How to Teach Money Management Skills to Kids

This info about how to teach money management skills to kids (including kids’ allowance tips) is from Karyn Hodgens, creator of KidsSave — a unique money saving program that puts kids in charge of their money.

Before her tips, a quip:

“The easiest way to teach children about the value of money is to borrow some from them.” – Anonymous.

Borrowing money may is probably an effective way to teach anyone about money management…especially if payments are scheduled and interest rates agreed on. For more info about kids and money, click on Raising Money Smart Kids: What They Need to Know About Money and How to Tell Them. And, read on for Hodgens’ tips on teaching money management skills to kids…



How to Teach Money Management Skills to Kids

You can begin teaching financial concepts to kids as soon as they start asking for things – usually around age two or three.  Have informal conversations about kids allowance, how money is used to buy things we need, and that we only have a certain amount of money so it’s important to make good choices about spending.  When kids enter elementary school, it’s a good time to begin their “formal” education into money.  Giving kids an allowance and then having them learn how to effectively manage it helps establish positive life habits. 

Our biggest mistake about teaching our own kids about money management was that we didn’t intervene with our youngest son, who spent all his money until he was about seven.  Our oldest was a great money saver, and we thought our youngest would catch on.  But he didn’t.  That was when we decided he needed help seeing the value of saving money.  So we visually showed him the power of compound interest (which was the impetus for KidsSave, our kids’ savings and money management program).  When he saw how much his money could grow, he became a believer in saving. 

If you have teens, you might find 7 Money Management Tips for Teenagers helpful.

3 Tips for Teaching Kids About Money

1. Use your everyday experiences to teach money concepts.  When shopping, discuss prices, value, sales, needs and wants.  When watching commercials, discuss the messages being sent.  When getting money from an ATM, discuss where the money comes from, how it is earned, etc.  You’ll be surprised at how many moments come up during the day that allow you to teach your kids money management skills. By taking advantage of them now, your kids will be better prepared to meet the challenges and opportunities that await them later.

2. Give an allowance or offer ways for kids to earn extra money.  Kids need hands-on experiences managing money if they’re going to become financially responsible adults.  By being in charge of their own money and getting an allowance, they’ll learn how to make good choices, save, set personal financial goals, and live within their means. 

3. Allow kids to make mistakes with money…within your family values.  If we teach kids how to learn from their mistakes, they’ll learn money management skills early and be less likely to make more expensive ones when they’re older. Kids’ allowances can allow them to make mistakes and learn about money.

Surprising Tips for Teaching Kids About Money

  • Kids learn how to behave in the world simply by watching what you do.  As a result, kids are learning about money whether or not you have made an attempt to teach them.  And they’re observing how you choose to spend or save your money which teaches them a lot about your values.  
  • Kids can manage money from an early age if the expectations are clear and consistent.  Given the opportunity and guidance, kids as young as 5 or 6 can learn to save, spend wisely, share, and set short-term financial goals.

If you have any questions or thoughts about teaching money management skills to kids, please ask below!

Karyn Hodgens has a degree in child development and a multiple subjects teaching credential.  Her passion is educating parents on the importance of financial literacy for kids.

4 Reader Comments

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  1. Laurie PK says:

    Interesting info about being a teaching kids money management skills:

    “Parents who intentionally teach their children about financial management may exert a greater influence on children’s financial knowledge than do lessons learned in high school and those learned in the workplace combined….parental investment in the financial skills and knowledge of their adolescents may pay substantial dividends in terms of youth health, adjustment, and academic success.”

    This is from a new study by Dr. Soyeon Shim, from the Norton School of Family and Consumer Sciences at the University of Arizona.

  2. Hi Joan,

    I agree with Laurie…yours is a great question and one I often get from parents. The goal is to create kids who have a healthy “relationship” with money. An analogy I like to use is with food. We teach kids good eating habits by explaining the purpose of food, offering healthy choices, explaining why certain foods are better for us, etc. It doesn’t mean that we can’t splurge on a chocolate sundae or a big Mac every now and then. And just because we talk with kids about food doesn’t mean they’ll become obsessed with it.

    It’s the same with teaching kids about money. Healthy money habits and attitudes begin early with discussions on the purpose of money, how it’s earned, how to make good choices, how to live within our means, etc. Again, it doesn’t mean we can’t splurge every now and then. In fact, it’s important that we do teach kids that money should be enjoyed. A lot of life’s opportunities will be missed if our relationship with money becomes one of accumulation.

    As with most things in life, it’s really all about balance. That comes through in our attitude and actions.

    Good luck, Joan! And thanks for the great question!

    Karyn Hodgens

  3. Laurie PK says:

    The leaders of the financial website for women called “Women and Co” wrote a great article for my See Jane Soar blog, about being a financial role model for your kids. Here’s the link:

    http://seejanesoar.theadventurouswriter.com/financial-role-model-suze-orman/

    I think kids learn money management skills not just from what their parents say (explicit teaching), but alway what their parents do (role modeling good financial behavior). So, perhaps if the parents are overly conscious of money, the kids will be too…and if the parents are too frugal to enjoy the benefits money brings, then the kids will too….

    Although kids often learn things that their parents never taught, don’t they?!

    Thanks for your question, Joan – it’s a good one.

  4. Joan says:

    will children grow up to be too conscious of money and too frugal to enjoy it?

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