Teaching Children Good Money Habits

five smiling children holding piggy banks
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Wanting what is best for your child is one of the most important things in life. Each day presents a teaching opportunity for parents. Whether it be teaching your kids how to be respectful and patient or bold and outspoken, parents leave big impressions on their children. It is no wonder why your relationship with money could have a direct impact on their relationship with money as adults. 

Because purchasing has become so easy in the digital world, many children do not have a clear understanding of how money works. For younger-aged children, a swipe of a debit card or credit card is all it takes to get what they want, but do they have a true understanding of how money is earned or how to budget? 

You may be surprised to hear that your child’s future habits with money could already be taking shape. 

According to some experts, lessons on financial responsibility should start before the age of 7. The habits they develop now could follow them through adulthood. 

Before you become overwhelmed with the thought of instructing your child on yet another important life lesson, remember, that most children are eager for their parents to teach them to handle money with confidence. 

Mother and daughter putting coins into a piggy bank
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We have 5 tips on how to teach kids to become financially literate

1. Do not be scared! Talk about money

Sure, your child may only be interested in saving up to buy that toy or video game he/she has been eyeing at the store, but it is important for them to understand that “fun purchases” can only be made after responsibilities have been met. For older children, this is a wonderful opportunity to talk about good and bad credit. For younger ones, explain in a simplified way that money first needs to go towards bills, necessities like groceries, and savings. Any money left over can then go towards that shiny toy in the window.  

2. Use Cash for Purchases 

According to Forbes, it may be a good idea to start using cash when making purchases in front of your little ones. This shows your children the process of money going out. Letting them make the purchases themselves with physical money also helps them understand what it means to get change back. It also builds their confidence when it comes to handling money. If you use debit cards, explain to them that money is still being used from your bank account. Show them your receipts so they can grasp the concept of how much items cost and how much was paid.  

3. Save, Spend, Give

This model is all about choices. In older kids, this can be illustrated through bank accounts and budgets. For the little ones, think about labeling three jars. Your child can then choose where they want their money to go and see the fruits of their labor along the way. Take the opportunity to help your child produce a short-term goal, like buying a toy or new outfit. A long-term goal like saving up for a car is a good approach for older children. When the time is right, it is also a good chance to teach your child about the importance of giving. Ask your child what causes are important to them and let them experience the great feeling of helping others by donating to an organization of their choice. 

Dad teaching son to clean the house
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4. Help Them Make Money 

Giving your child the opportunity to make some money is a great lesson in responsibility and discipline. This can be done in a number of ways including giving money for chores or even rewarding kids for taking on additional tasks. No matter what option you choose, this is about teaching kids that money is earned. For example, if a chore is not completed, nobody gets paid. Another option is to make your child pay you for doing their work if they fail to complete the task.  
Thankfully, now, there are a number of different ways to pay your child and help manage their accounts. Several banks now offer child debit cards that can be opened up as young as 6 years old. Parents have the ability to deposit and transfer money in and out of their child’s account. Through apps, your child can see exactly where their money is going or how much they have saved. These accounts may also give debit cards to the children (supervised by parents) to spend how they would like from their own accounts. If they blow their money on something you know they will regret later, let them. Just make sure you stand strong and make them start the process over again. They will probably think twice about spending so quickly in the future. 

5. Build a Healthy Relationship with Money 

As parents, it is not necessarily easy to explain to a child the stress that comes with a tight budget. Make sure when talking to your kids about money not to stress them out. Be calm and confident. Your child should not feel like they are taking on any of your adult financial stresses. This will create an unhealthy idea of money for them. Instead, especially at an early age, keep things positive. Focus on teaching them hard work, the benefits of saving, and the satisfaction of reaching a fun goal. You are their model for good financial behavior so take a long, hard look at your practices and make sure you are setting a good example. 


Remember, financial responsibility is not determined by the number of shiny things you can buy, but the security money can provide when used the right way. This is the lesson that will keep paying off for your child for years to come. 

High-interest loans can be expensive and should be used for short-term financial needs only, not as long-term solutions. Customers with credit difficulties should seek credit counseling. The opinions expressed above are solely the views of the author and may or may not reflect the opinions and beliefs of the website or its affiliates. Cash Factory USA does not provide financial advice. Visit cashfactoryusa.com for rates and terms. 101 Convention Center Dr., Las Vegas, NV 89109.  

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