One of the reasons I decided to start a personal finance blog was due to disappointment. Mainly, disappointment due to the fact that our formal education system fails to teach kids about money. When I began learning in-depth about personal finance, I realized how much I didn’t know, wanted to know, and wished I had learned much earlier!

Learning to create a budget, track expenses, and the power of compounding investments is far more valuable in the vast majority of our lives than chemistry or trigonometry (not that those aren’t important!). People are much more likely to need to know how to use a loan amortization table than they are to use the periodic table (I haven’t looked at one since high school for sure…).

While I hope that someday it will be incorporated into formal schooling, in the meantime, it is entirely up to us to educate our children about money. I have three children, including one who will be starting her Senior year of High School (!), so this is something I’ve given a significant amount of thought to over the years. Perhaps I’ll pass along my love of budgeting to one of my children (ha!).

The best ways to teach kids about money are to incorporate learning into everyday tasks and to take advantage of opportunities that arise, allowing them to make money decisions.

Give Kids A Weekly Allowance

I’ve given a lot of thought to whether allowances should be given based on doing chores or just simply as a learning tool without attaching them to chores. Ultimately, I’ve chosen to give my kids their allowances without any strings attached. Their regular chores are expected with no additional reward beyond the satisfaction of contributing to the family (I’m sure they are inwardly joyous, although outwardly not so much). Don’t worry if you can’t afford to give your child a large allowance. Even a dollar a month for a young child can teach them valuable money lessons.

Kids should take responsibility for keeping their money in a safe place. If they lose their money, parents shouldn’t jump in and replace what they’ve lost. It’s tough love, but that’s how you learn to be responsible.

THE LESSON: Taking responsibility for decisions regarding handling and spending money.

Set Up Savings Accounts at a Local Bank

Starting a savings account when your children are young will reinforce the importance of savings. Encourage your kids to deposit part of their allowance and other earnings into their savings account for the future. They might be saving up for something as small as a new baseball bat or a new book, but it will teach them that sometimes you have to wait for things that you really want.

For very young children, it may be more advantageous to start a savings jar rather than opening a savings account. This way, they’ll be able to visually see their money grow.

THE LESSON: Delayed gratification & saving for something instead of using credit cards.

Give Kids Opportunities to Work

My kids are often able to earn extra money by completing additional tasks around the house, in addition to their regular chores. There are times when one child is just shy of having enough money to buy something they want and will offer to do some jobs to earn that last little bit that they need more quickly. Extra jobs around my house usually entail cleaning walls and baseboards, scrubbing floors, and folding laundry. How much you wish to pay your kids is up to you, but I usually pay them around $5-10 per job, depending on how long the task takes.

Additionally, a lemonade stand (or similar idea!) can teach them about how a business works. If you provide the ingredients and supplies, having your kids pay you back for them out of their income can teach them a valuable lesson about starting a business. Not only is a lemonade stand a ton of fun, but it’ll also teach them to handle and count money.

Several years ago, we passed a group of kids selling their pearler bead creations near our home, and my kids begged me to stop so that they could buy some. They happily used their allowances to purchase several treasures from this small “shop”. You can’t get any better than kids teaching kids about money and business.

THE LESSON: Working hard for your money and hustling when you want to earn more income.

Help Them Set Goals For Their Money

A child’s version of setting financial goals may simply be deciding what they want to spend their money on, but it’s a great start to being intentional with finances. Setting goals is essential when it comes to managing money, and the earlier it is learned, the better.  Goals give us something to work toward and encourage us to refrain from mindless spending, allowing us to allocate our money to items that are more important to us.

One way kids can set a goal is to define a portion of their income they want to save, such as 10%, or a portion of their income they want to give to others. A young child can simply put money in their savings account or savings jar with the goal of purchasing a new toy or going to the movies when they’ve reached a certain goal amount.

THE LESSON: Setting financial goals to encourage living their best, intentional life.

Set an Example of Long-Term Saving

In conjunction with setting goals, children need to see the long-term impact that smart personal finance can have.  Involve your kids in watching their accounts grow, or help them start an account if they don’t currently have one.  For example, show them (or start!) their 529 education savings plan. Even a small deposit into these accounts on a regular basis will help them get excited about the power of saving.

