Teach Your Kids Money Management Skills

If you have always felt the need to teach your kids money management skills, but don’t feel that you have the right skills to do it, then read on.

I was in exactly the same position, but have adopted a few simple principles which have really helped

Money management is something I never really learned as kid

And when I left home for University and then properly in my first job I was ill-prepared for what lay ahead

And as soon as I had a family that lack of money management nous started to rear its head big-time

As a result of this, I have always pledged that I would teach my kids money management skills

And even if I say so myself they have all grown up with a sound financial grounding and the basic information and tools to manage their own money effectively.

At times it has been difficult – especially when we ourselves have been going through tough times

And their friends all had the latest computer game or smartphone –

But in many ways those tough times have been the making of all of us.

After all, during such times difficult money management decisions genuinely have to be made and you do find yourself walking the walk,

You find yourself having to put in place what you are trying to teach

I would also say that this article is written partially in retrospect – there is stuff here that I wish I had done but didn’t, but if I had my time again I would do

Anyway, here are 10 tips as to how to teach your kids money management skills – skills which should hopefully stay with them for life.

10 Top Tips For Teaching Your Kids Money Management Skills

Before we start I just wanted to state my firm belief that kids are never too young to start learning about money.

It’s a bit like starting to learn a language when they are young – the younger they start the more natural it will become

And over time the talk of money, and the handling of money will become second nature

Indeed, Warren Buffett, one of the world’s leading financial management gurus bemoans the fact in this article on CNBC

His point is that a significant number of parents don’t start talking about the importance of money management until they hit their teenage years.

Buffett advocates starting much earlier – even at the pre-school level, and I would support that view wholeheartedly

1. Determine Whether Your Kids Are Spenders or Savers

It’s really odd but my kids have been brought up pretty much exactly the same.

Yet one is definitely a “saver”, one is a “spender” and the third is somewhere in the middle

There is no rhyme or reason to it, it’s just “how they come”

I have had to take a slightly different approach to the “spender” as opposed to the “saver”.

With the spender, I have encouraged them to save some of their money on a regular basis.

With the saver, I have actually had to encourage them to spend, or at least set goals for what they want to spend their money on and work towards it.

Think about it – you may be really pleased that your child grows up saving all their money.

You may well think it is “job done” – my child saves every penny he can.

But does your child know how to spend their money?

Sooner or later they are going to have to spend money on something, and it is part of your job to help them spend sensibly.

You don’t want them turning into either a maverick who just wastes and fritters their money,

Equally you don’t want them turning into Ebeneezer Scrooge, who will not part with their money even at Christmas and Birthday time

It is all about striking a balance.

Encouraging spenders to save, but just as importantly teaching savers how to spend is all part of their financial education.

2. Give Your Kids Spending Money But Explain What is Expected

We’ve always given our kids spending money on a monthly basis from the age of about 8

But in doing so we have made it absolutely clear that there are certain jobs/chores that they need to do to earn it.

Don’t be afraid of holding it back if you have to if their obligations to you are not met

Clearing up after dinner, keeping their room tidy,

Keeping their shoes clean

These are all examples of stuff that we expect them to do as a condition of giving them spending money

The key is to make sure your kids know exactly what it is they have to do to earn it.

That way you can also give them the opportunity to earn extra for additional jobs which may need doing.

3. Encourage Saving in Your Kids

Encouraging your kids to start saving early is one of the most valuable things that you can do for them.

It will start to instill a discipline and “habit” of saving which will serve them well in later life.

For young kids get them a piggy bank and encourage them to save their money in it – no matter how small amount

In the case of older children open up a bank account or a savings account and actively encourage them to pay into it.

Get relatives to pay Christmas or birthday money into it so they can watch it grow

One of the best disciplines you could possibly get your kids into is to save a certain amount of anything coming in – 20% is a good figure

So if they have a job 20% of their earnings go off to savings.

If they have birthday money, likewise

This actually then bridges the gap between saving and spending because the other 80% is available for them to spend

4. Teach Your Kids How to Budget

How to budget your money is probably one of the most important life skills you can learn, and one which s so often neglected.

I have some budgeting articles on the site which you should read.

Encourage them with a simple incomings/outgoings table that represents what comes into their world and what goes out of it.

Personally, I would also share with them the family budget because it helps to start to explain the implications of money

It also gives them a glimpse into the future in terms of what they will have to account for when they are older

(assuming that you budget of course – if you don’t then my article should help!)

5. Encourage Your Kids to Earn Extra Money

We’ve always encouraged our kids to earn extra money.

When they were young they could do jobs over and above what was agreed for their spending money (such as washing the car, helping clear the garage etc)

But it is really when they get to teenage years that they are likely to start earning their own money

Of course, this is beneficial to your teenager as it gives them vital life skills such as reliability, teamwork, and exposure to plain hard work.

It also starts to build up their resume or CV with relevant experience which is vital on a university, college, or future employment applications

It is also beneficial to you, especially if they earn enough to buy their own clothes and video games as it eases some of the costs of upkeep considerably

There are loads of ways teenagers can earn their own money including

  • Babysitting
  • Car washing
  • Lawn Mowing
  • Pet Sitting or Walking
  • Waiting On
  • Till Work
  • Delivering Newspapers

Get them out there earning – you won’t regret it

6. Do the Shop With Your Kids

Now there are definitely two schools of thought when it is suggested that you do your shop with your kids.

