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How To Teach Your Kids About Money

How To Teach Your Kids About Money

| January 03, 2019
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In our opinion, the benefits of establishing sound money habits and strong financial literacy at a young age are immeasurable. We believe that it should be a priority of every parent to teach their kids about money. No matter what their age, there are many opportunities that will present themselves to parents to provide “money advice” that their children can take into their future.

Depending on a child’s age, certain money lessons will make more sense. For example, for a child that is younger (preschool to elementary school), starting off with a piggy bank is a great way to start the conversation around good saving habits. As they get older, you can start finding ways to teach them about less elementary topics, such as the value of hard work, debt, budgeting, compound interest, etc. While the list below is not exhaustive, we hope that it provides several valuable tips on ways that you can teach your kids about money.

Budgeting, Saving, Spending, & Debt Management

While the piggy bank idea is great to start learning saving habits for children that are younger, it is important that good saving habits continue as they get older. One way that we recommend a parent emphasize this is to teach their children about budgeting. Even though most children do not have much in terms of expenses, there are always small spending needs that will come up.

By creating a budget with your child, they will begin to see exactly where their money is going. The next step to this would be to talk with your child about goals that they may have with how they want to spend their money. Do they want to save it up to buy a new baseball bat? What do they want to do with the money they have saved up from chores, work, etc.?

There are many ways that a parent can help their child maintain a budget. One way is to write it out on paper with them. Another way is to create a spreadsheet together. Finally, there are many free apps out there that most children would easily be able to navigate. Find the best solution for you and your children and stick to it.

The last topic that I want to emphasize in this section is debt management. In the conversations around budgeting, saving, and spending, it is vitally important that the notion of debt be brought up. One easy way that a parent can teach this lesson to their child is to offer up buying one of their “goal items” and giving it to them today. The lesson would be in charging them a small amount of interest to them over a  period of time until they have enough money to pay you back. When you go over their budget with them after everything, you can show them how much money they had to pay in interest from going into “debt” to you. If they internalize this lesson at a young age, they will easily avoid the traps of credit card debt and student loan debt that most young adults face.

Teach Them How To Make Money

There are many creative ways for a child to try to earn money. Newspaper sales and the classic lemonade stand are great options, and there are many iterations of both. Get involved and spark ideas for creating a profit and loss statement, marketing ideas, etc.

Another fun family idea is to go to neighborhood yard sales, pick up some items that you could sell online, and try making a profit on sites (or apps) like Amazon, Let Go, Craigslist, etc. You can also find toys on sale at stores like Target or Walmart and then try to resell them on Amazon at a profit.

Finally, if babysitting comes easy for your son or daughter, maybe running a neighborhood one-week summer camp could be a great opportunity at entrepreneurial success.

All of the ideas above are just a few options, and the goal is to let your child go through the process of what it takes to earn money. Whether they succeed or fail, the lessons learned will follow them as they grow.

Compound Interest

The earlier someone learns about compound interest, the better. At such a young age, their investment time horizon is very long. Make the extra effort to put pen to paper and show them what compound interest is all about.

Once they see the math and understand the exponential growth of what their money can actually do, you will have built in your child a strong case for saving early.

Delayed Gratification

This idea is more of an important lesson that can be applied to many facets of life. However, when it comes to money, having the discipline to delay gratification can help achieve financial success. Specifically, when choosing to spend today versus save today, if your child learns how to delay gratification, they will have some very strong saving habits in place as they get older.

One simple way that a parent can instill this ability would be to open a higher-yielding online savings account for them. Work with them to deposit some of their recent birthday money or summer earnings and show them how money can grow over time. If done at the right age, this will blow the minds of some children, leading to a strong adoption of sound saving habits.

Lead By Example

Kids are smart! If you want to teach your children about smart money habits, it is important that you exemplify exactly what you want to teach in your household. Even at a very young age, your children will pick up on if you are using your credit card, debit card, or cash when making purchases while they are around. It is also true that they will adopt the money habits that they see in their own household. Therefore, when it comes to conversations around money, communication is key. As your children get older, make the extra effort to explain certain transactions such as buying a home, buying versus leasing a new car, paying for college, and opening bank or brokerage accounts, retirement accounts, etc. While you go through certain stages in life that have to do with financial decisions, try as best as you can to involve your kids.

Take It Further

Maybe you have already been leading by example, as described above, when it comes to smart money habits. We love that! However, if you’ve realized that you want to get an even stronger handle on your financial goals, we at Harbor Wealth Management would love the opportunity to start that conversation with you. To take the next step, send me an email at or call my office at 985-605-7185.

About Jeremy Smith

With nearly two decades of experience in the financial services industry, Jeremy Smith serves as a dedicated and knowledgeable financial advisor and the founder of Harbor Wealth Management. He specializes in serving retirees, pre-retirees, small business owners, and widows, providing a comprehensive array of investment management and financial planning services. Jeremy aims to serve his clients as a financial guide who is here for their every need, helping families find lasting plans so they can focus on what matters most to them. To learn more about Jeremy, visit or connect with him on LinkedIn. You can reach Jeremy directly at or by calling his office at 985-605-7185.

Securities and advisory services offered through LPL Financial, a registered investment advisor.  Member FINRA/SIPC.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. You should discuss your specific situation with the appropriate professional.

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