How to Teach Your Kids Financial Responsibility

For children, parents are often their first teachers and role models in life, primarily through observation. For example, five-year-old Annie watching her parents take off their shoes before entering the house teaches her to follow in their footsteps—pun intended—and do the same herself. Financial responsibility is no different.

Although personal finance is often a skill we pick up later in life, helping your kids build that foundation helps them ease into the process and have a good grasp on what financial responsibility looks like. Here are some ways you can do that.

Teaching the Value of a Dollar

The most important lesson is the value of a dollar. For Annie, “a lot” of money could range anywhere from $10 to $1,000. In addition, the value of money could be relative to the item you’re purchasing. For example, while a cheap electricity bill could be $50, that same amount wouldn’t be cheap for fresh produce. The value of a dollar is also dependent on your financial situation—understanding this is something we learn through the experience ourselves. 

For younger children, the best way to start is by introducing them to small chores. This could include simple tasks like organizing their toys or folding laundry in exchange for $1. Then, with every chore that they finish, provide them with a few options to either use or save their hard-earned money:

  1. Candy, snacks, or other food that they like for $1. 
  2. A toy they like for $5.
  3. Putting away their money for another time.

These exercises help teach the concept of money, especially in terms of spending, budgeting and saving. Providing these lessons early on also creates a strong baseline for introducing regular allowances, teaching them to manage their money from a younger age. 

Bring Them to Buy Groceries

The best way to teach is to lead by example: involve your children in the grocery process! This could include budgeting for weekly groceries, looking for deals on produce and products, creating a list of items to buy, and even how to choose good vegetables and fruits. It could also be as simple as asking them for anything they want and showing them how it fits into the budget, or even pointing out good deals at the store. 

Showing what budgeting, spending, and saving look like through example helps cement the concept while also being fun and interactive. 

Be Transparent in How You Manage Your Finances

Let’s say Annie’s now eight years old and has a pretty good grasp on the basics. She’s followed her dad along for grocery runs, knows how to find good deals and fit them into the grocery budget, and has $27 saved up in her piggy bank from chores after tastefully spending $13 on toys and candy. What’s next?

Financial responsibility is largely knowing your financial situation and learning how to balance your income, debts, and expenses while saving. By now, Annie has an excellent foundation for this without knowing. The next step is to start opening comfortable chats about your finances and how you manage them. For example, it could be about saving money for retirement or saving up for the next family vacation; even chatting about how you prioritize your payments, like bills, groceries, then entertainment. 

These conversations shouldn’t be stressful for you or your children but instead provide an understanding of what this all looks like in practice. 

Teach Them About Debit and Credit

Most kids are eligible for debit cards around 12 years old, and teens with credit cards at 18 years old with a youth account. Before you help them sign up for these, give them a financial chat: explain how debits and credits work. When they’re 12 years old, open a conversation about different ways to put aside their money for savings, and consider starting with a spending limit on the debit card until they say otherwise. For 18-year-olds starting with their first credit card, teach them how credit, credit debt, and credit reports all work (check out our articles about paying off credit debt and credit mistakes to avoid). 

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If you have any questions or need any financial advice, we’re always here to help!