One school of thought is that you will end up spending more than you intended as you give in to their demands on “extras” that you hadn’t budgeted for,

So keep your kids well away from the weekly shop

This is perfectly true and a danger if you are trying to save money

However, when your kids are a little bit older and a bit more “mature” – say around 10 or 11, then take them around the supermarket

Try to explain the choices which you have to make to stay within budget

These may include

  • Branded products vs supermarket brands
  • Essentials vs non-essentials
  • Decisions about buying in bulk to save money over the month
  • Using coupons and loyalty cards
  • Shopping around for best prices
  • Staying within budget

All of this is introducing and teaching good money management habits

One alternative is to do an internet grocery shop, putting products into a “virtual” basket.

One great advantage of this is that you can explain decisions in a less pressured environment,

And (because it adds up the basket as you go along), you can start to make decisions about what you buy and what you don’t

7. Explain How Credit Cards and Credit Work

A good time to start teaching children about these concepts is when they are around seven years old.

You can begin by talking about how cash and credit cards work.

Explain that borrowing money to pay for something is and what we do when we use a credit card.

Also explain that when we purchase by credit, the item purchased is far more expensive than it would have been had we paid for it in cash.

That could be a great starting point to discuss the importance of operating your own household economic unit on a cash basis.

Teach your child the benefits of buying only what can be paid for using the cash at hand.

Then explain that credit cards have a role to play in our lives but only serve us well when we use them in a disciplined fashion

8. Play Some Simple Money Management Games

The best way to get kids to start understanding the concepts of money and money management is through play.

It doesn’t have to be complicated – a simple “shop” game will suffice to get the message across.

For instance, devise a game that looks at the items which will go towards that evening’s dinner.

Give them a budget to work within

Let’s say you have a budget of $7 or £5 to buy minced beef, tomatoes, onions, and pasta for a simple spaghetti bolognese.

You have $7 in your budget and that will buy all the items.

However, if you want garlic bread as well then this will push you over budget so the choice is

  • Sacrifice one of your other ingredients and stay within budget
  • Don’t buy the garlic bread and stay within budget
  • Buy the garlic using a credit card (money you don’t have).
  • This then leads to a more detailed discussion about how much that will cost when interest is added on.

Of course, you may be a little wary about introducing the “concept” of credit cards quite so young,

But in my experience, it is best to acknowledge their existence and explain exactly what they are and how to use them.

Incidentally, this sort of game starts getting them to think about “wants” and “needs”.

In this example, you need the spaghetti bolognese ingredients but you want the extra garlic bread!

9. Walk the Walk

Don’t just talk the talk – you need to walk the walk and practice what you preach.

Apologies for my mixing of metaphors but if you are going to be trying to teach your kids about money

And if you drumming in some good financial principles then you need to demonstrate this by adopting those exact same principles yourself

So if you don’t currently budget then learn to, if you don’t watch what you spend then start doing so.

One example of this which really hit home with me recently was that I had started to not open all my financial statements and letters,

And started ignoring phone calls.

In my defense (my lord) I sort of knew what was in them and was dealing with them but nevertheless

My 18-year-old came back from University one Christmas and had some letters waiting for her of a financial nature,

And I was shocked to see she didn’t open them.

I questioned her as to why she hadn’t opened them and the importance of dealing with finances and she immediately came back with

“well Dad, you don’t open yours”

She had me there.


The moral of the story is if you want your kid to adopt good financial and organizational habits you really need to be demonstrating those habits to them

Open your mail,

Respond to phone calls.

Be seen to be doing the right thing


10. Start Setting Some Financial Goals

Most of what we have talked about so far exist in the “here and now” and day-to-day management of money.

Goal setting is starting to think about what you want to achieve six months, a year, or even ten years down the line

Now I am not saying that you need to go through a whole exercise of SMART goal setting with your kids

But just to start getting them focused on what they may want  (wants are OK if they are thought through and budgeted for)

And more importantly what they need in the future

This could be a new toy or gadget that they have their eye on which they will need to save for,

Or when they are a bit older a nice car or a deposit for a house.

Start getting your kids thinking a bit longer-term rather than the day to day “

For instance “What can I buy from the sweet shop with my spending money?

If you do then a lot of what we have talked about in this article will fall into place.

Summary – How to Teach Your Kids Money Management Skills

My biggest wish is that every parent or parent to be gets something from this article that they can go away and action with their kids.

Every family (and indeed every child) is different in terms of what they take on board,

So the best a parent can do is to start the ball rolling and hope for the best

If you are in a tough spot yourself financially come from the point of view of “learn from my mistakes”.

If you are in a good financial state come from the point of view of “this is what I did …..”

Tailor the messages to your own situation and where you are right now ..

My best advice is to make money management part of your day to day life with your kids

And by doing that you will be stressing the importance of good money management and set them up for life

If you liked this article please do share it on your favorite social media platform.

I would really appreciate your comments.

  • How have you approached money management with your kids?
  • Has this article helped?
  • Are there any tips that you could pass on?

Comment below please on “how to teach your kids money management skills”!!

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