Raising a kid is one of the most challenging tasks in the world, and there are just so many things you as a parent need to keep in mind for them. One of these things is money management. Many adults often don’t have good money management skills that can help them abstain from unnecessary spending and from properly planning their future paths.

Many working Americans are struggling with saving money for their short term and long-term goals. Around 1 in 5 people don’t save enough for their annual income. Only 16% of Americans are saving more than 15% of their income.

This article will be talking about all the ways you can use to teach your kids to be smart and responsible about money management. In this article, I will cover the most ingenious ways through which you can instill money management values in their hearts.

1. Set An Example

Kids are very impressionable beings and are quite literally a mini version of you. If you’re a parent, you would know this that kids have a tendency to pick up every single bad word you say, even if you’ve just said it once. These small creatures are adorable but at the same time need to be taught the difference between right and wrong.

If you want to teach someone else something the best way you can do that is by incorporating what you preach in your practices. It is essential always to show your best side, especially when you’re around kids. So, the next time you go for grocery shopping, you can keep talking and engaging your kids in the decision process and keep asking them whether or not they will ever use that product or if they think you won’t use that product. If your kids say no to something, put it back in the rack so that they know that just because you like or want a product doesn’t mean that you absolutely need to have it.

There are also other tiny ways to teach your kids the concept of being smart with their purchases. This can also teach them about the price factor while making purchases, which can teach your kids to be considerate about their expenditures.

2. Encourage Them To Spend From Their Savings

One great way to teach kids about money management is by incorporating practicality. Most parents use a very effective strategy by encouraging their kids to work around the house on chores for some extra money. It makes kids more eager to help out and also helps them to collect money.

The next time they want something and have to pay out of their own pocket, they will be much more sensitive to the price factor and will naturally spend less because they will have some value instilled about the kind of hard work needed for the job.

3. Piggy Bank Systems

Piggy banks are an ingenious and tried and tested tool to help kids generate a saving habit. Many kids will get excited to put in coins and notes in the piggy bank and try to build up the amount in their piggy banks to go ahead and purchase something that they like or fancy. Most kids have dreams of going to Disney Land and if you have a Potterhead as a child, your kid might be incentivized to save up enough to go on a trip there.

4. Encourage Your Kids To Start Small Businesses

If you’re a young adult like me who is frustrated that they did not make a YouTube channel when they were small, you need to make sure that your kid does not miss out on this opportunity. Encourage your kid to set up an online business in something that interests him and support and guide him throughout the process. In today’s time and age with everything going increasingly digital, there are many newer and unique opportunities that you can capitalize on. Very soon having a college degree will not be a determinant of someone’s success and accomplishments in life.

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One of the ways your kids can actually learn the most about money management is by doing businesses of their own, and this can also help them figure out ways to minimize their costs and maximize their profits. Doing businesses on their own at a young age will also help them in getting a head start at life.

5. Start An Allowance System

If you cannot get your kid to start their own business or put the energy into getting chores done, you can consider setting an allowance system where your kids get a certain amount as pocket money. They have to plan and manage that amount throughout the month, which can help them learn money management skills.

In the initial months, it may happen that your kid uses all his allowance at the start of the month and then asks for a loan from you to cover the extra expense. It is important not to pamper him/her and only give out loans for things that you think are an absolute necessity. Very soon, your kids will be able to adjust their expenses according to their allowance.

This is incredibly important as recent surveys indicate that older households are more likely to be saving more than 10 percent of their annual income.

6. Openly Communicate To Your Kids About Financial Matters

Most parents are very reluctant about letting their kids know about financial matters and constraints. This often leads to awkward situations where your child demands certain things that would fall out of your budget. Parents are then forced to make necessary alterations to their budget to allow them to have whatever they demand. Not only is this problematic in the sense that your kids will become spoiled and come up with unreasonable demands, but it is also going to become the breeding ground for bad purchasing decisions by your kids later on in life.

