Teaching Children How to Manage Money: 5 Tips for Savvy Parents


Five Ways to Teach Your Children about the Value of Money

By Dr. Robyn J.A. Silverman

(Teach your children self reliance and responsibility!)

When I was about 5 years old, my father took me down to the corner store so that he could buy a newspaper for himself and a pack of gum for me. When we exited the store, there was a path of coins in a neat little line in front of me leading to the parking lot. I was so excited! I started picking up pennies and nickels and dimes, oh my! My father smiled at my enthusiasm and said, “You know if you put that money away and add to it each time you receive more of it, sooner or later, you’ll have your very own money tree. Then you’ll be able to buy all sorts of special things with it!”

That was my first experience with money and it stuck with me. It taught me that money was plentiful and that over time it could reap great gifts. I began looking for ways to find and make more of it. My father started giving me an allowance. Additional compensation was provided when I would do extra chores.

I became a bona fide saver. In fact, whenever anyone in the family needed money, they would come to me! I kept my money in a bright yellow cash box. I used to find little “I owe you” notes in it from my Mom and brothers when they needed a few dollars.

Not everyone has such a happy give-and-take relationship with money. A few years ago, I became friendly with a woman who had a very different experience. Her parents died when she was just a child and she was left to live with her older siblings. Her first memory of money was of rummaging through the couch cushions for any loose change that the family could use to buy groceries. It taught her that money was scarce and that she would never be able to secure enough to live comfortably.

Our first experiences with finances, whether good or bad, are very important to our future relationships with money. Luckily, we can control some of these experiences with our own children. By taking the time to include them in some appropriate financial decisions while teaching them the value of money in an enjoyable manner (without dictating or commanding compliance), your children will be well on their way to cultivating a healthy relationship with dollars and cents.

(1) Be a financial role model: You can show your children how you save and spend money in several ways. Bring them to the bank when you make a deposit or an investment. Use coupons at the grocery store. Demonstrate how you choose one product over a similar, yet more expensive one, so that you stretch your dollar more effectively. And of course, show your children how, because you saved, you can now purchase something special that you would not have been able to afford had you been more careless with money.

(2) Discuss money and financial choices: This goes hand-in-hand with the previous tip. When you explain your decisions and even ask your child to join in on the conversation when you are choosing between saving and spending, you are shaping your child’s understanding of money. Speak out loud when you bring your children to the grocery store and ask them to participate in finding “the cereal that is on sale” or the “juice shown in the coupon we clipped from the paper.” You can also allow them to hold the coupons and hand the money to the cashier—further instilling that it takes money to buy “things.”

(3) Set spending limits: Discuss how much you can spend at the store, or, if your children are going to be using their allowance, discuss how much they want to budget for a particular item or event. This will help you and your children stick to the plan while still having fun. Be firm with these spending limits. Otherwise, you will be teaching your children that by simply whining or begging, they will get more money. This is not the way life is, so why set the precedent?

(4) Allow children to manage money: Allowance can sometimes be controversial. However, it is a great way for children to learn how to manage money within safe parameters. By encouraging them to make their own decisions about money and deal with the benefits of good choices and the consequences of poor ones, they will learn to be more responsible with saving and spending. For example, if a child blows all his savings on a toy and then does not have enough to go to the movies, well, that’s learning for you! Think of it this way, wouldn’t you rather that your children learn these valuable lessons now rather than waiting and having them learn them as adults when the rent check bounces?

(5) Teach your children to divide up their money: Children should learn at an early age that all money should not go in one big spending pot. Decide on a percentage of money that each member of your family will give to charity each year (usually 10% of earnings). Your children will take great pride in choosing which type of charity they want to support. In addition, provide money jars or piggy banks for (a) money that can be spent now; (b) money for short to medium term savings and goals; and (c) money for long term savings, goals and investing. With very young children, leave all of these piggy banks in the child’s room so that the children get a very hands-on understanding of money. As children get older, help them open a bank account and look for appropriate ways to invest their “long term savings” for maximum return.

Understanding the power of money takes time and tolerance. Mistakes are bound to happen. After all, they are part of the learning process! The important things to remember are to be consistent with limits, encouraging of saving and responsible spending and patient with your children’s decisions—even if they are not the best choices in the long run. How else are they going to learn that if they want to grow money trees, they better get to planting, maintaining, and cultivating the seed?

Have a Powerful Day!


This article was originally published in Bay State Parent Magazine

Some of Dr. Robyn’s other articles that teach self reliance and responsibility feature (1) Learning how to my own tie shoes; (2) Learning how to do the laundry; and (3) learning how to pack my own bag

Dr. Robyn J.A. Silverman is a Massachusetts-based child and adolescent development specialist whose programs and services are used worldwide. Known as “The Character Queen,” she is also a success coach for parents, adolescents, and educators, who are looking to achieve their goals, improve their lives or improve the lives of others. She is a writer and professional speaker who presents to PTAs, schools, parents, and organizations that focus on children or families. Interested in doing some coaching with Dr. Robyn or having Dr. Robyn present a seminar at your child’s school or at your business? Go to her website or her Powerful Parenting Blog for more information.


6 Responses

  1. Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

  2. Brilliant article. However, I would like to add that telling your child how hard it is to earn money is another good idea.

    I believe that if your child sees you very tired when you come home from work, he will mostly likely be conscious that earning money is very hard.

    In fact, I made a similar post last around 2 months ago and hope it can also help your readers.


  3. Thank you, guardian angel, for your response. Children do need to learn that money does not “grow on trees” and that someone works for the money.

    My hope is that children also learn that with careful planning and forethought, money can be a fun and interesting part of life– and working for the money can be pleasurable even when challenging.

    Best regards,
    Dr. Robyn

  4. […] effort, or money to assist others in need. How would they like to help? Perhaps they would like to give some of their money to charity (i.e. allowance or birthday money). Perhaps they would like to donate their time to a local charity. […]

  5. […] a vital skill everyone should learn, and that we’ve been discussing lately and that we’ve discussed previously on the […]

  6. For me one of the greatest ideas to save money as a teen was keep it out of the reach. A debit card helped a lot because at that time few shops accepted them as payment. Another way to keep the cash is to go out without it. Sounds silly, but really works. If I don’t have money with me, I can’t spend it.

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