Money Management For Kids: How to Teach Kids Good Money Habits

money management for kids

As a parent, it’s clear that you want the best for your children — not necessarily in terms of the best gadgets or the coolest toys, but in the form of security. If you’re thinking about laying down the right foundation to do well in life even after you’re gone, it's best to teach them how to handle money. 

In this blog post, we share everything you need to know for teaching kids good money habits.


Why You Should Teach Your Children About Money 

According to experts, it can be difficult to do well in life if someone doesn't obtain a working knowledge of money. Because money is an integral part of daily life, parents should help their kids become financially literate. 

Money is in everything we do, including: 

  • What we eat
  • Where we live 
  • What clothes we wear 
  • Which car we drive 
  • Which school we go to
  • How many kids we want 
  • The kind of entertainment we choose
  • Which hospital we go to 
  • What gifts we give to others
  • The insurance policy we have 
  • The vacations we take 

No matter what it is, money is always involved in our decisions. Yet, parents don’t seem to think that it’s essential to teach their kids financial literacy.


According to a study, most parents admit that they often miss opportunities to talk to their children about finances and money. Other parents also say that they are extremely reluctant to speak to their kids about financial topics. 


Other on the other hand, children are hoping to get monetary wisdom from their parents. According to the same study, some children wish that their parents had taught them more about the value of money. 

Even if you don’t teach them about money directly, they need to learn lessons one way or another. If you want to shape your child’s values and thinking about money and provide them with financial literacy, follow the tips below: 

Start While They’re Young 

Studies show that the earlier you begin the financial education process with your child, the better. Experts believe that lessons should start before the age of 7 because research suggests that attitudes and habits regarding money already exist during this time. 

Once your child is old enough to know that they shouldn’t be putting pennies into their mouths, it’s time to introduce them to cash and coins. Be sure to explain what money is and how it’s used — this should be followed by showing them firsthand how money works. 

When you go out shopping, be sure that they see you making purchases with cash. Even if you use a credit or debit card, explain to your child that you’re using money to pay for your purchases. 

Another effective way to teach kids about money is by shopping together and showing them the receipts for the amount you paid. This can be done as early as their preschool years, so be sure to do this over and over until it becomes a habit with them. 

Some parents start their money-teaching strategies as early as 4 years or even younger. While some kids will get it after just a few times, others will struggle with the concept but the key is to remain consistent, and they will eventually get it too.


Allow them to Earn Money 

Your children need to have money to themselves so they can figure out how to use it. As such, it’s a good idea to provide them with an allowance or to give them some way to earn their money. 

Having them earn their money as opposed to just giving it to them will have a different effect on them psychologically and will truly teach them the value of having to work for your own money.

We all look at money differently, but people will always value money that they earn over money they receive for nothing. 


Experts will always say that they would rather have their kids learn how money is earned rather than just giving them any amount.


Parents can provide their kids with chores that they can do to get paid, which are then given to them as an allowance in an amount that’s fair for their ages. 

Other parents prefer to pay their children with a “salary” that’s deposited directly into their bank account every month depending on how much work they do around the house. You can also discuss doing more chores in exchange for a bigger salary to teach them the value of hard work.


Help Them Make Spending Decisions 

Apart from allowing kids to earn money, you could also provide them with an allowance system to teach them how to live within a budget.

If you have children who would always ask for money, setting up an allowance will show them how to budget their money and how to spend it wisely. 

Doing this will teach your children to track their money, both what is coming in and going out, while teaching them how money works in the real world when it’s their time to go on their own.

Once they get started with an allowance, your kids can start making their own decisions about money. 

One way to do this is by giving your kids three kinds of piggy banks: 

  • One for spending 
  • One for saving 
  • One for giving 

You can have your kids put their allowance into each of these jars, which will give them the freedom to decide how much goes where. Plus, you can teach your kids that spending isn’t always about buying the things they want. 

Their money can also be spent on things they would need to buy once they’re adults and you could also give them the choice to pay people to help them do things.

For instance, if your child can’t wash the dishes for some reason, having someone else do the task will cost them. 

The result is that they can pay you to do things for them — and all the money will come out of their allowance. This concept allows children to realize that every choice they make will have consequences because personal finance is all about decisions. 


Develop Saving Habits 

Any early interaction that kids have with money is likely to involve spending — when they see you spending money to buy things, they will want to do the same. Because of this, it’s important to teach them that money isn’t just earned to be used, but can also be saved too. 

