One of the lessons a child needs to learn in life is how to manage money. Largely in part to the lack of personal finance classes in schools, parents are increasingly asking how they can teach their children smart money habits.

While personal finance courses are becoming more prevalent on college campuses, many remain elective classes rather than graduation requirements. As a result, young people are left to learn about money through social means or by listening to influential adults.

In this article, we discuss how you can begin teaching money habits at home and the importance of teaching kids about money.


Provide Opportunities to Earn 

Providing children with an allowance is a popular way to introduce smart money habits. Rather than treating allowance as an automatic payment, we consider it best used as earned compensation for household chores or good grades. Working hard and earning an allowance is a positive life lesson for children who are motivated to succeed and earn money through hard work. Additionally, children who use allowances to purchase toys, treats, and other items they desire, learn the significance of their efforts in achieving their financial goals.


Encourage Healthy Saving Habits 

Saving and spending responsibly are valuable lessons to consider when teaching kids about money. For example, the practice of saving money in a piggy bank teaches discipline, goal-setting, and delayed gratification. Consider having a conversation with your child about saving money and the importance of setting money aside in case of emergencies.


tech kids smart money habits


Get Kids Interested in Investing

Your child may also gain an interest in wealth by purchasing a stock with which he or she has an emotional attachment. By investing in a familiar company, they remain engaged and excited to watch it grow. Children may be especially intrigued to be part-owners of big brands like Nike, Microsoft, Apple, etc. Through the appreciation of their share, they will learn the importance of investing. Additionally, this opens the possibility of teaching them the importance of compound interest.


Teach Children About Taxes

Consider explaining to your children how tax dollars are used to buy fire trucks or build libraries in your community. Introducing the basic principles of taxes helps prepare kids for financially secure adulthood and conveys a sense of shared responsibility for the good of the community.


Teach Kids to Set Financial Goals

You might consider discontinuing your child’s allowance when he or she reaches working age and encourage them to enter the workforce. Maintaining good grades while working helps children learn to value their money and the importance of prioritizing their work. Talk to them about how salaries are determined and help them determine how many hours they will need to work to achieve their goals.


Be a Good Financial Role Model

Finally, it is important to instill an appropriate emotional reaction when teaching kids about money. For parents, this may be the most challenging step. We believe it starts with modeling responsible money behavior and emotions.

The majority of what children learn comes from watching their parents and family, so it is important to set a good example. For example, impulse buying every item you see will teach your children that spending randomly and ignoring budget goals is okay. By focusing on savings and smart purchases, children will learn an appropriate time and place to spend money.

It is also wise to teach children not to compare their belongings with others. Since every family’s financial situation is different, this can be a complex subject to discuss. Having these conversations while they are young can help them realize that “brand new” isn’t always necessary and that sustainable clothing and old cars will still serve them well. 


Teaching Kids About Money – Summarized

Educating your children about personal finance takes time. However, when you put in the effort and continually communicate a clear message about money, you will help instill good habits.

  • The desire to instill smart money habits in children seems to be on the rise over the past few years, as parents inquired about how to teach future generations about wealth management.
  • Children learn differently, so what works for one family may not work for another.
  • Children learn best by observing their parents and family’s habits, so it’s important to be a good role model for them.


Speak With a Trusted Advisor

If you have any questions about your investment portfolio, taxes, retirement planning, our 401(k)-recommendation service, or anything else in general, please call our office at (586) 226-2100. Please also reach out if you have had any changes to your income, job, family, health insurance, risk tolerance, or overall financial situation.

Feel free to forward this commentary to a friend, family member, or co-worker. We hope you learned something today. If you have any feedback or suggestions, we would love to hear them.

Zachary A. Bachner, CFP®

with contributions from Robert Wink, Kenneth Wink, and James Wink

After graduating from Central Michigan University in 2017 with specialized degrees in Finance and Personal Financial Planning, Zachary Bachner set himself apart by earning the CFP® designation. Zachary now writes articles aimed at helping everyday people understand complex financial topics. He focuses on explaining financial planning concepts and strategies in clear, simple terms.


If you found this article helpful, consider reading: