babysitter working with a toddler

Helping kids understand money when they’re young will help them develop sound financial habits that pay off when they’re adults. Discussions about money can start early, but need to be tailored to the child’s age. This article offers several tips on coaching children by maintaining an open dialogue about finances and modeling sound money management-at every age.

If you help your kids understand money when they’re young, they’re more likely to develop sound financial habits that pay off when they’re adults. The 10th Annual Parents, Kids & Money Survey by T. Rowe Price found that kids who discussed money with their parents were more likely to have a budget and to save. 

Start early

Discussion about money can start early. Of course, you’ll want to tailor the information to your child’s age. For example:

Toddlers and preschoolers. Talk about how most people work to earn money to buy things like food and toys. Bring your kids along on shopping trips and discuss how much various items cost and point out the fact that buying a more expensive item means less money for other things.

Early elementary school. Explain the difference between needs and wants. Provide a small “piggy bank.” It might help if it’s a clear container so that your kids can see their gifts of cash grow. Consider offering a small reward when the stash reaches a specific level. 

Later elementary and middle school. Decide how you’ll handle allowances. One school of thought ties allowances to chores to reinforce the fact that most adults must work to earn money. Chores not done? No (or reduced) allowance. Another approach holds that the purpose of allowances is to help children learn to budget, and that all members of a family have chores they must do to keep the household running. So, a child who doesn’t finish his or her chores still receives an allowance and then may be disciplined in another way. With either method, let your child learn from mistakes. If he or she spends the entire allowance in one day, resist the temptation to provide an advance on next week’s allowance. It;s also important to have them save a portion of their allowance. This helps reinforce the concept that you can’t spend everything you earn. 

Keep money issues on the front burner

Even as kids get to middle school and beyond, they can benefit from financial practice and instruction:

Middle school. Gradually increase your child’s allowance, as well as the items it covers. Encourage your child to earn extra money through babysitting or other jobs in your neighborhood. 

High school. If possible, encourage your child to get a part-time job. Again, talk about the importance of putting some away-whether for further education or some other goal. Discuss how to use credit wisely and how interest compounds over time. 

Maintain the dialogue

Of course, at any age, maintaining an open dialogue about finances and modeling sound money management can help you raise financially responsible kids. Your accounting professional can provide additional ideas.


Hugh G. Hermanek, CPA, CITP

Hugh provides tax planning and preparation services for individuals and businesses.  He has extensive experience in small business and accounting software consulting, and advises clients on how to create efficiencies using technology.  Hugh’s understanding of technology and internal control processes are also used in performing SOC examinations.   Prior to joining Hancock & Dana in 1999, he worked for 10 years in private industry for two different Midwestern retailers.