The highlights
- Money habits are learned over time. You can help your kids grow into financially confident adults by tapping into their natural curiosity and finding opportunities to talk with them about money.
- Hands-on experiences with money can make for great learning moments. Give your kids the chance to earn money through chores or work and allow them to make their own spending decisions.
- You can also help your kids come up with a savings goal and work toward it to help them understand the power of saving. Getting a new game or toy can be pretty fun, after all.
We aren’t born with good money habits—they’re taught and practiced, just like any other good habit. And the sooner you start building those smart financial habits, the easier it is to keep them going long-term.
By nature, kids’ young minds are more open than adults’ to receiving new information—so it’s important to give your kids the tools and foundations they need to become financially confident adults early on.
Brian Ford, head of financial wellness at Truist, and Liz Frazier, CFP, and author of Beyond Piggy Banks and Lemonade Stands: How to Teach Young Kids About Finance, recommend starting with these five lessons—especially for the 4 through 12 age range.
1. Money is earned.
The toys, games, apps, and treats your kids love don’t just magically appear—you have to pay for them with the money you earn. When kids learn this, it can be exciting—they‘ll naturally be curious about working as a means to get what they want.
Chores can be a great way to teach your kids about earning money. Ford suggests using bigger chores, like cleaning out the garage, as opportunities to let your kids earn some extra compensation. But he doesn’t factor in basic chores—like keeping your room tidy or picking up your toys—as part of his kids’ allowances.
“We don’t want our children to think that they can just stop doing their chores simply because they no longer want or need the money,” he says.
You could also consider helping your kids with entrepreneurial experiences, like setting up a lemonade stand in the cul-de-sac, hosting a bake sale, or selling old belongings they no longer need.
Learning gratitude, Ford says, is another perk of working for a wage—your kids can appreciate the results of working for what they have and become more grateful for the work you do.
2. Saving can be fun.
Saving money means your child is on their way to getting something they really want. Have your child write down a specific savings goal. This will help them focus and get in the habit of setting goals, which they’ll need throughout other aspects of life.
Make saving fun by letting them pick out a piggy bank that matches their personality or creating a fun chart to track progress toward their savings goal. When they deposit actual coins and dollars, they’ll see how their hard work adds up—in their piggy bank or on their tracker.
When the time feels right, consider setting up a savings account for your kids. Especially for older kids, this can help them see how their money can grow. Once they have their own account, you can help them track their savings online—and you’ll get an opportunity to teach them about more advanced money topics, like how interest works.
Frazier also recommends that you have your children automatically save a percentage of their allowance or earnings instead of spending it all. “It can be 20% or 10% or 50%—the percentage doesn’t matter,” she says. “What matters is that automatic saving becomes a habit early in life.”
Reinforce the idea that patience and saving can help your kids earn the things they want. They’ll feel proud when they save enough for one of their goals, which can also help motivate them to continue saving.
3. It’s OK to spend, but smart spending takes practice.
Yes, kids need to save for things they want. But when it’s time to buy those things, they can celebrate!
Spending on the right things—things you saved and planned for—can feel good. And on the flip side, spending on the wrong things can be a valuable lesson to learn early on. Delayed gratification is an important concept for kids to learn, as it can shape their relationship with money well into adulthood.
“Kids need to understand the decision-making process,” says Frazier. “I try to talk through options with them … how they could split their money amongst purchases or save it. And then I’ll sit back and let them make some spending mistakes so they can see the consequences of their actions.”
For example, if they have $20 to spend at the fair and they blow it all in the first five minutes, they’ll learn from that and save some money next time—or weigh the costs of the games more closely.
Involving kids in decisions about money and teaching them how to spend on the things they care most about may help them learn fewer financial lessons the hard way as adults.
4. “Needs” are different from “wants.”
In all the conversations you have with your kids about spending and saving, the concept of “needs vs. wants” is likely to come up. This is another handy way to help your children understand how to make good spending and saving decisions.
While they’re young, your kids may not need to spend on bigger, basic needs like food or housing. However, you can still help them realize that putting needs like these first is a key part of budgeting and spending wisely.
A good exercise could be to have your kids write down a list of “wants” and a list of “needs.” Then, have them rank or prioritize all their wants and needs from the most important to the least important. Use their lists to keep the money conversations going!
5. Giving feels good.
Most children learn about giving by watching others give or through a natural desire to help people. You can set an example by talking about how you give and why it’s important to help others.
Giving doesn’t always require donating money. But if you do give financially, you can involve your kids in the process so they can understand why you give what you do and how you choose how much to give.
If giving isn’t part of your budget right now, you can still teach your kids about giving back by setting an occasional weeknight or Saturday aside to volunteer together for a cause you all care about.
Sharing these lessons with your kids can help them develop a solid foundation as they build their own relationships with money.
Next steps
- Give your child the opportunity to start earning by coming up with some realistic chores for their age.
- Have discussions about your child’s financial goals. What are they saving for? Where would they like to donate their money? How can you motivate them to save?
- Set up a savings account for your kids so they can watch their money grow.
- Use this “Great money habits” checklist and download this “My first savings plan” worksheet to continue helping your kids learn about money.