Helping Your Children Develop Good Money Habits

Remi Patel

2025-01-12

6 min read

Much like adults, some children are naturally more financially savvy than others. In most cases, you'll find that it's primarily up to parents to set a good example for the younger generation when it comes to budgeting, spending, and saving. The prospect of teaching your little ones about making financial decisions can feel daunting. That said, there are some super simple ways to make your kids conscious of the value of money and how to use it appropriately. Within this article, we've broken down the best ways to help your youngster develop their money management skills.

Teach Them to Decipher Between Needs and Wants

As we all know, choosing between things we want and genuinely need is a challenging task, even for grown-ups! This one is more relevant for older kids who have money to spend as opposed to younger children. To help them understand what purchases they should prioritize, encourage them to compare the various items they're planning to buy. Whenever they're contemplating using their money for a 'want,' ask them to consider whether there's anything else they should put their money towards first. Although it can be tricky for them to comprehend, it helps if you show them how you give precedence to the essentials before buying anything else.

Demonstrate How You Budget Each Month

Leading by example is also a great tactic when teaching your child how to create a budget. You don't need to use the exact figures from your own budget, but you can simplify it using more manageable numbers. As you show them how you split up your money into different categories, ask them to think about how they might use the cash they have in a similar way. Of course, kids won't be thinking about paying bills or grocery shopping, but they can allocate their money into distinct groups for things like savings, presents they need to buy, new clothing, etc.

Encourage Them to Set Themselves Goals for Bigger Purchases

If your child has a big or expensive purchase in mind, help them to make an attainable saving plan to steadily work towards their goal. Their age, item price, and how they acquire money will determine how much cash they can put away and how long it will take to reach the necessary amount. Let's take a child who earns $10 a week for completing chores and wants to buy something for $100. Ask your child to think about how much of their weekly income they can save each week, using this figure to find out when they'll have built up enough cash.

Explain to Them the Different Ways to Earn Money

To truly grasp the value of money, your child will need to understand how to earn their own cash. This is naturally a little easier with teenagers, as there's a good chance they can apply for part-time or after-school jobs. Still, there are plenty of ways younger kids can make money, such as helping with household chores. You could start by assigning specific amounts to each task, such as walking the dog, vacuuming, and doing the dishes. Babysitting is another fantastic option for older children who aren't quite old enough to secure a job but are eager to up their income!

Use Fun, Play-Based Methods

Thinking about and dealing with money isn't exactly enjoyable for most of us, yet there are many ways in which you can make it interesting for the little ones. You may not need to take this approach with older children, but a play-based strategy is worth trying with younger kids. Board games like Monopoly and Payday always go down a treat with youngsters. For smaller children, role-play scenarios for shops and restaurants can create awareness about spending. Moreover, you could even encourage them to pay for something in a shop as they get older.

Set Them Challenges With Fixed Sums of Money

As your children start to find their feet with budgeting and spending money, give them challenges using a certain sum of money. The amount can be as big or small as you see fit, but it allows your child to see what they can get for $1, $5, $10, etc. You might find they struggle to make their money go far at first, but with more experience, they'll begin to see how to make more informed purchases. Whenever you're in the supermarket or convenience store together, show your child how you make economic decisions based on the amount you plan to spend.

Help Them to Set Up a Place to Save

Having something tangible to work with will make saving much easier for your kids. In the early years, the likes of a clear piggy bank or jar work best, as they'll be able to see their money building up over time. As your child grows up, consider opening a bank account for them to use instead. If you really want them to level up their monetary skills, create a checking and savings account for them. Explain how they should avoid dipping into their savings and instead work off their checking funds.

Be Open About Your Finances When Appropriate

You don't have to spill every detail of your financial situation with your kids to open up the conversation about money in your household. Children soak up so much of the information they hear, and sharing some snippets about how you deal with income and outgoings can go a long way. For instance, you could talk about how you put away a fixed sum every month for vacations or how your earnings go towards utilities while your partner covers the rent or mortgage. The key is to discuss things you feel comfortable sharing that are also suitable for their age and understanding.

Learn How to Instill Financial Responsibility in Your Children

Try these easy-to-implement tips and tricks to help your children learn the ropes of financial decision-making. While it can seem arduous, you'll find it much more manageable by starting small and keeping things age-appropriate.

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