This Little Piggy: Teaching Kids Money Management

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Piggy Bank

Teaching your child about money should begin early. Even before a child can read or add, he knows what money is. When my brother, George, was four years old, my mom told him we couldn’t afford the toy he was asking for. “Mom,” George replied innocently, “Just go to the ATM.”

How much you teach your child about money will depend upon their age. As children get older, money lessons will become more complex, but here are some beginning guidelines for teaching your children to be smart money managers.

Be Aware of Your Own Spending Habits

Children are constantly watching their parents, and they will learn from your example. If you regularly say, “I shouldn’t buy that,” but do it anyway, your kids will not realize the consequences of bad money management. If you often declare, “This is a reward to myself for (X)” as you slide the credit card, you’ll teach your kids entitlement.

Even my mother, who is generally pretty good with money and exceptionally good at finding a deal, tends to reward herself often by spending money. I saw this as a child and unconsciously believed that I could reward myself for every little thing. Trust me, those little “treats” add up, and pretty soon I was spending much more than I should have.

Start a Savings Fund

Whether you believe in giving kids an allowance or not, teach them that whenever they receive money, they should pay themselves first. Let your kids pick out a jar or a piggy bank and decorate it. Put it somewhere they can’t get into it but can still see it, and help them put in 5-10% of their money every time they earn some.

If kids get into the habit of paying themselves first, they will be unlikely to live paycheck to paycheck in the future. In addition, you might want to set up a charity or tithing fund that they contribute to regularly. Some parents follow a 10-10-80 rule: 10% savings, 10% charity, and 80% spending. No matter how you do it, make sure savings and charity come before spending.

Teach Them How to Shop

To help kids get the most out of the money they earn, teach them to be thrifty. Take them with you to the store and explain sales, coupons, and price per unit. The more they understand, the further they can stretch their money (and the less you will have to pay for).

It’s not absolutely necessary to create a formal, write-everything-down budget (especially when kids are young), but help children be aware of how much they are spending and help them develop thrifty habits. For the most part, let children be in charge of how they spend their money. Making little mistakes while they’re young will go a long way in preventing them from making big financial mistakes in the future.

Teach Them Delayed Gratification

It’s around 3 years of age that most kids start saying “I want, I want!” Teaching kids that they can’t always have what they want—at least right away—is crucial to their future success. Studies show that kids who are able to delay gratification perform better in school and have stronger relationships.

So teach children that if they want that new toy or book, they can save up for it. Suggest jobs that they can do to save up pennies. Not only will learning delayed gratification prevent kids from viewing mom and dad as an ATM, it will give them a sense of self-worth.

Teach Them to Work

Many parents suggest only paying for children’s essential needs (food, clothing, etc.) and having children work to earn money for the things that they want. Whatever your method, remember that kids who work for at least some of the things they want will be much more careful about how they spend their money. They certainly won’t spend their hard-earned cash as freely as they would mom’s and dad’s.

However you choose to teach your children about money, start early. The better a child is at managing money, the less likely he is to give into the allurement of credit cards or living beyond his means in the future. And he’ll be smarter about things like investing and choosing construction loan lenders or a retirement plan. Teaching your child to be financially savvy sets him up for success.



  1. Glad to see someone else is on the same page as me. I just posted this week about teaching your teens to grocery shop – a lifetime skill that they badly need and that most parents don’t bother to teach them (my mom never taught me either). I am very strict with my boys about money – no free rides around here. If you want something, you’d better be prepared to pay half of it, or to work for it or save up for it. I think it’s the best training you can ever give them.

    • I agree Adrian! It’s great to teach kids money management young. It’s something they will use all of their lives. My mom didn’t teach me how to grocery shop either. Might be one of the reasons I hate going so much.

  2. Jacqueline Gum (Jacquie) says:

    Excellent article! I only wish the young parents I know would read it. Delaying gratification is huge…one that this generation of parents haven’t learned too well themselves, and therefore probably find it impossible to teach! I found a children’s “checkbook” for my nephew when he was 5 years old! It was a great learning tool for him.

  3. I smiled when I read this. I remember setting up a plan where the kids earned money for specific chores. Part of their earnings was put into a long term bank for a big thing they hoped to buy in the future. They choose the amount. Part of the money was put in a short term bank for things they would ask for at the store. It caused them to make decisions on what they really wanted as apposed to a spontaneous/frivolous buy. It really worked. They are now very good with many as adults.

    • Sounds like you taught them well Susan! I can’t seem to get my son to stick to earning money for chores yet. Until he does he gets to do them anyway without being paid. Maybe he’ll starting thinking “Hey, getting paid was better”.

  4. These are great ideas. I need to consider what messages I’m unconsciously passing on to my kids. I think some of it depends also on the kids’ personalities. My two daughters handle money very differently, so I have to focus on different things with each of them. It will be interesting to ask them in a few years how they learned what they know about money!

    • Yes, it is very true that no two children learn or do things the exact same way. There’s a huge difference between my boys too Meredith.

  5. Hey Krystle! (and Edson)

    Well I am officially not ready for kids. I buy anything that I think would help my business, my chill time, or that is a sour candy in large helpings.


    • Candy always makes me happy. Anything that is beneficial to you – I say go for it. As long as you aren’t breaking the bank.

  6. Beth Niebuhr says:

    Great advice, all of it. Both teaching by example and with words are important. I also think that it is very important to do what you say and don’t give in to “Mom, please, please, please!”

    • The not giving in part is very hard. My son’s favorite thing is if he’s bad he likes to think he can earn it back (whatever he lost). Sometimes there has to be no earning it back and that’s what happened yesterday. He was not happy but hopefully he learns from it.

  7. All great points and ones that have made all the difference in my life. My dad’s had better spending habits than my mom, but both of them made sure their kids learned all about money.

    • I can’t really say much about my parents spending habits. I do know my dad used to comment about how much he loved his credit card. Hopefully that hasn’t bit him in the butt too much these days.

  8. Sybil Brun says:

    Great ideas and inspiration here! Thanks for sharing!

  9. Suzanne Fluhr says:

    I have two sons also. They are both now 20 somethings and live independently. They are both self supporting and have savings! Having said that, they each have very different approaches to money and have since they were very little. However, each wanted control over at least some of his financial life at an early age, so both had jobs throughout high school and college. It could be that this was a reaction to my frugality which I think was passed down by my mother who was a deprived child during the depression.

    • When my boys are old enough I will be encouraging getting jobs in high school. It can teach so much about money as well as time management.

  10. Great tips for parents. Love the post. Kids will learn more by observing parents.

  11. It’s never too early to start learning about money! And I agree, children will learn by watching their parents. My folks gave me an allowance, and held to it very strictly. That’s what inspired me to start working part time as soon as I could – I wanted to be financially independent as soon as I could.

    • I hope my children have that same yearning that you did when they get older. I’m still trying to explain to my son that just because money is on a table or something that doesn’t constitute as finding it. Ugh.

  12. Jen Weaver says:

    I like your post. I think it is a great idea to teach your children about managing money!

  13. All great ideas, but I think the one about delayed gratification is not only very important, but often missed! Thanks for the tips.

    • Yes, delayed gratification is very important. It can’t be me me me now now now all of the time like kids want. Hope you had a good weekend Grace!

  14. Learning about money is important and I did my best to teach my son. I suspect it worked because, frankly, he’s cheap.

    Although he did make the decision to concentrate on his studies rather than taking a part-time job. It was an option because he’s saved for a couple of years and is willing to take a loan out if necessary.

    • I can understand the concentrating on school part. You are able to do that and get a good job in the end it’s worth. Then you’ll actually have some money managed.

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