Money and Budgeting For Kids: The Only Guide Parents Need To Read

What if I told you that it is easier for a child to learn to manage money than an adult? Would you believe me?

In a world where “cash is king,” understanding how to handle money is more important than ever. Parents must start teaching children about money as early as possible. Kids don’t need to understand the fine details of personal finance or complex investing strategies: they need to know some basics principles.

We love our kids, so have a seat, and let’s talk about how we can prep them for their future.

Set a Good Example

Sure, you might want to start by sitting down and going over basic financial concepts with them, but the most effective way to teach them is through your actions.

There’s no need to go into great detail about every financial decision you make, but try to use these decisions as learning opportunities. For instance, if you weigh whether or not it makes more sense for you to rent or buy a house, talk about what’s involved in each option and why you think one makes more sense than the other.

If you’re trying out a new budgeting app, explain what it does and give them a chance to check it out with you. No matter how old they are, there will be plenty of opportunities for them to learn from your example if they see that money is an important topic—and that even grownups have questions about how best to manage their finances!

Teach Them How to Budget Their Money and Track Their Spending

Kids need to know about budgeting and money management even as early as age 3. At this age, they’re not playing with real money yet, but you can explain the value of cash by using candies or cookies instead. For example, tell your child that he has to share some with his sister first if he wants more cookies. Teach them how to divide the objects into equal parts.

By the time they’re 5-6 years old, they’re now well aware of what it takes to get things they want. Help them understand the difference between needs and wants by introducing them to a simple budget chart consisting of two columns: one for “needs” (such as food and house rent) and another for “wants” (like toys). Explain that meeting only their basic needs is essential while paying for their wants requires enough extra funds in their budget after allocating money for basic needs.

Use an Allowance as an Education Tool

Allowances are an easy way to teach kids about money, and many children can benefit from the experience. While parents need to keep a close eye on how much their kids spend, there are ways to set up a system that works for your family that promotes good habits without punishing them.

Here are some ideas:

  • Make allowances as a way of teaching kids about money. You don’t have to be stingy with allowances—but when you give one, make sure it’s clear why you’re doing so. Set up rules around the amount and frequency (weekly or biweekly is best). Allowance amounts should cover your child’s basic needs and not go over budget; if you’re having trouble spotting where things got out of hand, put aside extra money for savings every week (for example) and periodically check the account balance.
  • Use an allowance as a life skill tool. Everyone deals with money at some point, but it can be tricky to learn how to manage it independently. By giving allowances consistently, your child will learn that monies add up fast when you have no idea how much they’re spending; she’ll also get a taste of budgeting her money properly and then re-evaluating later if needed. The use of an allowance is also a good tool for helping kids learn how banks work—and ideally, this moment will occur before they’re old enough to open a checking or savings account themselves!

Teach Them about Saving For the Future

The Story of the Piggy Bank is an early education tool designed to help teach children the value of saving. The concept is simple: Make saving and starting a habit at a young age to ensure that your kids have wise money management skills.

Help your kids learn the importance of saving money using a real account. First, each time they get a gift or money from an adult, have them put some into their savings account. Take them to the bank or credit union (or even to an ATM) and watch as they help decide where to deposit it. That’s a great way to promote essential learnings about budgeting and spending responsibly.


Children are largely creatures of habit, and learning good money habits today will help make tomorrow easier. Above all else, the best way to teach your kids to handle money is to model good financial behavior yourself. So be sure to adopt a financially responsible lifestyle in your own life, and you’ll be well on your way towards a financially-secure future for your family.


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