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Teaching Your Children About Money

by Emily Guy Birken

I vividly remember watching my father accept change from a cash transaction when I was a child, and trying to figure out exactly how it was fair that he had handed over a $10 bill and received two $1 bills (and our lunch) in exchange. I couldn’t have been more than four or five at the time, and although we were at the zoo, my attempts to understand how money worked is much more memorable to me than any of the animals we must have seen that day. That teachable moment was one of several unforgettable experiences in my childhood financial education.

Now that I am a parent, I am thinking more concretely about how to pass on that education. Money is not a subject taught in school. It’s considered taboo to talk about money, and often people will have a sense of shame about it. On top of that, we live in a “Gotta Have It NOW!” culture where credit is easy to come by. Parents absolutely must educate their children about sound finances, but many simply do not know how.

Teaching Your Children About Money

Teachable Moments

Unfortunately, a single discussion about money is not going to cut it when giving your children the financial life skills they will need as adults. The most effective way of teaching your children is by talking money all the time. Here are some common occasions for regular financial discussions:

At the Grocery Store

From weighing produce and determining what the cost will be, to keeping track of coupons, to comparing name vs. store brand, to keeping a running total throughout the trip, the grocery store provides you with a wonderful opportunity for your child to hone his math, money, and budgeting skills. Making a game of the grocery store with younger children by challenging them to find a cheaper alternative or add up prices quickly will make the financial education fun. For older kids and teenagers, allowing them to take the list to see if they can spend less than budgeted (without sacrificing any of the needs on the list) will inspire them to be savvy shoppers—particularly if you let them keep the difference between what they spent and what you budgeted.

When Paying Bills

The monthly bill-paying chore is hardly anything you would call fun. But when kids are small and want to do everything Mom and Dad do, it’s an ideal time to teach children about money. Allow children to see how much money you have and how much must go out to pay bills. Let them practice their addition and subtraction skills to help you balance your checkbook. If you still pay bills by check, put the kids in charge of double-checking that you have all the necessary information in the envelope before they seal it and stamp it and put it in the mailbox. Explain how the things your kids might take for granted—like heat and electricity and, of course, cable—cost money each month.

On Vacation

Even the most budget-averse family generally goes on vacation with only a certain amount of money they can spend. Involve your children in the decisions even before you’re on the boardwalk debating between the hot dog vendor or the pizza parlor. Saving for a vacation is a fun way to teach children about the power of savings goals. If children understand that giving up something now leads to something wonderful later, they will learn the valuable tool of delayed gratification. With only a certain amount to spend, including children on the planning process of your vacation will help them to learn how to budget and how to rank the importance of different options. Once you are enjoying yourselves on vacation, giving each child a certain amount to spend while away is an allowance lesson compressed into a week.

Lifelong Learning

It may seem strange or uncomfortable to include your children in your day-to-day money decisions, but the only alternative is leaving them unprepared for their financial future. By making money something you talk about openly and with fun and humor, you will ensure that your children have all the tools necessary to make good money decisions.


Published or updated February 25, 2011.
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{ 11 comments… read them below or add one }

1 Stephanie Taylor Christensen

Sometimes the best way of teaching is through hands-on learning and positive experience. Research indicates that kids who do chores have a better appreciation of money, and gratitude for the value of hard work and its rewards. Don’t want to be a spammer, but I wrote more about the topic on my in a an article called “Free, Effective and Rewarding Gift for Kids.”

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2 Mike

When I was a kid I found a little brass cannon in the store that cost $3. My parents taught me the value of money by giving me a 50 cent per week allowance. It of course took me weeks to save up enough to buy that cannon, buy I never forgot that money doesn’t simply grow on trees.

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3 John

Thanks for this post. Very well done. I agree, parents need to teach their children about money so they don’t become a statistic – debtors at 18 years old.

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4 IPA

One of the first things I remember buying with my own money was cowboy boots. I think I was seven. I had to save up money from working around the ranch to buy them. It was a great lesson my parents taught me and I’m glad they did.

Our four year old son wanted a toy so we told him he can save his money and buy it himself. When he had enough money (mostly birthday money) my wife took the money out of his piggy bank and they went to the store. She had him hand the checker his money and he walked out happy with his toy. Until they got home he went to his piggy bank and asked where all his money went. That was fun explaining how he exchanged his money for the toy. Then his eyes lit up and he realized he can save more money to buy more toys. We teach him quite a bit of money and how to save.

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5 Matt Bell

This is really good advice, Emily. I especially agree with your point about delayed gratification that you made when talking about vacations. There’s a lot of research showing so many benefits that come to those who know how to put off an immediate reward in favor of waiting for a better reward — financial benefits, friendship-building benefits, health benefits, SAT score benefits, and more.

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6 GG

I remember how, whenever we went anywhere, it seemed that our Ryan would find some money somewhere. Maybe a penny, a dime, and once, I remember a $10 bill ( I think that was at the Space Center in Huntsville), now you’re ‘finding’ money on the internet —— Ryan, you are amazing!! Hugs to all, GG

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7 Sonya

My mother instilled in me those same principals, and its gratifying to see now as an adult I’m able to purchase not only the things I need but can occassionaly reward myself with things I want. So I agree with the forum of being able to appreicte something once you’ve worked for it.

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8 Jacob

Hi,,
Whether in the best or worst of times, people need to know how to make, spend, and invest money. Everyone from the teenager collecting their first check to the retiree can benefit from increasing their financial intelligence

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9 Daddy Paul

Teaching kids about money is one of the best things you can teach them. Money is a big factor in many areas of life including divorce.

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10 Bill at FamZoo

Excellent practical tips, Emily. I really like the scenario you mention of saving and budgeting together as a family for a vacation.

An effective exercise we’ve used with our teens is to put them in charge of budgeting and tracking expenses for their own clothing (and dealing with the consequences when they blow their budget).

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11 Suzanne@GrowingRichKids

Great tips, Emily. Another important thing parents can do is to just simply say No. If we buy them everything they want (plead for), they learn that they should always get what they want when they want it. Parents are often driven by this desire to provide the very best for their children, but we’re setting them up for disappointment – and possibly a quick path to debt as they try to recreate life with their parents – in early adulthood.

We’ve got a big vacation coming up this summer so I love your idea of using this as an opportunity to share lessons about money with the kids.

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