Teach Your Kids about Money in 3 Easy Steps

teach your kids about money

In my last post, I shared with you that Without Purpose, Money is Just Paper. Some of you experienced some a-ha moments and it changed the way you look at money. I know giving my money purpose has been instrumental in creating the life I want for my family, and I hope it does the same for you. Interestingly enough, I also find that many of our beliefs and habits around money form at a very young age from watching how our parents handle their money.

This is why I so strongly advocate for parents to actively teach their kids about money. Regardless of whether you intentionally teach them or not, they are learning. And some of those habits and beliefs you may want to avoid passing to another generation.

teach your kids about moneyThink about it for a minute—how did your parents handle money? Did they argue about it in front of you? Feel bad because they had too much or not enough? Was money a taboo subject and it was up to you to figure out how it worked once you left home? How are you mimicking them? Or are you polar opposites?

Many of us have strong emotions tied to money, such as fear and guilt, and we don't know how to use our money in a way that brings us joy. We haven't learned how to set goals and save for the things that truly matter. We only knew how to consume.

These are the lessons we are involuntarily passing onto our children. It's time to break this cycle.

How to Teach Your Kids about Money in 3 Easy Steps

I taught my daughters that every time they earn or receive money they can save it, spend it or share it. We decide how to use our money by answering these three questions:

What's Worth Saving Your Money for and Not Spending it Today?

Have them make a list of 10 things they want, then compare each item to one another to find out which one is the important one to them. This becomes their long-term save goal. It should be something your children truly desire, cannot afford today and are highly motivated to achieve. Talk about the goal frequently to keep them excited and focused.

Success Tip: Make sure their goals are realistic and obtainable. For example, a pony is not a realistic goal for most of us. But perhaps there is a local place that offers horseback rides, which is a more reasonable goal. Also, make sure they can achieve their goal within a year or less. Otherwise they may lose interest.

What's Something You Want to Spend Your Money on Right Now?

financial literate childrenThere is generally no shortage of things they want right now, if your kids are anything like mine. Once again, I would suggest they compare items to one another to find out which one matters most. Before taking them to the store, go online and help them find the best price or a coupon to lower the cost, if possible, then let them proudly pay for it.

Success Tip: Let your children know they don’t have to spend all their money immediately. Let them know Money Smart Kids always keep a few dollars in their spend jar, so they have money available for surprise opportunities or when they find something unexpected they want.

Who is Someone You Love and Want to Share Your Money With?

I am a firm believer that sharing enriches our lives and want my girls embrace sharing their time and money. Some kids struggle with sharing initially. Taylor did not want to share at first, but after she saw how much her big sister enjoyed sharing, it's become incredibly important to her as well. Don't force it, but let them see how rewarding sharing is and soon they will follow suit.

Success Tip: If your children are new to sharing, make it fun and tangible. Don’t just send money to an animal shelter, but call in advance and find out what they need most. Have your kids purchase the items and deliver them to the shelter, so they can see firsthand how their money makes a difference.

A New Generation of Financial Literate Children

Just like it's important for you to give your money purpose, your children need to learn to do the same. These three simple questions can help your children become more conscious spenders and develop good, life-long money habits. I started teaching my girls how to save, spend and share when they were toddlers, and today, at ages 7 and 9, they are more financially literate than many adults.

How are you teaching your kids about money?

shannon ryan

Shannon Ryan

Shannon Ryan, CFP® is a Mom on a mission to help busy parents teach their children simple, value-based principles that guide their money decisions and support their long-term financial well-being. Shannon wrote The Heavy Purse to help parents start money conversations with their children through a fun, bedtime story and developed companion workbooks to help deepen those conversations. Visit TheHeavyPurse to learn more on how to raise Money Smart Kids.

  Connect with Shannon on Twitter,  Facebook, and YouTube 


    • DC @ Young Adult Money

      DC @ Young Adult Money 06/12/2013 7:03 a.m. #

      Great questions, Shannon! I definitely agree that these three questions can lead the conversation when it comes to children and money.

      • Shannon @ The Heavy Purse

        Shannon @ The Heavy Purse 06/12/2013 1:43 p.m. #

        Thanks, DC! I've had many great conversations with my girls, thanks to these questions. It's really helped them focus on how they want to USE their money, rather than just mindlessly spend it. They are much more conscious consumers.

    • Brittany

      Brittany 06/12/2013 12:40 p.m. #

      Last summer, I took my daughter over to the local animal shelter with a gift card to a pet store, rather than items as you suggested. I found it was less expensive for us to grab the gift card instead of trying to buy enough of one item for all the animals (not that we would have to do that but felt a little guilty if we left someone one), and thought it would help the animal shelter get whatever they needed the most faster. In the end though, it was a great way to teach my daughter the importance of money and the difference it can make for others -- even our furry friends!

      • Shannon  @ The Heavy Purse

        Shannon @ The Heavy Purse 06/12/2013 1:47 p.m. #

        A gift certificate is fantastic idea! For me the most important part of teaching a child to share is to see firsthand how their money helps, which is what you did when you took her daughter to the animal shelter. I know once my daughters got a taste of sharing that it has become incredibly important to them and they share far more than 10% of the money they earn and receive within a year.

    • krantcents

      krantcents 06/12/2013 1:44 p.m. #

      Good points! I encouraged my children to save by requiring they save 50% of any money earned or received. I even gave them an incentive to match any savings when they bought a car.

      • Shannon @ The Heavy Purse

        Shannon @ The Heavy Purse 06/12/2013 11:54 p.m. #

        Thanks! It's great to get kids into the habit of saving at a young age. A car matching fund is a great idea and I'm sure your kids appreciated it too!

    • Corina Ramos

      Corina Ramos 06/12/2013 2:10 p.m. #

      Hey Shannon,

      These are great conversation-starters with our kids at any age. I started out with my parent's financial habits. I had to learn the hard way but now I'm much better with out finances, however we're still paying the price for those mistakes we made years ago.

      I make it a point now to take advantage of any opportunities to talk money with my teens especially now that they're headed into young adulthood and college.

      Great post Shannon! Hope all is well GF!

      • Shannon @ The Heavy Purse

        Shannon @ The Heavy Purse 06/12/2013 11:56 p.m. #

        Hey Corina!

        It's so great that you're talking to your kids about money, so they don't have to learn the hard way, like you did. It will make a difference in their lives. I definitely want my girls to appreciate money and feel confident that they are making smart money decisions.

        You have a great week too, my friend! :)

    • David Smith @ PBC

      David Smith @ PBC 06/16/2013 7:15 p.m. #

      Hello Shannon, a lot of people will surely agree with your recommendations. First of all, it is necessary to teach our kids about money matters. It will help the entire family if the kids are financially educated. Family money should have a good purpose and children should learn about this.

Comments are closed.