How to teach your kid personal finance & money management. How to teach your kid the necessary lifelong lessons of personal finance & money. The easiest ways to teach your kids personal finance and the money value. Teach your kids money management to become successful in the future.

How to teach your kid personal finance & money management. How to teach your kid the necessary lifelong lessons of personal finance & money

There are few more valuable lessons to learn in life than the value of money and how to deal with it. It can be the difference between living a financially stable life and squandering each paycheck.

How to teach your kid personal finance & money management

Fortunately, kids are financially blank slates. They’ve not yet had to make any big money decisions. And as a parent, you likely want to give your child the tools and know-how that will help them make those future decisions right.

Research shows it’s possible:

A study conducted by Rowe Price found that kids who regularly discuss financial topics with their parents are 64% more likely to have confidence in their financial future. 

That’s great. But it can be difficult to know exactly what to focus on and what resources to use. Below is your step-by-step, age-by-age guide to gradually cultivating money-smarts in your child.

Early Beginnings – Ages 3 – 6

A study by the University of Cambridge found that money habits in children are formed by age 7. Before and after this pivotal age, kids may not understand the gravity of money. But, they can understand some basic financial concepts that will help them form healthy habits. So, it’s important to focus on the foundations of money.

The four essentials of money 

  • Earning 
  • Spending 
  • Saving 
  • Giving 

Naturally, your kid might not jump at the chance to learn the ins and outs of these concepts. As of now, their favorite toys are theirs! And that’s how it’s always been, thank you very much. That’s why it’s essential to get on their level. Work with what they already know and explain in terms they’ll understand.

Show, don’t tell

Kids soak in information from their environment at great speed. And no pressure, but all little eyes are on you. Whatever they see you do with money, they’ll mimic. 


Teach them how the spending works by withdrawing some paper cash, notably coins, and letting them get familiar with the look/feel. Bring them up to the counter when making purchases and explain what’s happening as you hand over money and receive goods in return.


Now that your little one has a better grasp of where toys and sweets come from, they’ll want some money of their own. Explain to them in basic terms that they’ll have to work for it. Of course, this doesn’t mean they’ll have to get a job but rather do some extra chores around the house. 

Easy ways to teach your kids personal finance and money management. How to teach your kid personal finance & money management


Saving is timeless, so it’s best to use the traditional piggy bank for this lesson. Now that your child has amassed some hard-earned cash have them put it in a piggy bank.

Take a small percentage of this amount and add it to the piggy bank every week. All that’s left to do is watch your child’s face light up with joy when they see their saving growing – et voila! A savings lesson has been learned.

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Ages 6 – 10

Kids’ brains develop to understand the cause-effect relationship after age 6. By now, your child can see that:

  • Parents must work to earn money.
  • Not all money is tangible. 
  • Goods and services have an individual and inherent value that can be purchased with money.

So, it’s time to feel these observations with them. You can achieve this by hashing out some basic economics. Consider clarifying the difference between goods and services, needs and wants, and short-term vs. long-term goals. 

Needs vs. wants 

Purchases are aligned by necessity. Consider making a list of “needs” and “wants” with your child. If possible, sit down with your child and show them the fundamentals of bills. Make it clear that electricity, heat, and other vital functionalities must be paid regularly before “want” purchases.

Goods and services 

Money isn’t only spent on physical goods and on someone’s efforts, skills, and time. Your child needs to understand the distinction. A relatable service purchase for a child would be apps or streaming services you might use daily. Explain that you pay for these things because someone worked hard to make them. 

Moreover, the fact that goods and services are often intertwined can be challenging. However, there’s no need to be in-depth. Using your child’s favorite game or toy as an example should suffice.

Tell them in simple terms about the team that worked to make the product and others behind the scene work such as transport. You can even reference the workers they’ve likely witnessed stocking shelves or thriving transport trucks. Explain that all of these people must be paid, and that’s why services or goods have value. 


Money starts losing a bit of its glamour in the early teens. They understand that soon they’ll have to manage their own financial matters, and it’s up to you to make that as easy as possible for them.

