Your Children and Finances: Earlier the Better

By Jennifer Smith

Often the lessons our children pick up on come directly from the examples we set. When parents struggle with money, don’t talk to their children about it, and don’t instill good financial practices in their kids, they set their children up for potential struggles as adults. Our society contains many marketing messages which can financially ruin someone very quickly. Use the following tips to make sure you teach your children how to manage and save money.


Five Tips Every Parent Should Understand

1.  Actions Speak Louder than Words

Children of all ages mimic their parents and it extends further than picking up on the language they use or a son wanting to be just like his father. When parents struggle financially while hiding those struggles, children become adults without a good understanding of how to handle money. It’s not always easy, but as parents, if you set a good financial example, pay your bills on time, and include your children in the budget conversation every month, you will teach them lessons they won’t learn in school.


2.  Put Them in Charge

It might seem strange to think about a five-year-old child in charge of money, but you need to start them early.  Young children will need you to lead the way, but as they get older, you can use a prepaid visa card, checking account, and saving account to help teach them how to manage money. Even if you, as the parent, do the actual buying of things for them, you can still put the money in their account, help them create a budget, and allow them to make the payments.

This can include paying for school activities, lunches, extra-curricular activities, and other expenses you would usually just write a check for. By depositing the money into their account, along with any spending money you give them for chores around the house, they learn early how to handle money. This will serve your kids very well as they grow into young adults and start to take on more expenses.

3.  Teach with Consequences

A huge mistake parents make, after doing everything else right, is not allowing for consequences. For example, you help your new teenager open a checking account, deposit all the money he needs for the month into the account, and then he writes a bad check. Instead of teaching him to do extra chores or use some of his savings to pay for the bad check (and all the fees that go with it), you just…cover it. As much as you might think you’re protecting him, you’re really just teaching him that it’s okay to write bad checks because Mom will just bail you out.


It might be difficult to sit on the sidelines as your child deals with the consequences of missing some activity because she didn’t manage her money well.   But remember that this experience will teach her a lesson  – an important lesson learned early, before it could cause larger issues. Let the consequences do the punishing and it won’t take more than one or two bad checks for the lesson to get across.

4.  Pay Allowance

Yes, your children should earn a small income from you. They should have a set of chores (age appropriate) to do just because they are a part of the family and household, but you should also provide them with a few other weekly chores they earn allowance for. Make sure, however, that if they don’t complete a chore, you don’t pay for that specific one. This helps instill the values of work and your kids will feel good about earning their own money.

5.  Teach Giving and Saving

If you don’t get through to your children with any other financial lessons, giving and saving will serve them very well. Teach them how to give a percentage of their income, no matter how small the amount is, to a charity, church, or another good cause. You can even pick a charity you and your child feel some type of connection with and match their donation. Giving is a very important lesson and don’t forget, this lesson is also learned from example.

Teaching your children how to save money is another very important lesson. As they enter into teenage years, you can offer to match the money they save, up to a certain amount, towards a car. If they are 13 years old, you are giving them three years to save enough to buy a car. This teaches your children to save towards large purchases instead of financing. (You can start such savings lessons at a much younger age using toys they children want or places they want to go.)

Because schools don’t teach young adults how to handle money, this duty falls upon the parents. Start young with simple lessons and lead your children with your own example. You can seek the advice of many professional and financial programs for children, if you need help. Just make sure you talk about money and include your children in your decisions, so they can learn how to handle money before someone else teaches them the wrong ways.

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