How To Teach Your Child About Money — Even If You’re Broke

By: Jelani Clay     Topics: Childhood Development

I don’t need to tell you how important money is. Maybe only second to love, money is the most sought after thing in the world.

You would think that there would be classes taught in school every year on how to properly manage money. Regrettably, we learn the hardest money lessons on our own well into adulthood.

Why? Because our parents never broke the cycle and taught us. We could’ve been practicing since the age of 3.

Let’s stop this cycle of passing our bad money habits to our children. Let’s secure them with the confidence they need to practice positive money habits and ensure an abundant future.

1) Teach the basics.

Kids need to know the difference in value of each item of currency. Teach them about pennies, nickels, dimes, quarters, dollar bills, etc.

There are many tools available to help with this. For children 0 to 5 you can use our memorable educational song Quarter Dime Penny Nickel that teaches how to count by 25s, 10s, and 5s with ease. The cool thing about this is you can have the song playing during car rides or around the house leaving it to teach valuable lessons without officially teaching.

For children 5 and up, you can get a super deluxee play-money set that includes over $5500 in realistic looking fake bills and coins.

ABCya created a fun online money game, but you can also use money worksheets to create worksheets on-the-fly and select which bills/coins to include.

2) Give them an allowance.

The best way for kids to learn about money is for them to actually have money of their own that they can use.

An allowance covers this pretty nicely. You get to choose the amount and frequency, but one idea is to give them their age in dollars every week. If they are 5, give them $5 a week.

You can even throw in bonuses for chores, good behavior, and excellent scholastic achievement.

Girl Learning to Count Money

3) Teach them the value of saving (or paying yourself first).

Make it mandatory that they pay themselves 10% of their weekly allowance. For instance, if a child receives $10 a week, they should pay themselves (or save) $1 per week.

This means they cannot spend this money unless it’s used to make more money. So any business ideas they have (ie lemonade stand, candy merchant, etc), this savings should be their seed money for it.

Over time this savings will accumulate to something big. The bigger the savings, the bigger the money-making opportunity.

With the habit of saving in place, it would be an easy transition during adulthood for your child to put away a percentage for retirement like in a 401(k) or an IRA.

4) Teach them the value of helping others (or giving).

Instead of just making it mandatory that they pay themselves 10% of their weekly allowance, also make it mandatory that they set aside another 10% for helping those less fortunate.

With this practice they will learn to live below their means removing the impulse to buy, lease, or rent unneeded items in the future.

As an added bonus, they will become charitable and will learn the joy involved in helping others.

5) Keep good records.

Give them a notebook to track all income and all spending. Better yet, use a free online spreadsheet from Google Sheets.

They will learn computer skills and responsibility. You can easily double-check the numbers from time to time and even threaten not to give an allowance if this is not done properly.

This will help you be responsible with money just as much as it will help your child.

6) Teach about debt.

Nobody wants to talk about it until it’s too late, but teach your kids about debt early.

Let’s say your kid wants something now that he or she can’t afford with their 80%. Explain how much it will cost and display (via a notebook or spreadsheet) how long it will take for them to save the money for it.

Then give them a choice between:

  1. Waiting until enough money is saved to make the purchase
  2. Buying the item now for a monthly rate with interest

Really take the time to show them how much more money they will pay over time if they buy now with interest.

If they choose this option, you can immediately take that amount from their allowance but only after they set aside their 10% to themselves (must pay themselves first) and 10% for giving.

With the decrease in weekly funds, they will quickly learn of the added stresses that debt can bring.

If you’re teaching this lesson, be strong. Don’t cave when our child is begging for money. This could be a great time to introduce the value of work and make your child work more around the house to earn that extra money.

7) Protect your money.

None of us ever wants to lose money, ever. This sucks balls.

This is an extension of lesson #3 on saving). For that 10% that the kids pay themselves, protect it. Store it in an extra good hiding place or a secure bank.

Do not allow your child to waste this savings on any business venture that is not well researched. For instance you wouldn’t give your cousin money to start a clothing business if they don’t know where to buy clothes from or how to sell them at a fair price.

If there are currently no business ventures available, the money should be stored in a reputable bank’s savings account so that it will acquire interest until your child is ready to multiply it further. This way your child just increased his or her earning power by doing nothing.

The Final Value

We all know the value that the world places on money. Let’s give our kids this knowledge early so that they can have more practice than we did and make better decisions.

Money doesn’t have to be a serious thing. Make a game out of it (who can save the most, who can come up with the best ways to invest, who can earn more from $5, etc).

As a parent, I recommend Charles Conrad’s The Richest Man in Babylon — Six Laws of Wealth. It goes into more details on some of these principles and will give you an objective look over your own finances.

Quick Summary

  1. Teach the basics
  2. Give an allowance
  3. Teach about paying themselves first
  4. Teach the value of giving
  5. Keep great records
  6. Teach about debt
  7. Protect the money

Although many people are stingy when it comes to money, don’t be stingy with your parenting skills. What are some other ways you’ve taught your kids about the proper handling of money? Let us know below.

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