How to Teach Your Kids About Money

How to Teach Your Kids About Money

- in Finance, Parenting

As parents, we have the important task of preparing our children for adult life. Sometimes that’s done through example. Other times, it’s done through teaching moments. Teaching kids everything they need to know is an overwhelming reality that you and I will probably never fully achieve before they grow up and leave our care. 

While we teach our kids their ABCs, how to be polite, how to make friends, how to root for the home team (that’s a good lesson, right?!), and how to ride a bike, there’s one area that many of us forget to talk about: money.

As a blogger and freelance writer focused on personal finance, you would think our kids would be well on their way to financial success. That’s hardly the case, though. It’s actually through us dropping the ball in this focus area that I’ve learned the importance of teaching kids about money. We’ve done our kids a disservice in this area. We’re working hard now, while they’re in their teen years, to make sure they are well prepared when they enter the “real world.”

You may have seen North Carolina in the news recently, where personal finance classes were added as a graduation requirement state-wide. This is great news and should be implemented across the country, honestly. Like many life lessons, learning healthy personal finance practices should start at home first. 

Teaching kids about money will look very different depending on age, your own views on money, and their learning style. With that said, here are some quick ways to teach your kids about money. 

The three jar method

It seems simple, but using three clear jars to teach kids about money is super effective. Label the jars “Save,” “Spend,” and “Share,” and as your kids earn money, they divide it up into all three jars. 

This allows them to spend money on something they want, save for bigger, more expensive financial goals, and give money to someone in need. Don’t limit giving to just charities or church. Allow them to help out a friend or sibling if they want. 

Open a bank account for your kids

As your kids get older and outgrow jars or piggy banks, open a savings account for each of them. These will be custodial accounts, which have their name on them but are under your care. Most banks offer these types of accounts, which take money management to another level. Find an account with no minimum balance requirements and no monthly maintenance fees. Having access to view the account online is great, as well.

If you have high school students, you may also want to open a checking account. This allows them to learn how to balance a checkbook. It also can give them access to a debit card, which can come in handy, especially if they are driving and need to stop for fuel. 

Help them set money goals 

Everyone should have money goals. Our goals are going to look different than the goals our kids set, and that’s OK. 

Even if it’s just saving up for the latest video game, it’s still a goal and requires planning and saving. Help them track their money, so they watch as they get closer to hitting their goals. 

Play games

Playing a board game like Monopoly introduces kids to basic principles of personal finance. From saving and investing to passive income (owning hotels), kids learn valuable lessons as they make their way around the board. 

If you want to spice up your next Monopoly game, play with real money as Adam Carroll did, which he shares in his TEDx talk.

To give an allowance or not? 

One of the most debated topics when talking about kids and money is whether or not to give kids an allowance. An allowance is a set amount of money that kids receive for a set period of time, typically weekly or monthly. 

Some people tie tasks to allowance, like completing household chores or getting good grades. This is more of a commission-based model. 

Whatever you decide to do will communicate a lot to your kids. If you give an allowance with no expectation of any kind, they may think they deserve money no matter what they do. If you pay them for chores, they may expect to get paid anytime you ask them to do anything around the house. If you want to build an expectation in your household that everyone pitches in, this may not be the best way to teach that. 

One way around this would be to give everyone specific chores they are required to do as part of the family. Then, offer other opportunities for kids to earn money with special projects and chores outside of the norm. You can also encourage your kids to pursue entrepreneurial opportunities to make money instead of just giving them money. 

Make them use their own money to pay for something

There’s something about using actual cash to pay for something when you’re at the store instead of a credit or debit card. It makes the purchase more “real.” If your child is saving up for something they want, instead of ordering it on Amazon, take them to the store and make them pay for it with their own money they’ve saved. 

Include kids in financial decisions

Involving kids in day-to-day money decisions allows them to be a part of the process in your household. Plus, they get to see how intertwined finances are in our lives.

I’m not talking about big decisions, like how much money to put in your IRA or which credit card to get. Every trip to the grocery store involves tons of small financial decisions. Start there first and work your way up to more important decisions. 

