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The 6 best ways to teach kids about money

Use these simple techniques and you'll give your kids the best foundation for using money wisely.

By MSN Money Partner Nov 12, 2013 12:50PM

This post comes from Kentin Waits at partner site Money Talks News. 

Money Talks News on MSN MoneyKids are sponges; they soak up details from their environments more efficiently than most adults could ever imagine. So, it’s not hard to see how children can inadvertently absorb ideas and lessons we don’t mean to teach.

 Boy holding allowance money © Bryan Mullennix, Photodisc, Getty ImagesWhen we vocalize our stress over paying bills, argue with our spouse about money, and complain about how difficult it is to make ends meet these days, we might as well have a textbook in our hand and an apple on our desk.

Maybe it’s time to take a recess and figure out a better strategy for actively teaching our kids about money. In a world filled with financial pitfalls, working to create positive and empowering associations with money early can help set children up for a lifetime of better choices, less stress, and more security.

1. Use cash

Especially for young kids, the concept of credit is a bit abstract. Instead of relying on credit or debit cards for the bulk of your purchases, use cash.

Cash is the currency that most younger folks deal in (at least for a while) and it’s a more visual medium to teach lessons about money. Let your children hold cash, make simple transactions with you, and drop coins in their very own piggy bank. As they mature, you can build on those basic cash concepts and use more representational methods of payment such as credit cards, debit cards, and other paperless transactions.

2. Provide an active allowance

Establishing a consistent allowance that’s earned through basic age-appropriate tasks is perhaps the most fundamental method of teaching kids about personal money management. Actively earning an allowance helps children understand the important links between time, labor, and payment.

But don’t let the lesson end once the money is earned. Allow your kids to manage a portion of their income independently and help them make choices about saving and spending. Over time, they’ll begin to understand spending on a deeper level -- as an exchange of time for things. And that lesson sets the stage for exploring more advanced concepts later such as investing, entrepreneurship, and appreciation/depreciation.

3. Give them a piggy bank … with a twist

Few things empower kids more than feeding their own piggy banks. When children have the opportunity to earn their own money, save it, watch it grow, and make choices about what to do with it, the whole arcane world of grown-up finances becomes a bit less mysterious. After all, what better motivator for learning could there be for a kid than having a bit of the green stuff that’s all their own?

But instead of the old-fashioned piggy banks we’re all used to, try a more novel version. The Money Savvy Pig was developed by Susan Beacham, founder of Money Savvy Generation, a website that helps children learn about money.

The Money Savvy Pig is a transparent plastic piggy bank divided into different sections based on how savers want to use their money. There’s a slot for Save, a slot for Spend, one for Donate, and another for Invest.

It’s a simple tweak on a classic idea, but the lesson is a good one -- money should be targeted for a specific purpose at the time it’s deposited and successful money management is always driven by some sort of budgeting process. Further, it lets young savers see their money accumulate in each area and better understand the earning/saving/spending/depletion cycle.

At nearly 20 bucks, the Money Savvy Pig is pricey for a piggy bank. If that's too much, use a cheaper one or none at all. The important thing is to introduce the idea of coupling saving with allocation and budgeting.

4. Be a gamer

Developing a healthy relationship with money begins with understanding it, not fearing it, or being bored by it -- and that’s where games come in. Play is an integral part of kids’ lives and it can be a vital tool in helping them build positive associations with money.

Board games like MonopolyPaydayThe Game of LifeMoney Bags, and Exact Change teach kids how to count, spend, and handle money. 

Money Word Games is a free online game where kids learn to solve word problems related to counting change. It teaches simple algebraic concepts and helps kids build basic calculation skills. T. Rowe Price and Disney teamed up to create another free online game, The Great Piggy Bank Adventure, which guides children through various financial lessons with the help of what else? A virtual piggy bank.

5. Participate in family philanthropy

Of course, there’s more to money than earning, spending and saving. Take a holistic approach to the positive power of money and make philanthropy part of your curriculum.

Beyond encouraging children to donate a portion of their income to the charity of their choice, contribute some of your family’s time, energy and talent to those causes closest to your heart. It helps teach kids to spread the wealth in all its forms.

6. Teach by example

Particularly with younger kids, it’s important for parents to actively monitor the messages they’re sending about money.

Constructive lessons don’t involve mom and dad airing and sharing their financial fears and anxiety about money within earshot of young ones.That only teaches money is a source of frustration and personal financial management is a headache. The best teaching methods and moments allow children to establish their own relationship with money through guided exercises and real-world experiences.

