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Teaching Your Kids How to Save and Spend Money Wisely

Written by: Kristy Welsh

Last Updated: September 8, 2017

It is never too early to teach your kids about money. Instilling good habits regarding spending and saving should start as early as possible. An online study conducted by, showed that over half the respondents claimed they earned money while in or before elementary school. And, most of the respondents claimed they did not feel prepared to manage their money after high school and one in three ran into early credit card problems.

By the time your kids are teenagers, they will most likely have a rather large list of perceived needs ranging from iPhones to the latest fashion. Particularly if you as parents indulge yourselves regularly in the latest of electronic gadgets and luxury items, your teen is witness to your spending habits and will likely assume that these things are essential as well. Observation and repetition are two important ways children learn: if they see that you stick to a budget and spend money wisely, they are much more likely to adapt the same skills and attitude. To help give your children a responsible start in the financial arena, here are some tips for instilling saving-savvy life skills in your child:

  1. As soon as children can count, introduce them to money.  Share with them regularly what the cost of items are: at the grocery store, happy meals at McDonalds, etc. Make comparisons such as "if we wash our own car today instead of paying the carwash, we save $10; we can buy three happy meals with that!" They will be able to relate to the savings and how this choice benefits them.
  2. When giving children an allowance, give them the money in denominations that encourage saving. For instance, give them five $1 bills instead of a $5 bill, and suggest that at least one dollar be set aside in savings.
  3. Give them the tools to save.  Initially, a simple piggy bank will do the trick. When they are old enough, open an account for them at your local bank; many banks offer incentives for kids to save, such as free monthly stickers, toys and treasures, etc.
  4. Help children learn the differences between needs, wants, and wishes.  Use examples they can relate to; look around the house and discuss your family's choices and the things that you could live without. This will assist them in making wiser spending decisions in the future.
  5. Combine the value of instilling good work habits with financial ones.  Give them extra money for specific household or work-related chores. These should be separate from the items that they are required to do as contributors for the household or their individual chores.
  6. Help your children set saving goals.  Write them down; people rarely reach goals they haven't set in writing. Start with toys when they are young and create a plan on how to finance the purchase. Such goal-setting helps children learn to become responsible for themselves.
  7. Take the opportunity to teach children about how credit cards work.  Explain to your child how to verify the charges, how to calculate a fair tip, and how to guard against credit card fraud.
  8. Encourage saving for college.  If your teenager is already earning money from summer jobs or part-time work, you can have them save a portion of their paycheck for their college tuition. Having contributed something towards their college education will give them a sense of pride.
  9. Allow young people to make spending decisions.  Test the adage of "live and learn" at an age when the learning is perhaps less expensive when their spending choices are less than desirable. Contingent on their choices, initiate discussion of spending pros and cons prior to the next spending spree. Show them through example the benefits of doing research before making major purchases, waiting for the right time to buy (during sales) and the use of coupons.
  10. Warn children about product marketing and advertising tricks.  We are deluged with commercial messages about cool toys and fad products; will a product really perform and do what the commercials say? Is this really a good deal or is it too good to be true? Share the value of your vast experience with them.
  11. Teach them to share with others.  An important part of teaching kids to be financially and socially responsible includes showing awareness they have a responsibility to other less fortunate people outside themselves and their family. Show them this through example by giving and volunteering to charity as a family.

These practices, when started while the kids are young, will help them grow into teens and young adults who know the value of hard-earned money. Remember that a solid education in money matters taught through example is one of the best tools you can give your kids, as it will aid them the rest of their lives.