5 Things You Need to Teach Your Kids About Money

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teach your kids about money

As a parent, one of the most valuable things you can do for your children is to teach your kids about money. As a kid who grew up learning nothing about money or how to manage it, I can attest to the risks that children who are uneducated about personal finance can face.

The lack of teaching about how to manage money that I experienced as a child led to years of money mismanagement which resulted in a mountain of debt for our family. Since I want to do everything I can to help my children avoid that kind of financial distress, I’ve put together a list of important things I think they simply have to learn about personal finance management and money in general. Here are 5 things you might want to teach your kids about money:

Teach Your Kids About Money Management


In other words, teach them to have a plan for their money. When I was a kid, any money I earned was, to me, simply money that I now had available to spend on whatever my heart desired. I never learned about the importance of saving or giving. Because I wasn’t aware of the importance of a plan for my money, it sure didn’t last very long, There wasn’t any savings, and I had no long-term goals.

If you are purposeful about teaching your children the importance of having a plan for their money, they can learn the value of short and long-term money goals, the importance of a good saving/investing plan, and the value in giving their money to causes they deem worthwhile.

Know the Difference Between Needs and Wants


I believe this truth is largely lost in today’s society. One of the most valuable principles you can instill as you teach your kids about money is to make sure they understand clearly the difference between a need and a want. Needs are really a very short list: we need food, water, shelter, basic clothing and medical care.

Everything else is a want.

If we can teach our children that wants are not really a necessity, we can help curb the tendency to justify unnecessary spending. Once kids have a handle on this valuable truth, they are better prepared to learn the next key to good money management.

Learn to Understand the Importance of Value-Based Spending


Value-based spending, simply put, is the willingness to learn what things you value most, and to spend your money accordingly. For instance, what is more important to you: that vacation in Italy you’ve been dreaming of or your thrice weekly dinners out? If you chose Italy, you’ll reach your vacation goal faster by cutting your dinners out to once a week, or maybe even once a month.

It’s vital that your children don’t see this as a denial of spending, but instead as a choice to spend money on what matters most to them, as opposed to making purchasing decisions based on instant gratification. By teaching your children this valuable money-managing key, you can ensure they will learn not to waste their money on things that really hold very little value to them, but instead, save their hard-earned cash for something more worthwhile.

The Power of Compound Interest


It’s vital that children understand the value of compound interest, both in regards to saving and investing, and in regards to debt. By giving your children mathematical scenarios of how much more money can be earned via compound interest, and how much more money can be spent via compound interest regarding debt accumulation, you’ll be teaching them the value of saving and investing their money instead of spending and accumulating debt.

Instilling a Creative Mindset When It Comes to Earning


This, to me, is one of the most valuable tips you can share as you work to teach your kids about money. Kids need to understand that they do have the power within them to earn money, and not just via a paycheck from someone else.

You’ll be giving your kids a great gift if you can help them to learn to figure out what their vocational talents and interests are, and how to use those interests to earn a buck. We did this with our oldest daughter when she was quite young. Seeing that she had a real gift for writing fiction, we worked to help her turn one of her stories into a self-published children’s book. Now published on Amazon, Maddie’s book, Running Free, is producing a steady income for her.

By teaching her that her income-earning abilities are in her hands, we’ve opened up a whole new way of thinking for her, and she’s becoming quite adept at finding creative ways to earn money by doing things she enjoys and is good at.

By committing to teach your kids about money management, you’re helping to set them up for a stress-free financial future.


What is the one thing you really want to teach your kids about money? What is the most valuable tip you were taught about money as a child? What do you wish you would have learned about money earlier in life that you now know?



Photo courtesy of: Steven Depolo

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Laurie is a wife, mother to 4, and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom, and to a simpler, more peaceful life.


  • Nicola says:

    When we have kids, I want to teach them that money is not something be afraid of, nor is it something to be yearned after. Yes, be careful with it and spend wisely, but there is more to life than having lots of money. I’m going to make sure they understand the difference between needing something and wanting something, and letting them make their mistakes early, so that they can then understand what not to do. In theory! 🙂

    • Laurie says:

      Nicola, you are SO on the right track!! These types of money lessons are vital for those wanting to help their children have a healthy understanding and respect of money.

  • Gretchen says:

    This is great advice John, and I especially love it because it talks about the things you need to cover such as the difference between wants and needs, and a few examples, but leaves exactly how to go about it up to us. Now comes the hard part – actually teaching it!

