“Mom, can we get this? Please?!” If you’ve ever taken your child through a store like Target or Wal-Mart, you’ve likely heard this plea more times than you can count. As parents, we understand that money isn’t limitless, and not every wish can be granted. However, explaining this to children, who have little grasp of financial concepts, can be challenging.
Teaching kids about money is an essential life skill that sets them up for future financial success. According to the FDIC, children as young as three can start learning about money. But don’t worry—it’s never too late to begin! Here are some tips to help kids develop a healthy understanding of money:
Introduce the Basics
Young children start learning about coins and bills in elementary school, but understanding what things actually cost is another matter. A child might think $100 can buy a car or a house simply because it sounds like a big number to them. My daughter once asked for a puppy, and when I explained that it was expensive, she said, “Just use the magic card at the machine!” Clearly, she hadn’t yet realized that debit and credit cards are not magical money dispensers! Teaching kids that money comes from work and not just an ATM is a crucial first step.
Teach Smart Consumer Habits
Advertisements make everything look fun, delicious, and exciting—but kids need to learn that not everything is as amazing as it appears on TV or online. Ask them questions like: Is this something we really need? Will it last a long time? Are there hidden costs? Teaching kids to question advertising helps them become thoughtful consumers rather than impulsive buyers.
Give an Allowance and Encourage Wise Spending
When kids receive an allowance—whether it’s earned through chores or given as a teaching tool—they learn to make decisions about their own money. Let them make their own choices (within reason) and guide them through the consequences. If they blow their entire allowance on a toy that breaks in a day, they’ll learn a valuable lesson about quality and value.
Encourage Saving and Giving
A great way to instill good money habits is by setting up three money jars: one for spending, one for saving, and one for giving. This teaches kids that money isn’t just for immediate gratification—it’s also for future goals and helping others. As they grow, consider opening a savings account so they can watch their money grow with interest.
Let Kids Earn Money
If your child wants a specific toy or experience, give them opportunities to earn extra money through age-appropriate tasks—whether it’s extra chores, a lemonade stand, or helping a neighbor. This teaches them that money is earned through effort and gives them a sense of accomplishment when they reach their goal.
Allow Small Money Mistakes
We’ve all experienced buyer’s remorse, and it’s okay for kids to learn this lesson early. Let them spend their money on something they think they want, even if you know it’s not the best choice. They’ll quickly learn the importance of making smart purchasing decisions.
Be a Role Model
Kids learn by watching us, so if we demonstrate smart spending habits, they’re more likely to adopt them. Avoid impulse buying, talk about budgeting openly, and involve your child in real-life money decisions, like comparing prices at the store. Your actions will speak louder than any financial lesson you try to teach.
Helping children develop money management skills early on will give them the tools they need for a financially responsible future. By making learning about money fun and practical, you can set them up for success—one lesson at a time!
