Teaching Kids About Money


By Amy Hackworth. Mason Jar Piggy Bank via Heritage Tree Soap Co.

When I was six or seven, my dad and I were at a favorite convenience store with the most enticing array of ice cream flavors and the best waffle cones. I can still smell them as they came off the iron. When I asked for an ice cream cone he said he didn’t have any money with him. No problem, I thought, and glibly suggested he just write a check, a proposal that practically begged for the “money doesn’t grow on trees” speech that followed.

Now that I’m a parent, I have a little more sympathy for my dad’s frustration. Teaching kids about money is no small task, and I love discussing great ideas and best practices. Years ago, Gabrielle’s sister Sara wrote a guest post about their family bank that inspired and motivated me, with great suggestions on breaking down earnings for giving, long term savings, short terms savings, and spending. I’ve thought about that post for years, and I’ve always gotten a kick out of the fact that the kids got a sucker with every trip to the family bank, since that was always my favorite part of a trip to the bank with my mom.

While there’s a great debate about how children receive an allowance (Just for breathing? For doing regular chores? Or for working beyond regular family contributions?), there does seem to be a general consensus among experts that kids need access to money to practice the essential skills of budgeting, saving, giving and spending. Without money to practice, our children might have to learn those skills as young adults, when the stakes are higher with things like car payments and college tuition at risk. Suze Orman suggests offering a sliding scale for work like mowing the lawn or washing the car that falls outside the realm of regular household duties, with easier jobs being worth less, but requiring completion before the more lucrative jobs—no leaping up the pay scale without putting in your time. She also suggests renaming the traditional allowance “work pay” to avoid a sense of entitlement and to reinforce the correlation between working and earning money.

When it comes to saving money, Janet Bodnar, of Kiplinger, suggests starting small with young children. Help them save for an easily attainable item to help them understand the principles of saving and delaying gratification. When they’re a little older, kids are ready to learn about the power of compound interest. When bank interest rates are low, parents might consider adding an extra point or two to sweeten the savings experience.

How are you teaching your kids about financial literacy? Are you giving allowance or work pay? Are you rewarding your children for saving or helping them work toward savings goals? Please advise!

P.S. — Great age-appropriate lessons and activities on MoneyAsYouGrow.org, plus more age-by-age suggestions about saving money here and a little more about the basics of financial literacy here. To explore finance through picture books, check out this great list of books about money, plus discussion questions. And check your own financial literacy with this short quiz.

25 thoughts on “Teaching Kids About Money”

  1. I’ve been on a budget since third grade. My dad had us sit down with him and submit our proposal in writing for how much money we needed and for what. In high school I received a monthly sum and by the time I was a junior in college I had a check for the semester.

    My parents were not secretive or weird about money – they were up front that things were expensive and if I wanted something that surpassed their idea of reasonable (key: THEIR – my parents were on the same page about money) then I had to make up the difference if I wanted it. Example: I REALLY wanted Guess? Jeans. My mom said they would pay $20 for a pair of jeans so if I wanted them I would have to earn the $28 to make up the difference. BRUTAL! But I took really good care of those jeans.

    My favorite money memory: my dad co-signed on my college credit card. I missed a payment. He had his secretary call me at school, make an appointment with me, and I had to drive two hours mid-week for a meeting with “my creditor”. At his office, like I was not his child. He did take me to lunch afterwards, but it was an unforgettable lesson in financial responsibility. I love you, Dad! :)

    My kids are 10 months and 2, but I hope my husband and I can impart the same consistent financial wisdom, but more importantly: we have to live it. No hiding shopping bags, no mine v. yours, save,save,save. They are watching EVERYTHING and we have to remember that so much of what we do touches against money. I figure the greatest gift we can give our children is freedom from having to take care of us in my old age because we spent too much money on things we couldn’t afford and didn’t save.

  2. This post is couldn’t be more perfect right now! We haven’t started a formal allowance/work pay system for our kids yet but I think it’s time. Yesterday my seven year old daughter said something along the lines of, “Yeah, we can’t get that Lego kit because we don’t have a lot of money.” I literally did a “wha-wha-whaaaaaat?” triple take at that. I explained that not spending a lot of money and not having a lot of money were two totally different things. We actually have more money when we don’t buy everything we want the moment we very first want it. She seemed to understand the concept but I think the time has come to actually put some dollars in her hand and let her practice that distinction herself.

