How to Raise A Money-Smart Child

If you’re searching for ways to raise a money-smart child, you’re going to love these tips and ideas!

Teaching children to have a healthy respect for money seems to be harder and harder. So many parents give their children everything they ask for that other kids start to think they can have whatever they want when they want it.

I know my kids thought like this. Or at least they did until they started to understand how hard it can be to earn money, why you need to save, and how to be responsible with spending.

The earlier you start teaching your child about money, the better they’ll be about managing it when they’re grown. By then, it will have become a lifelong healthy habit.

Money conversations can be tough though. Money seems to be one of those “taboo” topics that nobody wants to talk about. And, nobody seems to know how to talk about. If you didn’t learn good money habits until you were an adult, you might not know how to approach the conversation with your child.

Talking about money with your child doesn’t have to be hard. Here are a few simple money habit ideas to get you started!

Save for a rainy day

Creating a habit of saving is essential to personal finance and wealth. From the time your kids are old enough to ask for things they want you should start teaching them how to save and budget.

Money is earned

When your child reaches the age that they can comprehend the cost of things they want to buy, it’s time to give them the cold, hard facts . . . Money doesn’t grow on trees. This can be a good time to discuss numbers with them. How much money do you make an hour? How many hours do you need to work to buy groceries for one week?

Budgeting

A budget is something many kids (and some adults) don’t understand. Your children may need to be a little older to grasp this topic, but learning what a budget is, and why you should have one, is one of the most important money-smart lessons you can teach.

Be careful with credit

Credit cards can be helpful at times, but kids need to understand that they are not free money. And repaying this money can be costly. Let them borrow from the Bank of Mom and Dad for something they want, but charge them interest until they repay it. They’ll grasp the idea pretty quickly.

To make teaching these lessons a little easier, there are a few things you can do to get your kids onboard with creating healthy money habits.

How to Teach Healthy Money Habits

Teach them to budget visually

Help your kids create savings jars for their money so they can visually see it and watch it grow. Label one jar for “saving” and one for “spending.” If you want to teach your kids the importance of giving back, set up a third jar for “charity.” Each time they receive money, like an allowance or birthday gift, have them divide the money into the two or three jars. Before long they’ll be able to see the money in their jar grow, and it will encourage them to keep going.

Encourage them to give their “savings” jar a goal; something they want to buy or someplace they want to go. This will help teach them about giving their money a purpose.

Make it fun

Classic board games like Monopoly or The Game of Life are great for teaching basic money matters in a way your child will understand. You can also visit Kids.gov to find age-appropriate games and videos that teach money skills in an interactive way.

Get them involved

Ask your child to help when you’re grocery shopping. Teach them to compare brands and prices to find the best deal. Give them a grocery budget to work with and ask them to create a grocery list for the week without going over budget. You can help them create a list by looking through the pantry and fridge and making a menu plan based on what you already have.

Set an example

Kids are always watching you. If you have a habit of pulling out the credit card every time you go out to dinner or go shopping, they pick up on that and learn that behavior. Teach them good money lessons by following them yourself. Pay with cash or debit card.

Give them a “job,” not an allowance

Don’t just hand your kids money. Instead, pay them for chores they do around the house, so they learn the importance of earning it. Different chores can earn different wages. Taking out the trash might be worth $2 while cutting the grass earns $15. As an added bonus, they’ll be more likely to help with the household chores!

Raising a money-smart child needs to start early, but how do you teach little ones about budgeting? When they’re young, some money matters may be beyond their comprehension, but not all of them are.

Age-Appropriate Money Lessons

Ages 2 and 3

A 2- or 3-year-old may think a nickel is worth more than a dime because it’s bigger. This is a great time to start teaching them the value of each coin. Make it fun and educational with a coin identification game. Trace different size coins on to a piece of paper and color in the shapes. Then, ask your child to match the coin to the drawing and discuss each one by name and value.