Teach kids about interest

Paying and earning interest can be a difficult concept for kids to understand. That doesn’t mean we should avoid it. 

One way to talk to your kids about interest is by sitting down with them and showing them your credit card bill. If you have any loans, those will work too. Show them exactly how much is borrowed, how much you pay monthly, how much interest is charged, and any other details that help explain how interest works. 

You can also offer them loans anytime they want to buy something and don’t have the money. If they want to buy something that’s $30, lend them the money and have them make installment payments, with a small interest fee attached. 

We also want to teach our kids the good side of interest, too, which is the power of compound interest. 

Using the jar method above, you can add interest earning to your child’s savings jar slowly over time to show how earning interest works.

Another great way to teach the concept is by using this free Compound Interest Calculator from the U.S. Securities And Exchange Commission. Create real-life scenarios, fill in the blanks, and click “calculate.” 

Teach kids by example

Perhaps the best way to show our kids how to manage money well is for us to be the example. If we have a healthy view of money, there’s a good chance our kids will see that first hand. 

Make it a point to have conversations as you are paying bills, balancing your checkbook, investing, or completing other weekly or monthly financial tasks. Let them help fill in the monthly budget. Show them how to make change. Any task involving money can be turned into a learning lesson. 

Great resources for teaching your kids about money

There are so many great resources to teach kids about money. Here are some of my favorites: 

The Learning Center and Money Museum

Located in the Federal Reserve Bank of Cleveland, this free museum is full of interesting exhibits that teach several basic money concepts. It’s also a great history lesson on how money was invented. 

Visit the Learning Center and Money Museum website for more details and operation hours. 


FamZoo is a family finance app for parents, teens and kids to use. It uses prepaid cards and allows you to teach kids to have an experiential financial experience. 

Track chores, manage allowance, track spending, and much more. Kids have access to accounts, but parents can set specific rules within the program and have complete visibility and control. 

Dollars & Sense

H&R Block created Dollars and Sense to give parents free financial literacy resources for kids. There’s a series of lesson plans and activities on topics like budgeting, savings, loans, 401(k), and more. 

Practical Money Skills

If your kids like playing video games, why not use them as a way to teach financial concepts? Practical Money Skills offers several online games for kids to enjoy while learning personal finance skills. 

Check out Financial Football 3.0, which is a game partnership between Visa and the NFL. 

The Mint

The Mint is another great website full of financial literacy resources for kids, teens, parents and teachers. The site is full of games, tips and tools to learn vital money skills you’ll need from childhood to adulthood. 

Savings Spree

Savings Spree is an award-winning financial literacy mobile app (available on iOS) from Money Savvy Generation. There is a cost associated with this app. Within one day of using it, though, you’ll start to see the value of a tool like this.  

Smart Money Smart Kids

For a book on teaching kids about money, check out “Smart Money Smart Kids: Raising the Next Generation to Win with Money.” Written by Dave Ramsey and his daughter, Rachel Cruze, this book teaches common sense ways to approach financial topics with kids and teens. Some of the topics include debt, hard work, spending, saving, giving, paying for college, and living responsibly. It’s the perfect book to add to your reading list

College Scorecard

If you have teens who are starting to look at colleges, the College Scorecard is a great tool to use in their search. It allows you to compare college costs, and get a snapshot of employment prospects and student loan debt information for students who attend those schools. 

Next Steps

We can either choose to let our kids learn about managing money from the world around us or take the initiative to start the conversation at home. No matter the age of your kids, it’s not too late to start investing in their financial literacy. It could end up being the best financial investment you and I ever make. 

What methods have you used to teach your kids about money? What resources have you found helpful? 

About the author

Kevin Payne is a freelance writer specializing in personal finance and travel. His work has been featured in Forbes and Credit Karma. He is a regular contributor to Student Loan Planner, FinanceBuzz, and Club Thrifty. Kevin is the budget and family travel expert behind Kevin lives in Cleveland, Ohio, with his wife and four kids. His spare time is spent exploring Northeast Ohio and planning family vacations.

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