Plan for Tomorrow | Tips for raising financially smart kids
A father helps teach his young daughter

Tips for raising financially smart kids

Sep 20, 2023, 7:50:48 PM | Reading Time: 4 minutes

Your kids learn fast. From figuring out how to use a computer to playing sports, their brains can make active connections quickly. That same ability also applies to understanding how money works. As early as age three, you can start teaching your children how to be financially smart and form good habits. Here are some tips.

Discuss money early

If you aren’t talking with your kids about family finances, they may draw their own conclusions about money, which could be inaccurate or wrong. Teaching them the value of money early on will help them learn how to make sound spending choices in life and allow them to learn about the consequences of overspending. Many parents don’t start teaching their kids about money before age 5 and don't discuss finances with their kids until they are teenagers. Be sure to:

Talk openly and honestly – Don’t hide your financial problems or lie about the family financial situation. Kids can handle the truth and will learn to appreciate openness. 

Speak plainly – When you discuss finances with kids, talk about values, instead of giving the figures. You want them to understand the concepts of saving, budgeting, and paying debt without bogging them down with dollar amounts.

Allow your kids to participate – A good way to discuss money with your children is to let them sit in on family budget meetings. Show your kids the bills you have to pay each month and talk about how you determine income and expenses by teaching.

The difference between needs and wants – For children, separating needs and wants can be difficult. A good way to help your children distinguish between them is to discuss specific items while you're out shopping. Ask them to point out items that are needs or wants as you walk through the aisles.

How to save money – Your kids probably won’t understand how money saved over a long period has the potential to grow, so it’s important to teach them that value. You can demonstrate this by creating a way to pay the interest on the money they save. This demonstrates how investing works and how saving money can benefit them in the long run.

Patience when purchasing – As a parent, you can help your kids develop patience by not purchasing every item they ask for. Set an example by avoiding impulse purchases and explaining why you aren’t buying something you like until you save money for it. Encourage children to think through their purchases before they commit to them. 

Play money games

Kids tend to learn faster and better by doing things themselves. So, playing money games that teach kids the value of cash and how to handle it is a good way to introduce financial concepts to them and have some fun. Once you purchase a game, play it with them and explain concepts about saving, budgeting, and investing as you do.

Allow your children to earn an allowance

An allowance is a good way for your children to learn the value of earning money. Don’t provide your children with an allowance automatically. Instead, set up an allowance based on specific tasks. Choose age-appropriate chores or tasks for your child to complete each day. At the end of the week, they can earn a specific amount of money for those activities. Chart their activities and accomplishments throughout the week. Having a visual method of showing how they’ve saved will help them see how their money comes and goes. You must also remember to be consistent. Once you’ve decided on how an allowance is earned, don’t change the terms. This will help your children understand the benefits of earning money.

Teach with money apps

There are a plethora of apps for smartphones and tablets that can help explain financial concepts in ways that your children will understand. Many are able to teach complex concepts in easy (and fun) ways your kids may enjoy. Do a quick search online to see what options are out there, and reads some reviews from fellow parents to help you select a game you think your kid will love.

Help older kids with personal finance

As kids grow older, they’ll need more guidance and experience with managing money. One way to help your child is to open a savings account to teach him or her how banking works. Look for a bank or credit union that offers an account without a monthly fee and minimum balance requirement. If your child isn’t old enough to have an account, sign as a co-owner until they are old enough to manage it. 


REV 3/2023