    1. We’ve had simliar conversations, where my kids think I’ll buy something for them if it’s not very expensive. I’ve tried to explain that it’s not always about price, but also about what we want most. And I, too, am feeling like the best education will be when they have the money in their own little hands. Thanks, Jenni.

  3. So glad to see this post. Opening up the discussion with kids about money is key to helping them to become “money comfortable.” It’s important to break down the taboo of not talking within the family about the subject of money.

    We give our 7-year-old seven dollars per week and require her to put two in her save jar, two in her share jar and the rest is up to her – share, save or spend smart jar. Like you said to Jenni, Amy, it’s important that they “practice” with their own money.

    I also think it’s best not to tie allowance to basic chores because it’s purpose is to teach kids to learn to make money choices (and learn from the successes and mistakes) and get comfortable using money. They can learn about earning money by doing bigger chores that they may not be required to do as a member of the household (like painting, mowing, etc.).


  4. My almost 12-year-old gets $20/week (actually $21 – more below). That seems a lot, and it was a big jump for us from the $10 she’d got previously. However, she made a presentation to us on why she felt a significant raise was in order, and she made a good, solid case.

    We break it down like this: $10 she has to spend as she wishes during the week. Since she won’t be going to an after-school program this year, she will want a little running money for after-school snacks. The other $10 is for short-term savings. This comes in handy for things like an impromptu trip to the mall. She has money accrued that she can spend. It adds up quickly enough to put her on the hook for most “spontaneous” purchases. The final $1 goes into a long-term savings account that she’s not allowed to access.

    The additional $10 in short-term savings makes it much easier for her to save for purchases, but also forces her to really consider how she’s spending her money. I have seen over the years she’s been receiving an allowance, an increase in her understanding of money management. I’m hopeful she won’t learn these lessons the way my husband and I did by making a series of expensive missteps.

    Our next step is to integrate charitable giving into her money scheme. We donate as a family, but we haven’t asked her to contribute to that yet.

  5. We have a system in which the gingerbread boys (ages 12 and 9) are required to do certain things each day (which include morning and evening “stuff”–i.e., brushing teeth, making beds, showering–as well as chores, schoolwork, and practicing instruments. They have a weekly checklist. They check off the items they did each day, and can get up to $1/day for doing these things. At the end of the week, if they have completed all their tasks on the checklist, we double the amount. This amount goes into the family ledger, so while they aren’t actually receiving cash in hand, it’s in their “savings.” Quarterly, we pay them 10% interest.

    In return, they must purchase all their clothes, along with club fees, field trip fees, gifts, etc.

    We really like this system, because it rewards consistency, savings, and work. It also teaches them the value of money and a bit of frugality. When we go into a store and they ask for something, I turn it back to them: You have the money. Do you want to buy this? Invariably, they realize that they don’t really want to spend $15 on a trinket.

    It does require a bit more work on our part, but the rewards are worth it.

    1. Impressive system! I’m a little daunted by the record-keeping end of it, so I was glad to hear you say it is a bit of work on your part, but worth it. Such important lessons, right? And I love your idea of quarterly 10% interest.

      1. It’s not too bad, actually. My husband made up a spreadsheet for their checklists and just prints out new ones as needed.

        The next thing on our to-do list is teaching the boys about car-shopping and giving them full reign when we buy our next car. It might be crazy, but we figure if we teach them well enough, they’ll have the tools to make a good decision.

  6. I make personal finance a part of my the homeschool curriculum. Right now my kids are reading The Richest Man in Babylon. They’ve read Dave Ramsey. I want them to avoid the pain and heartache of making money mistakes. Stuff I wish I had known when I was a young person!

    I just finished a series of posts on personal finance and entrepreneurship for kids (linked).

  7. My friend’s ex-husband gave her her child support in one dollar bills – just to make her angry, which it did. But she turned into a teaching moment for her three girls. She sat at the table and had them look at the money; it looked like a lot. Then, she had them count out the money in little piles; this much for church contributions, rent, groceries, gas, etc. As the original pile grew smaller, their eyes grew bigger. When there was just a small amount of money left, she told them that was what they had at the end of each month to just have fun. Her three daughters earned ALL their own money for all their high school activities; they never asked her for ANY money because they had seen what little there was to spare. What a great lesson and smart mom! Very significant column, Amy. Such an important issue.