While I understand that sometimes we want to shelter our kids from the cruel world of finance and get them everything that their heart desires, it is smarter to introduce them to the world of finance to save them from the massive heartbreak later. Parents are rarely ever around for the entirety of their children’s lives. Because of this, it is always better to give them the necessary training and guidance so that they are mentally equipped to make smart financial decisions in their lives.

Over the last 20 years, the middle-class lifestyle has gotten 30% more expensive with the cost of big-ticket items like college, housing and childcare rising significantly.

7. Teach Your Kids About Delayed Gratification.

As adults, we often have this waiting period rule where we wait for three days or more before deciding whether we actually need or want the desired product. The same principles need to be enforced on kids as well. As a parent, you will need to discourage impulsive purchasing behaviors and ask your kids to wait for one day and assess whether they would actually need the product. It would be best if you also asked your kids whether or not they will actually use the product in their daily lives.

In most cases, children insist on getting things because they are simply visually appealing. As a parent, we know this all too well considering the piles of toys our kids already own and do not use. If you want to discourage wasteful spending with your kids, you need to limit the last toy purchase to the next toy purchase. This will teach them to be more considerate with their purchasing decisions.

You can also encourage them to give away toys they don’t use to make space for the new toys that are coming in.

8. Visit Shelters With Your Kids

While COVID-19 has caused many people to avoid going out and encouraged many others to stay at home. In these times of distress, it is ever more important to pay visits to shelters and orphanages and spend time with the less privileged. It is even more important to take your kids along with you to help them understand the value of some things that they take for granted.

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This can teach your kids to be more mindful about the way they spend money and teach them respect and help them become better people in the longer run. Sometimes putting a smile on someone else’s face is all that your kids need to become more grounded and considerate people.

9. Scavenger Hunts.

Money management doesn’t necessarily have to be boring. If your kids are erratic and bored from being locked up in the house, you can hide money in odd places around the house and ask them to find it. This can turn into a healthy competition and can also get them to work for their money in a fun way. (Please do discourage them from turning the house upside down in this activity because that can turn out to be quite a mess for you to clean up later).

Scavenger hunts can be a fun bonding exercise and can also get them to make efforts for money. The money they find can be used for whatever they want to purchase. However, you can incentivize them to get better things if they save efficiently.

10. Promise Financial Returns

To introduce your kids to the world of money management and financial incentives, the best thing you can do is promise them financial returns if they save an amount. You can fix the percentage or a solid figure and name this as the interest that they will get if they save for one month. For example, if your kid has $500 in hand, you can promise him $50 more if he cannot spend that amount in a month or two months.

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Many kids will quickly catch on this practice, and this can be a foolproof way for you to get your kids to start saving their money. To make this more realistic, you can also introduce a concept like a bank account or a savings account and many banks now open savings accounts for individuals below the legal age. This way, their money will be in a secure place, and they will also be able to keep depositing more money and withdrawing some money all the time keeping the $500 amount constant.

If executed correctly, this practice can be a great foolproof way for your kids to learn effective money management and also develop a smart saver and investment habit from a very young age.

11. Use Coins

Coin bags are an inexpensive and fun way to teach your kids about money management. Encourage your kids to count the number of coins in their bags and add and subtract certain amounts. Initially, I thought that this was a very boring activity, but I was being set up to be very surprised as kids usually end up loving this activity, and this can easily keep them occupied for hours!

This can be a great board game to play with your families at nights. It also helps your kids learn the art of budgeting and can prove a fun-filled bonding exercise. Just make sure that your kids are above the age of 6 to protect them from accidentally ingesting any small coins.


So, these were all the tips I had to help generate money management skills in your kids. While you don’t necessarily have to use all of them, it is better to do a little experimentation with these tricks to find out which one of these works better. Every kid is different, and what might work for my kids might not necessarily work for yours. Just remember to be consistent with whatever strategy you use.

We all wish that we could manage our finances better and make smarter investment and financial decisions. These habits start very small, and our kids must pick up these habits to avoid struggling in their later years.

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