Ages 4 and 5

Before going grocery shopping, ask your child to help you clip coupons for the items on your list. Then, at the store, let them find the products that match the coupons. After shopping, put the amount you saved on your bill into a savings jar so your child can visually see how much you saved.

Ages 6 to 8

When your child starts doing chores and earning money, it’s time to start teaching them about saving vs. spending. Use the jar method at first so they can visually see their money grow. Then, as it builds, you can help them open a savings account at a bank where they can earn interest on their money.

Ages 9 to 12

By this time, your child has the basic math skills they need to start comparison shopping. You can take this beyond the grocery store by having them comparison shop for anything they want to buy. This is also a good time to start teaching budgeting skills. When there’s something they want you to buy for them ask “Do you really need it this week or can it wait since we’re going out to dinner?”

Ages 13 to 15

Teens are ready to start learning about investing but in a risk-free way. Have them choose a company they’re familiar with, like Nike or Nabisco, to follow in the stock market and make a pretend investment. Make it a team learning experiencing by having each member of the family pick a stock to follow. Then read the newspaper or watch the financial news together. Talk about how the stock values of everyone’s choices have changed and which stocks gained or lost.

Ages 16 and up

Pre-paid debit cards are a simple tool you can use to teach financial responsibility. Some cards, like the American Express Bluebird, allow you to transfer money online without paying a fee, deposit checks through mobile deposit, and even set money aside for savings. Teenagers can use these cards to pay for what they want or need without having to carry cash or create debt with a credit card. You can load the cards with a set amount of money and then let your child budget for themselves. You can also track your child’s spending by viewing the account summaries and discuss spending habits.

If your child is like most, they’re attached at the hip to their electronic device. Put it to good use with a few apps to teach them about saving and budgeting.

Educational Money Apps

PiggyBot

This app is a digital piggy bank. PiggyBot gives kids a direct role in managing their money and shows them a visual of how much money they have. It’s free but only available on iOS devices. Recommended for kids ages 6 to 8.

Green$treets: Unleash the Loot!

Kids can rescue their favorite endangered animal while learning about money matters. Using a budget, they can buy food, shelter, and toys for their animal friends and play with them before they are released back into the wild. Having an animal friend that depends on them gives kids an incentive to budget wisely and reach their goal. It’s free and available for iOS and Android devices. Recommended for kids ages 5 to 8.

Celebrity Calamity

Join the celebrity world as a financial planner. The goal of this app is to manage a fake celebrity’s budget and keep him or her from overspending, while also keeping them happy. It’s free but only available on iOS devices. Recommended for kids ages 6 and up.

Motion Math: Cupcake!

Here your child can learn both money and business skills. Players make cupcakes using ingredients they buy then set a price for the baked goods. They are also responsible for delivering orders and managing costs and revenue. This app is $4.99 and is only available on iOS devices. Recommended for kids ages 8 and up.

Action Plan for Money Smart Lessons

What lessons can you start teaching your child this week? Make time for a focused conversation. Keep it brief, but stay focused so that they can understand the importance of what you’re teaching them.
Look for opportunities to talk about money with your child throughout the day. Everything from buying your morning coffee to putting gas in the car to giving them money for lunch can be a money lesson.
Be aware of the times that your child is not respecting or understanding how money works. Use these as teachable moments.
Know that money matters are something you will always be teaching your child. Be vigilant about looking for opportunities for a discussion.
Decide what money lessons you want your child to learn so that you can start planting seeds and teaching these lessons early in an age-appropriate manner.
As your child gets older, take the next step in their financial education. For instance, upgrade their savings jar to a savings account. Then, upgrade the savings account to a debit card that they can use for responsible purchases as well as savings.
In addition to teaching your child to save, it’s important to teach them to budget their expenses. Teach them to budget early on, so they can manage their money responsibly by the time they’re teens.

Raising a money-smart child doesn’t have to be a challenge, but it is an ongoing lesson from the time they’re young until they’re grown. But along the way, they’ll build strong financial habits that will help them live debt-free, save for emergencies, and create wealth.

How to Raise A Money-Smart Child