6 Tips for Teaching Kids About Money

As a parent, teaching your kids about various aspects of life is part of the job description. But teaching kids about money can be challenging, and there's no one-size-fits-all approach to doing it. To help you find the right approach for your family, here are six ways to build teaching your kids about personal finance and money management into your daily lives. 

1. Set a good example

Taking the time to research and educate yourself about good money habits can set you and your children up to prioritize good financial decisions.

That's not to say that you need to be perfect. Personal finance is indeed personal, so make goals and decisions based on what's important to you. The important thing is that you seek to understand ways you can improve your money management, so your children can see that you walk the walk. 

As you seek to provide your children with a good example, you may also wish to stress the importance of giving. If your financial situation is relatively stable, making charitable donations to causes you care about or even individuals who are struggling can help your children learn the importance of kindness and generosity.

2. Consider an allowance for small chores

Teaching kids about money can be difficult if they don't have any to work with. When they're younger, earning money for small chores is one way to help your kids understand the relationship between work and income. 

You may also wish to talk about your own job and how you earn money, and why it's important to manage the money you earn to maintain the lifestyle your family values. Whether or not you get into specifics about your income and expenses is up to you, but even speaking generally about why you work, and how the money you earn supports your lives, can be a good introduction. 

3. Teach them how to budget and save

As your children grow and start earning money, you can help them choose how to spend their hard-earned cash. You don't need to take control of their money, but give them a framework of responsible spending and saving, then allow them to make their own decisions. You can also talk to them about the importance of avoiding impulse buys and taking the time to consider larger purchases before pulling the trigger.

Your children may not have any essential expenses yet, but you can talk to them about both spending and saving money and how their financial decisions now can help prepare them for the future, when financial literacy will be far more important.

When your kids are younger, consider getting them a piggy bank where they can store any money they've earned. As they get older, though, you may wish to help them open a checking and savings account, giving them the flexibility of a debit card, the power of compound interest on their savings, and other services to better manage their money. Try our compound interest calculator to see for yourself! 

4. Teach them about debt

Debt can be a helpful tool to improve your lifestyle or even your financial situation, but it can also become burdensome or even financially crippling. Long before your students have to make a decision about student loans, it's important that you talk to them about the impact debt can have.

You may consider doing this in a strictly educational sense, or you could offer a practical learning experience. For instance, if your teenager wants a new phone, you could lend them the money to buy it and expect regular payments. You can choose whether or not to charge interest, but even the fact that they owe you money can be enough to help them understand how debt payments impact their lifestyle. 

You may also consider adding your child as an authorized user on your credit card. In addition to helping them establish their credit history, this step could also help them learn about how credit cards work and why it's important to pay your bill on time and in full every month.

5. Talk about everyday financial decisions

It's normal for children to ask their parents to buy things they want, such as candy at the grocery store, a new toy or video game, or a phone or computer. But even if you can afford to pay for these things, it's important to talk to your children about how everyday financial decisions can impact your plans.

For example, talk about the opportunity costs of buying candy, toys, or video games on a regular basis, particularly in how it affects your ability to save and work toward your other goals. 

You can also talk about how larger purchases, such as a new phone, tablet, or computer, may take some time to save up for. 

6. Show them how money can grow through investing

Once you get the basics down, consider talking to your kids about investing and how they can use their money to potentially build wealth over time. 

With Acorns Early, for instance, you can open a custodial investment account for your children and help them get started. You can encourage your kids to put some of their own money into the account and even make your own contributions. 

This simple approach to investing can help them learn the basics while they start creating a strong financial future for themselves.

This content is for educational purposes only and is not intended as financial advice. The views expressed are generalized and may not be appropriate for all investors. 

Investing involves risk, including the loss of principal. Acorns Early is a custodial UGMA/ UTMA account, money in a custodial account is the property of the minor. Each Early account identifies a beneficiary who will take control of the account at age of transfer determined by the custodian. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions.