10 ways to teach kids about money management

At UBT, we’re frequently asked when kids should learn to manage money, and our answer is always “the sooner, the better!” In today’s often money-oriented society, raising financially literate children is essential, and there’s no time like the present to start. Starting now, with decisions about buying a birthday gift, investing in a new game, or giving to a worthy cause, will pave the way for decisions like these later — except on a larger scale. Here, we’ll talk through 10 things you can do to help your kiddos understand money basics and allocate their funds wisely.

1. Start with pocket change

Begin by introducing the concept of a modest allowance. This encourages kiddos to understand the value of the dollar (or coin) and how to manage it. Check out our suggestions for digitizing your child’s allowance plan to make the process even more educational — and pretty painless.

2. Talk about spending and saving

One of the first steps in teaching kids about money is to engage in open conversation about money. Answer their questions, or make math problems about money — or more specifically, about earning and saving for something they want to buy. Sharing stories about your own childhood experiences with money are also good conversation starters.

3. Begin with budgeting basics

Guide kids in creating a simple money plan, and together, decide how they should budget their money. Help them allocate funds for different purposes, such as saving, spending, and sharing; this last category can help them determine how much they want to give to church or charitable causes and how much to spend on gifts for family and friends. Using clear jars for each purpose visually illustrates the categories and helps even smaller tots grasp the concept, and older kiddos will benefit from a paper example, simple spreadsheet, or online visual.

4. Discuss wants vs. wants more

Early lessons on discernment between needs and wants will serve your kiddo well, and by all means involve them in discussions to determine which are essential for survival and which are nice to have but not necessary. For the purpose of their own money, however, learning to prioritize between two "wants" is going to be the first step, and they may need some verbal guidance from you.

For example, telling your kiddo that if they want to buy a toy today, it will take them longer to save for the bike they’ve been wanting, or asking kids, "Do you really love this toy more than xyz, or do you just like it?" helps them work through prioritizing purchases.

5. Start them saving for goals

Encourage goal setting by helping kids identify what they want to save for, whether it’s a toy, gadget, or even a future event. The message here — and it’s a good one — is that waiting and saving for something they want can be more rewarding than impulsive spending. This valuable lesson on the importance of delayed gratification helps foster discipline and build self-control, not to mention bigger bank balances. (For older kiddos, this is also a good chance to incorporate a high-level lesson on compound interest while promoting the habit of saving.) To incentivize savings, mark the milestones, and keep the momentum going, help your kiddo record money wins in a ledger or tracker.

6. Take them to the bank

Introduce the concept of banks by taking your kiddo to a nearby branch to open a savings account. It’s a great opportunity to meet some of the friendly faces they’ll encounter at the bank, see what it’s like to work with a teller or banker, and get a high-level overview of what kinds of activities go on at a bank.

7. Do a price check

When your kiddos do decide on a purchase, this is a good time to review that budget and make certain they’re spending within the allocated amount and not overspending. By showing your kids how to compare prices before making a purchase and helping them make informed decisions, you’re helping them to develop a skill that will serve them well in adulthood.

8. Encourage earning opportunities

Inspire an innovative spirit by suggesting age-appropriate ways for kids to earn extra money, like chores or selling some of their toys or clothes online, on consignment, or at a garage sale. To get you and your industrious earner started, we’ve put together a list of summer jobs for teens, as well as a fun guide for chores your younger kids can do to earn allowance. If your kiddo opts to DIY it in the form of a lemonade stand, lawnmowing or pet-walking service, or other entrepreneurial endeavor, another teaching opportunity may present in the form of a discussion on supply/product costs, profit margins, etc.

9. Lead by example

Children often learn best by observing, and involving them in your own money matters as appropriate — even if it’s a trip to the grocery store — serves to demystify the topic. Demonstrate responsible financial habits in your own life to show your kids how budgeting, saving, and wise spending can contribute to a secure future.

10. Make it fun!

Lessons in money management can be simplified and made enjoyable. By incorporating games, visuals, and age-appropriate activities, virtually any teaching moment can be turned into a fun and interactive experience, making it truly child’s play.

Know you have people (and resources)

By instilling strong fiscal principles — including how to allocate funds wisely — early on, we equip our children with essential life skills. Give yourself a hand, knowing you’re laying the foundation for an empowered and financially responsible future for your child. Have a question, or need information on this or related topics? Your friends at UBT are here to help.