10 Tips for Teaching Kids about Money

By Laura D. Irwin and Kent E. Irwin

Raising financially responsible children is a worthwhile effort. Most adults were not taught how to manage finances as children. However, if you teach your children how to be financially responsible, you will help them to become financially successful. This may be the greatest financial legacy you can give them, much more than any gift of money.

Lesson #1: The Value of a Dollar and Attitudes about Hard Work

Children learn the value of a dollar and a good work ethic by earning money for age-appropriate chores. For example, even a very young child can earn a small allowance for helping to pick up their toys. Since coins are a choking hazard, perhaps the ‘putting the toys away’ lessons could end in watching you put a coin into their piggy bank.

Previous generations seemed to have better attitudes about their work lives. It seems that work is viewed today as a necessary evil that produces little fulfillment other than a paycheck. Entertainment activities and weekends are all we look forward to. We are a society that is addicted to entertainment as a relief or escape from the misery of work. Teach your children joy in physical and mental exertion. My grandmother, Audrey Stubbart, lived to the age of 105 working fulltime as a proofreader until 6 months prior to her death. She received pleasure from working, gardening, and teaching Sunday school. I remember hearing her say, “I get to go to work”, and never “I have to go to work.”

Lesson #2: Savings

Teach saving by making regular deposits into a piggy bank or bank account. When children save up for something specific, they make a mental correlation between the cost of the item and how much time it took to earn the money.

Lesson #3: Teach By Example

Remember that you are teaching your child about money by example, whether you realize it or not. If you regularly work on your finances, you teach a child that money is an important tool to master. Include older children in budgeting, so that they learn from your example and so that they learn restraint.

Lesson #4: Compound Interest or Investment Growth

Your children can invest in a bank savings account or a 529 college education savings account invested in mutual funds. This will teach your children that, in time, because of interest, the growth on their investments will be larger than their actual deposit.

Lesson #5: Personal Checking Account and Personal Expense Accountability

When your children are about 16, set up a checking account for them (most banks will require it to be a joint account with you). Then work together to figure out a budget that they need for personal items, such as toiletries and clothes. Next, deposit a monthly amount into their checking account, earned from allowances and chores or income from jobs, babysitting, pet sitting, and yard work. Teach responsible budgeting and help them balance the checkbook each month. It is essential that young adults leave the nest knowing how to manage their monthly expenses.

Lesson #6: Positive and Negative Consequences—You Reap What You Sow

This lesson applies to all of us at any age. If we study and work very hard, manage our money properly (including saving and giving), take care of the possessions we already own, and make wise choices, generally we will sow prosperity. If we are lazy with our goals, possessions, and money management and make poor choices, we will generally sow stinginess and dissatisfaction. (These are, of course, generalities.)

Lesson #7: Delayed Gratification—the ‘Anti-Spoiling’ lesson

Delaying gratification goes completely against human nature, but in the long run it is the best thing for us (much like eating our vegetables). Children who understand the value of a dollar, who have worked and saved, and who have not been given whatever they want will appreciate gifts and belongings much more than those who have been ‘spoiled’. We all have known ‘spoiled’ children and, as the word ‘spoiled’ implies, being around them stinks.

Lesson #8: Service to Others and Charitable Donations

Albert Einstein was once asked, “Doctor, why are we here?” He turned to his questioner in surprise that he had asked so elementary a question and replied, “We are here to serve other people.” Of course! We are here to serve. Serving others brings pleasure and joy.[i]

Give your children the gift of giving. Opportunities are all around us to help others. Let your children go with you when you volunteer, and encourage them to find ways of being generous with their money.

Lesson #9: Wants versus Needs

Parents provide the basic necessities of food, shelter, and clothing, so shouldn’t teaching a child the difference between wants and needs be basic, too? If only it were. Our children have become inundated with advertising directed specifically at blurring the line between needs and wants. If we were to believe the advertising, our young children would never reach their full potential without the latest educational toy, and our teens are sure to become social outcasts without the latest video games and music devices. If you have taught your older child the lessons listed above, you should be able to talk openly with them about whether the item is a need or a want. 

Lesson #10: Help Children Develop a Vision of their Future: Not Dreams of Money

The winners of the world are those who have a vision for their future and are willing to do the hard work necessary to achieve it.[ii] Help your children discover their passions, talents, and gifts. Then encourage them to dream about how they can make the world a better place. Too many people hope for ways to “get rich quick” because they are dreaming about money rather than dreaming about the difference they can personally make in the world. Every time you watch entertainment news and see that a celebrity is getting a divorce or going into rehab, it reinforces the adage that “money doesn’t buy happiness”. The most important money management lesson you can teach your children by example is to live happily today within your means while continually striving toward your future goals.

Summary

Being successful with the money you have is not easy or quick and there are no short cuts.  Continue to educate yourself about financial matters from sources such as the eFinplan.com website and obtain an eFinplan financial plan.  If you work hard to achieve the goals laid out in your e-Finplan financial plan and avoid these mistakes you will be well on your way to funding your dreams.  Your individualized eFinplan financial plan report and all of the articles on the eFinplan Web site are designed to Take the Mystery out of Financial Planning ^SM by presenting information in an educational and simplified format. 

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Laura D. Irwin is CFO and co-founder of eFinplan, LLC. She has a degree in Communication, but her life’s joy has been raising her two children.  She can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

Kent E. Irwin is CEO and founder of eFinplan, LLC. He is also a Chartered Financial Consultant (ChFC), a Chartered Advisor in Philanthropy (CAP) and a Chartered Life Underwriter (CLU). He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . For more information about eFinplan, go to the Web site efinplan.com.

Updated 1/08

Copyright © 2007 eFinplan, LLC. All Rights Reserved.

[1]  Nightingale, Earl. Earl Nightingale's Greatest Discovery "The Strangest Secret...Revisited" 1st ed. New York: Dodd Mead, 1987. 23.

[2] Ibid, 7.