How Can Parents Teach Good Money Habits to Children


Yet again your child is whining, “Mommy, I want that!” and pointed to an outrageously expensive toy. You roll your eyes and wonder why he keeps asking for more and more pricey ‘stuff’. Simply said, because your child doesn’t understand the concept of money – yet. Even though balancing a budget is a foreign concept for right now, you can teach your child good money habits. Using an age-appropriate approach, it’s entirely possible to help kids as young as five grasp the idea of what money means and why it should matter to him.

Money Doesn’t Grow On Trees

Start at the beginning. Ask your child, “Where do you think money comes from?” You can get more specific and add, “Where do you think our family’s money comes from?” If you have a preschooler or child who is just starting grade school, chances are her answer may be, “From the bank,” or, “The credit card!”

If your child doesn’t understand the reality of where money comes from, it’s time to teach her. The concept that you get a paycheck and it’s either a piece of paper (which doesn’t look anything like the cash and coins that your child knows as ‘money’) or is mysteriously added into your bank account a few times a month electronically is abstract. A young child may not be able to process this idea. Instead of just telling your child that, “Mommy goes to work and makes money,” show her. Give her a job to do around the house. Match the job with your child’s age. For example, a 5-year-old can fold laundry, a 7-year-old can do some of the dusting and a 10-year-old can sweep the floors. Pay her what you feel a fair wage is. Now that she sees first-hand that work can equal money, compare it to what you do all day long.

Start Saving

Having money is fun! You can buy all kinds of goodies with it. Your child knows that, and would happily spend 100 percent of his hard-earned chore cash on sweets, treats and various toys that he just has to have. But, what happens when the money’s all gone? Help your child to save his money for something special, instead of spending it the second it hits his hands.

Young children can stash their cash in a traditional piggy bank. As your child gets more experienced with money, and better understands basic math concepts, he can start charting his savings. Before he banks his money, have him write the dollar and cent amount in a notebook. Ask him to add it up at the end of every month. This running balance shows him how he’s doing when it comes to saving. It also allows him to plan ahead for purchases he might want to make. Is there a pricey toy that he wants? Your child can take a look at his book and figure out when he’ll have enough to buy it.

Model It

Your child is watching you, and everything that you do. Be a role model for spending and saving. Talking about managing money is part of teaching financial literacy, but so is showing it. For example, you’re at the mall on a family outing. You spy a sale at your favorite store. Take your child in and show her that differences between the full prices and the sale ones. If your child is old enough to do the math, have her calculate how much you’ll save by buying the items on sale.

Did your child come up with a unique way to save or become a master of sale spending all on her own? Tell us, so that we can inspire other parents with your child’s money management skills! Submit your child-friendly financial tips at for us to share.

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