  • Deb @ Saving the Crumbs says:

    Great points! I’m like you where my parents never sat me down and explained how money or financial management worked. However, my parents modeled it so well, that it was instilled in me without me ever knowing that it was anything but normal. That’s what I want to be for my kids…a real life example. But of course, also being intentional about explaining money management only makes things better!

    • Laurie says:

      Deb, you’re definitely on the right track!! Both being a good example and talking to your kids about money have to happen in order for them to have the best chance of money management success.

  • Jon @ Money Smart Guides says:

    When I was little, I remember my Mom taking my sisters and me to the bank to deposit some of our allowance in the bank. It was fun to act like a grown up and be in a bank. I’m glad they taught us the importance of saving money at such a young age because it certainly sticks with you as you grow up.

    • Laurie says:

      Jon, you were taught and modeled a valuable lesson!! It’s vital that we teach our kids the importance of saving. In our house, any toys or other non-necessity things our kids want outside of birthdays or Christmas have to be paid for by them. This simple rule has really taught them well to save for what’s important to them.

  • Prudence Debtfree says:

    Like you, I was not taught about money management when I was young. My parents were excellent with their finances, but it wasn’t a topic of discussion in our household, and I didn’t learn by osmosis. My husband and I became money-smart very late in the game, but fortunately, not too late to teach our children – two of whom are young adults now. You’ve laid it out so clearly. Thank you for a great post!

    • Laurie says:

      We were in the same boat, Prudence. It’s hard facing the fact that we messed up our finances so colossally, but it’s a relief knowing we’ve taught our kids well on the subject. 🙂

  • Ben Luthi says:

    My parents never formally taught me about money, but my dad did a great job at teaching my responsibility and independence. He gave me money to go to prom, but expected me to pay him back. I hated it then, but I’m so glad he did it now. That sort of stuff shaped me into thinking that if I want something, I can’t just expect someone else to give it to me. I have to earn it.

  • Joseph Brown says:

    Excellent advice. The basis for all personal financial education should be an understanding that money can be put to work to create more money. When kids have a true understanding they can make money work for them, as opposed to them working for money, everything else falls into place. Great post!

    • Laurie says:

      Awesome tip, Joseph!! And one often forgotten about as parents work to teach their kids about money. Thanks for the reminder. 🙂

  • Clint Greenleaf says:

    Great article – I couldn’t agree more. I started teaching the Give/Save/Spend concept to my kids at age 3… They got it by age 4 and now are very excited. The sooner we expose our kids to money, the sooner they can make mistakes which leads to good decisions. Thanks for the great blog!

    • Laurie says:

      Smart move, Clint, on exposing your kids to that concept earlier rather than later!! I believe it’s a crucial key to money-smart kids.

  • Brian @ Debt Discipline says:

    Great tip Laurie. I think its so important with no formal money/budget education being taught in schools that parent have an obligation to prepare their children. We are teaching our children as much as we can. We don’t want them to repeat the mistake we have made.

  • Shannon @ Financially Blonde says:

    I definitely want to teach my son the importance of needs and wants, and not confusing the two. I think I spent a good part of my 20s justifying that wants were needs because I didn’t have a good grasp of the difference. For us, we provide our son’s needs; however, he is mostly responsible for the wants. If he wants a new yo-yo or video game, he has to pay for those out of his pocket. It is amazing how many of those wants drop off when he has to pay for them on his own.

    • Laurie says:

      We do the same with our kids, Shannon, and it’s taught them so much about the lack of value on material items. Good for you guys for teaching the same.

  • Kassandra @ More Than Just Money says:

    I would hope that my stepson would learn that money is a tool, to be used responsibly in order to further himself. He already understands how money relates to him (meaning it takes money to put him through school, buy his food and clothing etc…) so that is a positive sign but we need to continue to shape and encourage his interest in money in ways that he doesn’t fall into the consumer/debt mindset.

    • Laurie says:

      Good for you guys for continuing to work to instill good money habits into your stepson. So many think that once kids older, it’s okay to stop teaching, but I disagree!

  • Daisy @ Prairie Eco Thrifter says:

    I think it’s important to teach your kids about money management, just as it’s important to teach them about any other life skill. I didn’t get a lot of money lessons from my parents, but what I did get, I retained.

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