Teaching children how to save isn’t just a good money habit, but it also allows them to learn delayed gratifications and discipline. Saving also teaches planning and goal-setting for kids, which in turn builds independence and security.   

You can help your kids get into a habit of saving their hard-earned money by providing them with a savings jar where they can slowly save cash or coins. You can then give your kids simple words of encouragement, such as: 

  • I love saving 
  • You’re doing a great job!
  • It feels great to save money for the things you need 

With younger kids, however, you’ll have better odds of teaching them the value of saving for short-term goals such as toys for birthdays, Christmas, or special occasions. Experts say that encouraging kids to set short-term goals while kids are young helps them appreciate the value of deferred gratification. 


Show Them How Money Grows

While saving money is a great habit, teaching kids about investing is the best way to teach kids how to build wealth. By teaching children how to invest at an early age, you’re going the extra mile to ensure that your children get a headstart for the future. 

Some parents start with this step by arranging custodial investment accounts for their kids so that when they get older, they’ll have an account to grow and manage.

Not only are they investing their money at a young age, but they are also allowing it to grow at a faster rate while they learn more about it and see how it works. 

If you’re not very good with investing or don’t know how to explain it to your kids, you can start reading a book about it. You can even share your book with your kids so that you can learn about investing together. 

There are various brokerages that you can get started with to have your children invest in a custodial account. Some of your options include the following: 

  • Stockpile
  • Charles Schwab
  • Fidelity


Be a Good Role Model 

Your guidance, lessons, and encouragement are all important, but just as important is how you handle money when you’re with them. For instance, if you constantly complain about the price of certain items while taking them out on a shopping spree, then you may not be sending the right message. 

Be sure that you’re modeling the right kind of behaviors around them whenever you handle money, so that they can pick up whatever you show them. Some parents don’t just stop at encouraging their kids to do the chores around the house, but they also help them and ensure that everything is covered. 

Whenever you’re not busy, take the time to help your kids when they’re doing the dishes or taking out the trash — then use this opportunity to discuss with your kids the value of what they’re doing. Talk to them about the importance of hard work and managing the money they earned.


A wise parent will tell their kids that it doesn’t matter how much money they make, but what they do with their money that counts. If you want to see your children grow up with a grasp of good saving and spending habits, then you’ll need to show them that you can do the same. 


In other words, you'll need to practice what you preach and you need to do it consistently. Teaching kids good money habits are hard enough on its own, so you need to take your time and trust the process. 

But if you put the work in and always communicate a clear message about your spending and saving, then you will be able to instill your children with good habits that will serve them well. 


Show them Why it’s Good to Give 

The reason why you’re teaching your child how to be financially literate is that it’s important to you that they learn the value in these lessons. You want to give them something they’ll appreciate for life — if you value the gift of giving, you can also teach this to your children. 

You have the power to instill the value of giving to your child by helping them make it a habit while they’re young. There are plenty of ways for your kid to contribute to causes other than their own. 

As mentioned, your child should have spending, saving, and giving jar, where the last jar can be used to donate to their favorite charity, zoo, the community, or other non-profit organizations.

In addition, you can also help them set up a savings account specifically to give to their chosen cause. 

You can also help them plan where they want to give their money by discussing their favorite places, people, organizations, and causes they wish to support. Be sure to choose a respected and trusted charity to ensure that all their hard-earned money goes to where it’s needed. 



By discussing how to create good money habits while they are young, our kids will have a better grasp of this concept once they’re older and have to venture out into the world on their own.

Understanding why this is important is the first step to teaching your kids how they can handle money that doesn’t just magically appear on their hands but is earned through hard work. 

Instilling good money habits in your kids won’t be easy but it will be worth it when you see just how well they can control their money, spending, and savings. By giving them the right instructions, some encouragement, and being a good role model, your kids can use this lesson that they will remember for life. 

If you would like to know more about how you can guide your child towards a healthy financial future, visit our website or call us at 904-723-6300. Our youth savings initiative has started for Financial Literacy Month, where we educate young people to develop good money habits, so be sure to sign up for this opportunity!

For most teens, having a car means no more relying on friends or parents for rides, and no more being stuck at home while everyone else is out having fun. 
Working hard to save for their own car not only gives teens a true sense of accomplishment and ownership, it also instills essential money and budgeting life skills. 
Bring the kids into any 121 Financial Credit Union branch during the month of April, and we'll give them a kickstart with $10 in their new account on us to put towards earning their financial freedom and their first set of wheels.



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