So, it’s time to get down to the nitty-gritty:

  • Credit 
  • Debt 
  • Budgeting 
  • Interest 

These concepts impact the consequence of money on your child. 


Let’s face it, credit can be scary. But it doesn’t have to be. Instead of even mentioning the word credit or outlining its real-world consequences, you can drive a simple lesson home: don’t spend more than you have or can afford.

And don’t worry, the “show, don’t tell” method won’t bankrupt you or plummet your credit score. There are many risk-free ways to show your kid the credit ropes. 

Consider giving them their own fun, make-shift debit card. Allocate a figure to the card and let them make their purchases while calculating how much they’ve spent.

If they spend beyond the figure and can’t pay it back, make a note of the deficit. It might feel mean to do, but to teach them the reality of credit, add to this deficit every week they cannot make repayments – exactly like interest.


Of course, your child may have to take out loans or make regular payments in the future. With college fees and car purchases likely looming, it’s time to introduce them to the fact that they may have to make controlled purchases beyond their means.


By now, your child can probably save for something they want before purchasing it. However, they may not know how to save in the long run – or not want to. You can help them with that. Consider asking them to list some things they would like to purchase in the future and then add up how much money they will need.

Help them decide on a percentage of their allowance they’d be willing to save every week until they can buy each listed item. By doing this, you instill the very basics of budgeting into your child’s mind without all the fuss.


Things are starting to heat up a little now. Your child will likely have more interest in money as they grow into their new-found independence. So, it’s time to take a look at the more worldly side of money:

  • Work
  • Banking 
  • Wealth – investment portfolios and stock


Your child is about to enter the workforce. Scary, I know! It seems like just yesterday they were crawling all around. But you’ve worked hard to set them up with financial expertise, and now they’ll want to get to work! 

Try talking to them about what type of work they’d be interested in and how they’d fit it into their schedule. Their first job could coincide with school, so talk to them about how shifts, hours, wages, and taxes work—Encourage them to streamline their schedule by considering commute routes and days off.

Does your kids know how money works_


Contrary to popular belief, banks aren’t going anywhere. 84% of bank customers ages 18-34, including millennials, have visited a teller at least once in 2016. Even if your teen opts for an entirely digital banking experience, they’ll still need to know who’s keeping their money safe and how.

Actively involve your kid and let them take the lead in the bank account opening process. Make sure they keep some requirements in mind such as online account management, interest rates over 1%, and no monthly maintenance fees.


Steadily saving over a lifetime can amount to wealth. And despite opening the doors to some desirable luxuries in life, wealth also provides financial comfort. So, it’s something every parent desires for their child. Fortunately, wealth can be achieved by anyone if they start practicing smart financial decisions early.

Ensure you teach your child about varied investment options and give them an idea of how the stock market works. They might not be immediately interested, considering it all sounds like “grown-up stuff.” But, if you explain the difference between active and passive income, they could grasp the convenience and attractiveness of an investment.


Your little ones are about to enter the real world, and armed with your financial expertise, they should do just fine. However, there are some final hurdles to cover:

  • College fees 
  • Car payments 
  • Mortgages 

College fees

This is the first “big” loan your child will ever make. And let’s face it, debt is overwhelming. Try to calm their worries by explaining the difference between good and bad debt. College debt, as long as there’s a solid plan or budget in place to repay it, is decidedly a very good debt.

Car Payments

A car could very likely be part of your child’s future. So, they’ll need to know all about car loans, repair payments, tax, insurance, and all the other regular payments that driving can accrue.


Eventually owning a house could also be high on your child’s long-term priority list. Unfortunately, most first-time buyers don’t even know where to get started. Make sure your kids don’t run into trouble by giving them the low-down on how to apply for a mortgage.

Explain the nuances of debt-to-income ratios or inform them on what to look out for while hunting down the right lender.

Final word

Since financial literacy is not yet focused on in schools, it’s still up to parents to instill all of the necessary knowledge for their child to successfully handle their own finances. And hopefully, with age and real-world experience – the lessons will sink in.

So, follow the steps above and help your child’s inner financial whizz blossom! It may take time, but financial savviness is a life’s work after all. And the benefits are beyond worth it.

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