How to Teach Your Child About Money

Photo by fu zhichao from Pexels

Money is an important aspect of our lives and it needs to be explained to children at an early age. Toddlers can learn what money is and you can use coins to help them in learning how to count.

As your child gets older, she can be taught more complex concepts like the value of money and how to pay for products and services. Once your child is a teenager she can learn how to open, fund and maintain a bank savings account and make money for herself by getting a job.

If you start teaching your child early in life, the money lessons you teach her will be remembered throughout her lifetime.

Teaching The Basics to Young Children

Use coins to teach 1- to 2-year-olds how to count. If you have a toddler who doesn’t know how to count, start off simple. Give him a coin and say, “This is 1 coin.” Then, give them another coin and say, “This is 2 coins.” Keep doing this until you have 5 or 6 coins. Have your toddler count the coins with you.

  • It will be helpful to emphasize the words “one” and “two” until your toddler can repeat the words back to you.
  • Be patient with your toddler. More than likely, it will take several teaching sessions for your child to start repeating the words.

Teach your 3- to 4-year-old child about coins based on color and size. Teach your child the names of coins, their size, and what color they are. Give your child a handful of coins and ask him to organize them into different piles in no particular order. Tell your child the names of the coins and see if he can point to the correct coin or repeat the name after you.

  • As an example, you can say, “This silver coin is a quarter, and it’s the largest of all the coins. Can you point to another quarter?”

Give your child a clear piggy bank to encourage saving. A piggy bank will teach your child how to start saving some of her money. Give her a clear jar instead of a porcelain piggy bank. Doing this will let her see the money accumulate. As she starts saving more coins, give her enthusiastic encouragement about saving some money.

  • You can say something like, “Wow! You’ve saved so many coins since I’ve last looked. Great job!”
  • You can give a child a piggy bank or savings jar at the age of 2 to 3.
  • Help your child use a coin machine to show your child how the coins she has saved will be exchanged for dollars.
  • It’s okay to allow your young child to buy things, but help her set a goal for saving money as well.

Read books to your child that teaches him about money. There are several informative and fun children’s books that will help educate your child about money. Search online for titles that you think your child would enjoy and buy them online or at your local bookstore. Then, read the book to him and explain any lessons he didn’t understand.

  • Examples include Money MadnessOnce Upon a Dime, and One Cent, Two Cents, Old Cent, New Cents.

Utilize Learning Opportunities for Older Children

Play “store” with your 4- to 5-year-old child to teach him about income. Once your child gets to be about 4-5 years old, you can set up pretend store or restaurant scenarios where you have to pay your child for products and services. Use fake or real money with the child to give him a lesson about working to bring in an income.

  • You can set up a fake McDonalds restaurant and have your child exchange play-dough hamburgers for money.

Teach your 4- to 6-year-old child about paying for things. Teach your child that she can’t take things from the store unless she pays for them first. She’ll be able to understand this concept somewhere between the ages of 4-6. If your child wants something, explain how much money it costs and whether you can buy it or not.

  • For instance, if the child picks up a candy bar at the grocery you can say something like, “We have to pay for that candy bar if you want it. Do you know how much it costs?”
  • You can also say, “Taking something from the store without paying is considered stealing and could get us in trouble!”
  • Ask your child questions before you buying something to get them thinking about how to save money, such as by asking, “That candy bar costs $0.50 less than this candy bar. Which candy bar do you think we should buy?”

Give your child choices based on price. If your child wants more than one thing, give him a choice between things that have a similar monetary value. This will start to make him more aware about the value of money and about how much things cost. It will also make him realize that money is limited and that sometimes he can’t have everything.

  • You can say something like, “You can get 2 pieces of candy that cost $5 or 1 toy that costs $5. Which do you want?”

Give your child an allowance for finishing chores. Set a list of chores that need to be completed around the house and give her a weekly or monthly allowance for completing these chores. Help your child think of things she wants to save for to help encourage and motivate her complete the chores. This will help her understand the value of money and the importance of saving money.

  • If your child doesn’t complete the chores, don’t give her the allowance.
  • Chores could include washing the dishes, walking the dog, taking out the garbage, cleaning the house, or helping siblings with homework.
  • You can say “I know you’ve been saving up for that new video game, great job. How much do you have so far?”
  • If you’re unsure of how much to give, consider giving them $1 per week for every year they’ve lived. So for example, if they are 9, give them $9 per week.

Educating Teenagers about Money

Explain compound interest to 11- to 14-year-olds. Start with whole numbers when explaining compound interest at first. Explain the principles of earning money by saving with a high-interest rate.

Use websites like to calculate compounding interest over time. There, your child can make calculations on how much he would earn at different interest rates.

  • Say something like, “If you saved $10 a month until you were 22, you’d have $1,200 but if you waited for 5 years, you’d only have $600.”

Help your teenager get their first job. Search online with your teenager and suggest different opportunities that might benefit her. Businesses are also likely to hire around gift-giving holidays. Visit local businesses around the holidays and ask them if they are hiring. Once your teenager gets a job and starts earning her own money, she will better understand the value of money and the hard work that it takes to earn that money.

  • Help your teenager dress for the part and write her first resume. Walk her through the entire job-searching process as it can be overwhelming to her because she hasn’t done it before.

Teach him how to budget.
 Write down a list of your teen’s income and expenses every month and subtract the expenses from the income. This will give him a good idea of how much money he can spend after he gets paid. Review the budget with him and see where he can eliminate some expenses so he can save more money.

  • Creating a budget is also very beneficial if he has things he is paying for himself, like a monthly cell phone bill or car insurance.
  • If you notice that he is spending a lot on clothes or other things he doesn’t need, talk to him about the value of saving.
  • For example, if your teenager makes $150 per week at his job and his total weekly expenses are around $100, it means he only has $50 to save and use for things he wants.
  • You can create the budget in a spreadsheet instead of using pencil and paper.

Open a savings account with her so she can save some of the money she earns. Some banks and credit unions will only allow teenagers under 18 to open a bank account with an adult. Take her to the bank or credit union and talk to a representative about opening a joint account. This will provide a means for her to save money and will give you the opportunity to monitor how she is spending her money.

  • Once you set up the account, show her how to use any online banking features.
  • Walk her through setting up her pin number and using the ATM.
  • You can also set up an online savings account which typically has a higher interest rate.

Show him how to fill out his annual income taxes if he has a job. Explain what taxes are used for and the programs they fund. You should also fill out tax forms with him during tax time on websites like TurboTax, H&R Block or TaxSlayer. Guide him through the steps and explain everything to him as you do his taxes together.

Compare the cost of colleges to teach her about debt and credit.
 Look at colleges and compare tuition costs with her. Explain how the interest on loans will accrue the longer the loan isn’t fully paid. Warn her about the potential dangers of credit cards and how her credit score will affect her ability to purchase a car or house in the future.

  • Advise her that he should only get a credit card if he can pay it in full every month.

The task isn’t as daunting as it may seem because you have 12 years or more to teach and monitor your child’s habits of managing their money. However, it is vitally important to realize that your child will learn more from your actions than anything else. So, it’s important for you, as a parent, to set the right example.

Creative Commons License
This work is licensed under a Creative Commons
Attribution 4.0 International License.

Published by W. M. Brown

I am a retired U.S. expat living in Ecuador. I was a business owner for 32 years before retiring in 2012.

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