Six Tips for Teaching Your Kids Financial Responsibility

Updated on November 27, 2016

It's never too soon to start teaching your kids about money. By teaching them basic financial skills now, you will help them build sound financial habits that will last a lifetime. The key is to tailor your financial lessons in a way that is fun, easy, and appealing for little kids. Here are six ways to do just that.


Show Them That Money Is Earned

Instead of giving your children a set allowance, consider giving them an allowance based on chores or tasks they complete, with possible bonuses for good citizenship. For example, if your four-year-old puts their toys away in the toybox before bed, or your ten-year-old cleans their own bathroom, they get rewarded with a set amount of money that is added to their allowance for the week.

Kids might earn bonuses for things like helping their little sister get ready for school or getting to bed on time every night for a week. This approach teaches your kids to take pride in hard work and that money is valuable and earned.


Start with a Piggy Bank or Savings Jar

A piggy bank is a simple but effective way to teach even very young children about saving. Toddlers can learn to feed coins to the "hungry piggy." Some kids do better with a clear jar, since it provides a great visual of how much money they've saved and how far they have to go before the jar is full. Be sure to let your kids trade in coins from the piggy bank for a special treat at the store or from the icecream truck now and then.

Transition to a Savings Account

Once your kids get a little older (elementary school is a good starting point), you can help them transition from a piggy bank to a savings account that earns interest. Be sure to bring them with you to the bank to set up the account, make the first deposit, and ask any questions they might have. Many banks offer fun educational programs for children setting up savings accounts, so you may want to give your bank a call ahead of time to see what they offer.

Try the "Divide by Three" Approach

One fun yet powerful method for teaching kids financial responsibility is the "divide by three" approach where kids divide their allowance (or money they receive from grandma and grandpa for their birthday, etc.) in three: one part to spend, one part to save, and one part to give to charity. This can start with a simple $3 allowance for young kids.

Be sure to involve them fully in deciding what charity to donate their money to, and then help them make it happen. You will not only be teaching your kids to be financially wise, but teaching them to be altruistic at the same time.


Make Shopping Educational

In order to really drive home the way that money works, try to turn shopping trips into educational opportunities. When picking out their favorite cereal for the week, point out how much it costs, and how many dollars they would need to save to buy it themselves. When you pay with cash have your child help count out the money and get the change back. Going to the store is also a good opportunity to show them how debit cards work.

Set a Good Example at Home

Of course, no matter how hard you work to teach your kids about financial responsibility, children do learn by example. This can be a great motivator for getting your own finances completely in order. Show your kids that you pay your bills out of your paycheck each month, and then set aside money for savings and for charity. Try to avoid excessive shopping for things you can't quite afford and don't have arguments about money in front of your children.

By taking the time to teach your children about money, you will help ensure they grow up to be financially responsible.


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