How to Teach Kids Money Management

Tips and Resources for Raising Financially Literate Children

Earlier is better when it comes to teaching your child about money.

Research suggests that lifelong financial habits are formed by the age of seven. Young children learn best through observation and decision-making. Explain spending, saving, and investing as you actively do these things, rather than as concepts. Model good money habits and give your kids opportunities to manage their own money.

Take Advantage of Teachable Money Management Moments

When you’re shopping with your children, speak aloud about the financial decisions you’re making. Say things like: 

  • “I know this cereal has your favorite cartoon character, but the generic brand tastes the same. We can get two of these for the same price as one of those.” 
  • “Apples are on sale this week. Let’s buy those instead of strawberries.” 

Help kids think through money decisions by asking for input. 

  • “You already have a raincoat. Why do you think you need another one?” 
  • “This raincoat costs the same as the movie ticket. You can have one, but you can’t have both. Would you rather buy the raincoat or see the movie?”
  • “Juice boxes cost more than the big bottle of juice. Should we buy a big bottle, and pour the juice into your go-cup for school lunch?”

Make Financial Concepts Tangible

Try the “Three Jar Approach.” Label the jars “saving,” “spending,” and “giving.” Each time your child earns or is gifted money, divide it evenly between the jars. Count the money together when you make a deposit.

Allow your child to spend the funds in the “spending” jar as they like. Ask your child who they would like to share the “giving” money with. It may be a religious organization, a charity, or a GoFundMe project. Have them choose a bigger-ticket item or experience to purchase with the accumulated money from the “saving” jar.

Consider Giving Kids an Allowance

Will your child have to complete chores to earn money? Will they receive a weekly or monthly allowance? In other words, will they need to manage their money over a shorter period or a longer period of time? Will you extend credit, giving your child an advance on their allowance? Will you charge interest?

Involve Kids in Family Budgeting

Show your child your bills. Explain how much you make an hour and how many hours you have to work to pay a particular bill. Talk about ways you can get lower that bill, such as taking showers instead of baths, opening windows instead of running the air conditioner, or turning off lights when you leave a room.

If your family is saving for something, such as a vacation or a pontoon boat, tell your child about it. Have a conversation about how much you put towards the goal and how often. Make a savings chart to keep on the refrigerator or family bulletin board.

Open a Bank Account with Farm Bureau Bank

If your child has $100, they can open an account with Farm Bureau Bank. Banking services are offered online or by phone, so they can manage their own account from the family computer or a smartphone. They can watch their balance change in real time as they deposit funds, use their debit card, or withdraw money from an ATM. Frequent balance checks teach your child to look out for account fraud. Ready to get started?

More Money Management Resources

The Federal Financial Literacy and Education Commission has a collection of great resources to teach kids of all ages about personal finances.