In addition, it may help your kids look forward to receiving Christmas and birthday contributions to these accounts from grandparents or other family members, rather than more toys.

THE LESSON: Learning to save for the long-term and seeing first-hand the power of compounding interest.

Encourage Giving to Others

Avoid entitlement.  Enough said, right?  While I’m grateful to live in a place and time that my kids can even feel entitled, it’s a constant battle to teach them gratitude. There are always other ways to help, and those opportunities are often most apparent during the holiday season.

Whether it’s sending money to a charitable organization, buying a gift for a friend, or purchasing items to directly support a community cause, kids will learn what it feels like to use their money to help others in need. Involve them in charitable causes that you already contribute to. There is an unlimited need in the world, and there are unlimited ways to help kids learn to give.

THE LESSON: Being charitable with money and learning gratitude.

Involve Kids in Gift Budgets

When purchasing a gift for a birthday party your child will be attending, you can involve them in a small-scale budget by giving them a set limit to spend on the gift(s). We all know that kids need limits, and money limits are certainly no exception.

Using cash is ideal in this situation, so it ensures they don’t feel there is flexibility to exceed the set budget amount. Slightly older kids can help even more with party budgets, holidays, and vacations.

THE LESSON: Learning to budget for expenses instead of arbitrarily spending money.

Use a Tracking Sheet for “Expenses”

If I were limited to giving only one piece of financial planning advice to anyone from children up to adults, it would be to track your expenses. This is simple these days, with apps that automatically pull in transactions from your bank and credit accounts. Yet, most people still don’t do it.

I personally would love to know the breakdown of what I spent money on as a kid – I can tell you that it was probably mostly candy. Young kids can simply use a piece of lined paper to record their purchases, allowing them to see where their money is going. If they have a savings account, they can use the ledger provided by the bank, making them feel financially savvy.

YNAB offers the ability to share budgets with its “YNAB Together” feature, which is ideal for older kids who have their own phone.

THE LESSON: Learning to write down expenses over time to be able to determine the usefulness of the things that they are spending money on.

Involve Your Kids in Cutting Expenses

Think of some ways that you actively participate in saving your household money. It could be clipping coupons, buying store-brand groceries, or making a menu plan that takes advantage of current sales. How can your kids help you with these tasks?

It’s simple, by having honest conversations. It is important to include why you don’t spend money on certain things in your house (for example, why they don’t have all the newest video games that the kids down the street have or why you don’t have all the subscriptions in the entire world…like the kids down the street).

Also, discuss with them about what things you spend money on instead; things that you feel make your life better than the alternative ways you could be spending your money. It goes back to MAKING YOUR MONEY MATTER (shameless plug for my blog here!).

THE LESSON: Learning to keep certain expenses low to be able to stretch your money further and maximize savings.

Don’t Buy Your Kids Toys “Just Because”

Instead of giving in to your child’s pleading for a toy at Target, teach them to save their own money for the item or ask for it as a Christmas or birthday gift. In addition, encourage them to play with and take care of the toys they already have, and minimize buying toys that are similar or just the updated version that has essentially the same function.

There will always be something bigger and better that you want to buy. It’s true for little kids, and it’s true for big, grown-up kids, like husbands. Unfortunately, this lesson is generally taught the hard way when young adults first move out and decide to buy everything they ever wanted with their new access to credit.

The sooner kids learn that money doesn’t grow on trees, the better off they’ll be for the rest of their lives.

THE LESSON: Learning that you don’t need to have everything that money can buy and that always wanting more material things will bring dissatisfaction and unhappiness.

Wrapping it Up: Teaching Kids About Money

Money is such a great tool that can be used in our families to build secure, contented, and less stressful lives. Modeling good financial habits for our kids and proactively teaching them through daily experiences can benefit generations.

As the quote goes, “To teach a child is to touch the future.”  Isn’t creating the best future possible for our child really what we want as parents?

How are you teaching your child about money?