part of Disney, Nike, or Apple through stocks.
✔ Use kid-friendly investment apps – Some platforms let kids invest with parental supervision.
📌 Example:
- Invest $10 in a company they love (e.g., Disney stock) and track its growth.
✅ Introducing investing early helps kids understand long-term wealth building.
9. Teach Generosity and Giving
Money isn’t just for spending—it can be used to help others.
Ways to Teach Generosity:
✔ Encourage donations – Let them choose a charity to give part of their allowance.
✔ Help others together – Donate toys or volunteer at a food bank.
✔ Teach gratitude – Discuss why helping others is important.
📌 Example: If they receive $10, encourage them to donate $1 to a cause they care about.
✅ Giving teaches kids compassion and financial responsibility.
10. Lead by Example: Be a Good Financial Role Model
Kids learn by watching their parents. If you practice good financial habits, they will too.
Ways to Be a Good Money Role Model:
✔ Talk about money openly – Discuss budgets, savings, and investments.
✔ Show smart spending – Compare prices and explain why you make certain financial decisions.
✔ Let them participate – Allow kids to help with grocery shopping or bill payments.
📌 Example: When paying bills, explain: “This is how we manage our home and plan for the future.”
✅ Your habits shape their financial future!