  8. I find this post really interesting, and I am definitely going to go over the other posts mentioned and the comments and take notes!
    We have another rule at my house for my 2 kids aged 11 and 8-the thing they are saving for must be parent-approved. Some of my friends’kids received money from their grandparents (quite a large sum for birthdays and Christmas) and they’ve used that money to buy a DS, that the parents disagreed with, but felt they couldn’t refuse since the kids were spending “their own money”. Well, that wouldn’t be possible at my home.
    We’ve had the same thing happen with my father in law, he gave almost $200 to each of my kids for Christmas, aged 6 and 9 at the time. We’ve told him that in the future, we’d prefer to get a check that we would spend on activities like tennis lesson, ski lessons etc, and we tell our kids that all those lessons are paid for by they grand dad, they call him and thank him. I don’t think kids should get that much money at such a young age, do you?

  9. As a Russian immigrant to US, I have to say that we never even had a concept of “allowance”, since, for one, money was tight, and two, it’s just weird for my culture, maybe, to separate money between family members?
    Anyway, all my budgeting and financial responsibility I learned by going grocery shopping with my mom. I guess at first she kept taking me with her because I was the translator, and then it was a kind of a bonding thing, but by just observing her – “Ok, we eat a lot of this, so we’re getting economy size. This is on sale, but we don’t normally eat this much, so we’ll skip it, even if it’s a bargain. The ice cream is on sale, but we bought water ice last week and we’re not getting more until that is done,” etc., I managed to get some killer budgeting skills, if I say so myself – and not just in grocery department.
    In fact, with my tiny fashion designer salary I managed to save more by the time I met my husband than he did with his hefty engineering salary.

    Our first child came from a very dysfunctional/abusive home (he came to live with us when he was 4), so allowances did not interest him. He just sat on the money, because his early life experience taught him that any of his possessions could be taken away, so why bother having aspirations?
    So I took him grocery shopping with me.
    He’s 15 now, and I am starting to see the same budgeting skills in the ways he’s planning his iTunes purchases – “This album is worth paying for, but this one, I’ll just get the two most favorite songs. This one comes with a free whatever, but I wouldn’t even use the whatever, so I’ll skip buying it.”
    It’s pretty gratifying, actually.
    And, obviously, we discuss any spending as a family (though I’m still trying to teach my husband the finer points of not going for the SHINEY! ^_^ )

  10. Hmmm, we’re just starting to think about that in our household. Our 4 year old can identify money and keeps change in a piggy bank (but it’s really just our own pocket change), but we haven’t started rewarding with $$ yet for chores. I think that’s a few years off for us, as she has no concept of saving or spending it all on something at this point. I love the ideas in the comments though!!

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  12. i love this post Amy! your comment about “write a check dad!” totally happens in our family with credit cards. “mom, just use a credit card!” or “mom, go to the bank and get money!” they have no idea sometimes where that money comes from.

    We have tried it all over the years – we do allowance, work pay, motivate with money, but this post was just a good reminder to be consistent and have a plan. i have two equal fears that my kids won’t only NOT know how to manage money, but i also fear they won’t have a good work ethic. and i probably over-stress the importance of both in our home.

    like everything in the summer, it can be hard to keep a schedule going – i need to be more consistent and i like the sucker idea! ha!

  13. I’m a bit late to the party, but there are so many great ideas here I had to comment.

    When the markets crashed a few years ago, my husband and I realized how few people actually understand basic money management and that if our kids were to learn it, we had to teach it.

    We began a system in which they began paying for all of their own activities, school lunches, etc. with a salary we provided to them. In exchange, they were required to be good family citizens and to complete a variety of daily and weekly “chores.” At the time they were 7 & 8 years old.

    They are now teens and understand budgeting, debt (we did occasionally need to issue loans for large, unexpected purchases that even surprised us, but the loans included collateral and interest), balancing a checkbook and online budget management. They know that if they are asked to do any job in our home, it is expected that they will do it without question as a part of their salary. If they do a big job that we might normally hire a contractor for, like wash windows or detail the car, they get paid extra money.

    The key is that we didn’t give them more money than we would have spent on them anyway and they used that money to learn how to buy what they wanted while maintaining their budget. These have been some of the most important lessons of their lives.

    1. Christine Byrne

      Thanks Tracie. I just started my kids on a similar system and so far so good. Out of curiosity, since this post have you noticed any spending behaviors I would want to watch out for? Did you place any restrictions on their spending? I also just started exploring some companies out there that focus on improving financial and business literacy in children through a variety of different mechanisms. One that I found interesting was one called smartypants.co. I am excited to see what emerges in the next few years. Thanks again for your post.

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