Do you realize your child’s first experience with money will impact his/her financial behavior for life? That’s HUGE – no wonder there is a lot of debate regarding how to teach children about money. Money isn’t everything in life but it can make life easier – an important concept to teach.

While I don’t favor paying children to complete normal household chores (some things we just have to do as a family member and money shouldn’t drive our motivation in this area), I do favor gradually introducing children to money – similar to how we gradually introduce them to drive a car.

Here are 5 tips to help your child learn about money:

When they receive money as a gift teach them to save a portion, donate a portion and spend a portion. This behavior will help them understand how money can be used. It will also help them learn how to spend within limits while saving for the future.

Involve them when planning family vacations. Let them see how you budget and save for these memorable trips. Start with small tasks and as your child grows, expand their role. Once you’ve selected a destination, ask them to calculate how much you need to save for travel, food, lodging and entertainment.  When you’re on vacation, ask them to keep track of spending. Being part of the process, children will learn to focus on saving instead of always asking you to spend.

Help them become aware of regular monthly expenses. Start with one item and gradually expand the list of regular monthly expenses.  Consider beginning with your grocery expense. Let your child keep track of how much you are spending while at the grocery store. You can also have them look for online coupons to reduce expense. During the summer, introduce them to the electric bill. Show them how using air conditioning increases the bill. By introducing your child to regular monthly expenses, they will learn money is used to pay for necessary expenses – things you need to live.

For holiday gift spending, give them a prepaid credit card. They will have the autonomy to spend how they want but will also learn how to spend within limits. Of course, you’ll need to help them with this process initially. Begin by having them make a list of who they want to buy gifts for and then determine how much to spend for each person. If they overspend, do not give them more money. Instead, help them figure out which items to return and alternatives for their gift ideas.

Gradually introduce them to a budget (which includes savings and donations). Give them a certain amount to spend monthly. If they spend their monthly allotment, do not give them more money. Allow them to make these errors now instead of making more costly errors while away at college.

Taking time to teach your child about money will help develop solid financial behaviors for his/her future. Part of the learning process is for them to make some mistakes on their own. It’s easier to manage these mistakes when they are younger and under your supervision — instead of when they are older and away from home.



Niv PersaudNiv Persaud, CFP®, CDFA™, CRPC®, is the Founder of Transition Planning & Guidance, LLC. Her firm bridges the gap between financial planning and coaching. As a Transition Consultant, she offers sage advice in all aspects of life – financial, personal and professional. Niv does not manage money and does not sell financial products. Her services include spending plan development, divorce financial review, life strategy and professional progression. Niv actively gives back to her community through her volunteer efforts. She believes in living life to the fullest by cherishing friendships, enjoying the beauty of nature and laughing often — even at herself. Her favorite quote is by Erma Bombeck, “When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left and could say ‘I used everything you gave me’.”