With well-delivered, consistent and age-appropriate lessons, it’s easy to demystify money and help your child develop a basic financial awareness that’s grounded in curiosity, responsibility and empowerment. With so many other life lessons hinging on mastering the basics of money, it’s one of the most important subjects parents can cover with their children. And the time to begin is now.

More on Money Talks News

Nov 17, 2013 3:44PM

When they turned 14 yrs each of my kids opened checking accts and received debit cards.  Every month I put $50 in their accts.  They quickly learned the $3.50 coffee drink or $200 pair of jeans wasn"t worth it.  It was the best $ I have ever spent!  They both had jobs in high school and learned further how to manage their money.  I made it a priority for them to understand check stubs, ramifications of student loans and debt in general.  Today at 23 and 20 yrs old they could each tell you their FICO scores.  My son, a college graduate works in finance and  has a 401K.  My daughter, a college junior is also on her way to financial independence.  They learned early the difference between needs and wants, counting their blessings and the value of giving to others.

Lest you think we are a privileged family, I have raised them as a single mother for the last 10 yrs-

no help financially or otherwise from family or their dad.


Nov 17, 2013 8:27AM
When we started giving my 5 year old daughter an allowance of $1.00 per week, she told us "You can't buy anything for $1.00 a week...I want $20.00 a week!". Of course, she got the $1.00, not $20.00. She learned about money at an early age. We talked about it a lot and she'd watch the bill paying etc. Don't make finances so mysterious to children. It paid off in her case. She's 22 now and has a pretty good handle on her finances.
Nov 17, 2013 9:55AM

I will say  one way to teach them value of work and money  is to make it as though  you are hiring them for work around house. clean windows, clean cars , clean bathroom etc something simple. give them a job description.and THEN pay them allowence like they are at work full time or by hr. let them pay part of bills say(25 cents etc)  without going too nuts about it. teach them consequence of irrresponsible spending. it has its perks but dont be too harsh on it. make it fun.

Nov 17, 2013 11:16AM
My kids got an allowance for doing chores. We hardly ever just handed them money. We made them save a portion of their allowance. Lots of arguments over that, but they soon learned that nothing is just handed to them. Now if they would just stop handing their kids money for nothing.
Nov 17, 2013 4:34PM
My kids had three banks, one for spending, one for saving and one for charity.  Every dollar they got for allowance or gifts was divided 50/40/10.  It worked.  As young adults today, they both have excellent credit and give their time and money to charitable causes. 
Nov 17, 2013 7:56PM

....controlling your child's allowance: an incentive for working and helping out around the house teaches a good lesson - nothing is free!


Now, the much bigger lesson will come from the example the child's parents provide: at this age (child) the experiences make the difference not the knowledge. So demonstrate: restraint, planning, saving and delayed gratification.


Unfortunately too many parents are teaching their children they can have what they want when they want it - by watching their parents pull out a credit card and buy a "want".


Children use behaviours, whining, begging, pleading, promising, and acting out to get what they want - parents must learn to manage these behaviours while modeling respectful interactions. As a result the children learn responsible money management and have a model for respectful relationships - bonus!!  

Nov 17, 2013 2:37PM
All reasonable good advice, except for the twenty dollar piggy bank.  The lesson there should be that there are many people who want to profit from your foolishness, so learn to recognize the scam.  I remember all the unorganized people who were convinced to buy a high priced organizer.  The organizer, of course, never helped, because the people were not organized enough to use them.
Nov 17, 2013 12:06PM

Money PIG $20.00  I don't think so.  A Peanut Butter Jar with a slit in the top and the lid Glued on....  Teach a kid about money like wasting it on a stupid bank.. Who is the Idiot that came up with this idea..?



Nov 17, 2013 9:20AM
Helping your child develop a basic financial awareness is a good thing but far from being one of the most important lessons. The american dollar will soon be worthless and leave us with another problem. Our children should be learning about the freedoms that were set for us in the constitution, how to get along with our fellow americans and work for what you want to achieve in life. These basic lessons are not being taught anymore and it is shameful. My children will and are learning the basic skills that will be needed to survive in a nation that is going to hell with or without money. If the brainwashing that is currently being done to our children continues, I know I will sleep well knowing my kids will have no part of it and most of all live their lives as free individuals.
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