Kids and Money: Principles To Teach at Each Age

by Spero Financial

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Teaching your kids how to be responsible with money is an effective way to invest in their future, and you can start teaching them earlier than you might think! A University of Cambridge report showed that foundational money habits are often formed by the age of seven. The sooner you start helping your children build good money habits, the better. 

It might be hard to believe, but teaching your children how to manage money at an early age will set them up for success later in life. Money is everywhere, and your children are going to pick up on its significance. Children who understand the value of money will walk into adulthood feeling confident in their financial skills and will experience less anxiety when it comes to making big economic decisions. So, let’s look at some money principles you can teach your children at every stage of their young lives.


By three years old, kids are already starting to form their own ideas around money. They mimic what you do, so you can start establishing good money habits at this age by simply modeling your own good habits. 

As parents, we often forget our kids learn by seeing, so demonstrate your money habits physically — not just verbally. For example, make a list for the grocery store and check it off as you put items into your cart. While simple, this process shows them budgeting basics and how to avoid impulse buys. If they ask for something not on the list, explain why you can or cannot buy it.

You can also begin teaching them to save at this age. Start with a clear jar, and as they receive money for birthdays and other occasions, have them put it in the “savings jar.” While they may not understand the value of money yet, they will see their money “growing.”

Lastly, start teaching your kids how to make decisions. Being able to make decisions in life is essential, so introducing this early on will have long-term impacts on their money and life skills. You can do this by giving them two options and having them pick one. If they struggle early on, give them a timeframe to make a choice. It can be as practical as choosing between two outfit options for the day or selecting the shoes they want to wear. Not only will this help build self-confidence and empowerment, but as they get older, this skill will help them make choices that influence their buying behaviors.

Preschool and Kindergarten

At this age, your children still might not grasp the value of money, but they know they need it to buy things. This realization gives you another chance to reinforce sound financial principles.

Explain how you make money. Around the age of three or four, your child will probably ask you why you go to work. When they do, use it as an opportunity to explain that working allows you to earn money so you can buy things like food, housing, clothes, and more! 

Also, your children will start to understand counting. Their basic counting skills can apply to money, so use that developing skill to help them better grasp the value of money, which leads to our next point.

Show your kids that things cost money. Set aside a few dollars (aka their budget) and take them to a store they choose. When selecting their items, remind them of their “budget.” It never fails that they will select an item — or several items — outside their budget. Explain that they will have to pick a different item or put something back to stay within their budget. Let them physically hand the money to the cashier to complete the transaction so they can understand that money is exchanged for something else.

Elementary School

Between first and fifth grade, your child will likely have a better understanding of the value of money, so it’s time to show them the benefits of earning and saving money. 

Remember the savings jar tip we spoke of earlier? Now, you can consider expanding it to multiple jars: Savings, Spending, and Giving. Explain the importance of each. Teaching kids to be generous from an early age instills the importance of helping others. A practical way to put this into action is by encouraging your kids to use their own money to buy their siblings and parents birthday or holiday gifts. It’s a simple step, but it will allow them to experience the joy of giving.

During elementary school, most kids are ready to start earning their own money. Assigning household chores is an excellent way to teach responsibility — and get some well-deserved help in the process. If you offer an allowance in exchange for chores, clarify the terms. Some parents allow their children to earn an allowance for work, others for good behavior. If your children work for their money, they can do simple things around the house, such as making their beds, cleaning their rooms, folding clothes, and putting dishes away. You can also set parameters for good behavior or acts of kindness and have your children earn money that way. Either way, it’s important for your children to understand that money is earned, not given. 

If there is a toy or game they want, but they don’t have enough money to buy it, remind them of the importance of saving for it. This helps them see that money must be worked for and saved in order to get what they want. 
Lastly, consider teaching them that instant gratification is rarely best. Help them weigh opportunity costs — if you buy this now, you won’t have enough money to buy the other item in the future. Explain the difference between wants and needs. This conversation is key in teaching your kids how to avoid impulse buys. If your child sees something at the store, don’t just buy it. Instead, consider making them save for it or wait for a holiday or special occasion to get it.

Middle School

Throughout their pre-teen and early teen years, begin giving your kids the responsibility of managing money. Now, take the glass jars from earlier and use the funds to open a bank account. Most financial institutions will allow your child to have a debit card once they reach 14 years old, and they may even offer online and mobile banking. Teach your child the importance of deposits and withdrawals and not overdrawing their account.

You can take this education to the next level by allowing your kids to manage their own expenses. For example, instead of taking them to back-to-school shopping and paying for their clothes directly, deposit the funds you’d plan to spend into their account. When you take them shopping, leave it up to them how to make the purchases (e.g., bargain shopping or name-brand). You can even do this with back-to-school supplies or an “allowance” for extracurricular activities with friends. 

Teach them the power of price comparison. Grocery shopping is an excellent tool for this. Compare similar products to determine which one is best for your family. In the long term, this simple practice builds skills that translate to larger purchases such as a car. 

Lastly, be intentional about teaching your kids how to be content. The middle school age tends to be the years of comparison, and social media amplifies this. Emphasizing the importance of contentment protects them from the cycle of buying things just to keep up with friends and trends.

High School

As your kids start thinking about life after school, you can start giving them a taste of “adulting.”

They can get a part-time job or put on their entrepreneur hat. While most teens would love to forgo working, the reality is that they will have to work sooner or later. Starting early will instill essential soft skills that will set them up for long-term success, all while helping them bring in income and build their resume.

Give them financial responsibilities. Your teen should have a solid grasp of wants versus needs. For their wants, you can let them pay for items such as outings with friends or clothing. For their needs, consider having them contribute to expenses like car insurance, gas, or cell phone bills if their income allows.

Lastly, expose them to financial tools. Your teen should understand how to manage their bank account by this point. Now, introduce them to the power of compound interest. This can be done by opening a simple savings account, term share certificate, or investment account. You also can start teaching your teen the responsibility of credit — from building credit to opening their first credit card. By understanding these financial tools and ideas, they will be much more prepared when they start making those money decisions on their own.

It’s essential to have discussions with your high-school-aged children about paying for college. College is a big financial decision, and your children should have a say in deciding how to pay for it. Encourage them to use some of their money to save for college. Explore affordable options like attending community colleges and in-state universities, working part-time during college, and applying for scholarships. Student loans aren’t the only option for financing higher education, so encourage your children to look for alternatives that won’t saddle them with massive amounts of debt.

Entering Adulthood

Teaching your children all the principles discussed above will help them enter adulthood with the tools they need to manage their money successfully. But this doesn’t mean you need to hang them out to dry. There are many ways you can continue to help your young adult children become financially independent.

To start, help them set a new budget. Their financial responsibilities will increase after college, so help them determine a healthy balance of needs and wants in their budget. They don’t have to spend all of their income on bills. In fact, they should be able to spend some of it on things they find enjoyable. Encourage them to create a balanced budget that leaves room for their essential bills and enjoyable activities. 

No matter how much young adults have been taught about money growing up, becoming financially independent can feel daunting. Encourage your grown-up kids to take full ownership of their finances, but let them know you’ll support them along the way. Knowing you have their backs will give your young adult children the confidence they need to thrive financially.

Your children will probably make mistakes somewhere along the road when it comes to managing their money. As hard as it may be, let them make those mistakes. That’s how they’ll learn and grow. Making a poor financial decision and experiencing the repercussions will drive home the importance of responsible money management and set them up for success as they enter adulthood. 

Ready to set your child up with their first savings account? Want to help your teen open their first checking account? Spero is here to help! Give us a call or stop by one of our convenient branch locations to start them on the path to financial success.

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