A healthy relationship with money starts early on.
Good money habits don’t automatically start in adulthood, they begin in childhood. Take a look around and you will see adults of every age making a mess of their finances. But what if they had learned good money habits as a child?
In school we learn algebra, calculus, and trigonometry but not how to budget, save, or invest. The older we get, the more responsibilities we have that make it challenging to focus on learning financial principles.
I started Rich Single Momma because I wanted to teach single moms how to make their money stretch. Eventually, this education morphed into financial literacy and financial empowerment. After helping 2500+ adults with their money challenges, naturally I started stressing the importance of parents educating their kids about money.
I talked with a few parents and money experts in the Rich Single Momma community who shared their advice about and experience with teaching kids good money habits at every stage.
How do you teach babies and toddlers good money habits? They are busy learning the basics of eating, sleeping, walking, and relating to the world. It may seem like a waste of time but it starts with the first monetary gift they get at birth and/or each year after that.
Babies are stimulated by colors and sound, so ask grandparents and relatives to buy cute musical piggy banks. With a musical bank kids love to deposit money just to hear the music or watch the kitty take the coin. Make the depositing money a daily or weekly ritual to build the savings habit.
Later, transfer the saved money into a kid’s savings account and continue the habit of depositing money into their at-home bank then making the deposits into their savings account each month.
Young children are naturally curious about the world so it’s a perfect time to teach good money habits.
Set up a toy store with prices on their own toys. Let them use change from your change jar to buy toys from you. Increase the prices and the amount they have to spend as they get older. Arm them with pencil and pad to calculate the price, so they don’t go over budget.
You might also consider introducing an allowance at this age. One parent, Stephanie Stockwell, said, “I started a chore-based allowance for my son, age 6. He can earn $0.25 for different chores around the house. We also let him pick a goal for his money. Once he has 1.5 times his goal saved — if his goal item is $10, he needs $15 — he can choose to buy the item.”
With more and more parents homeschooling their kids, it opens up the opportunity to teach good money habits. From financial literacy worksheets you can download to watching other kids talk about money on YouTube, learning good money habits can be entertaining and fun.
Children will learn more and likely be more receptive when they get hands-on experience at the grocery store, shopping online, and going to the bank or ATM. All are teachable moments parents can use in daily life.
Jolie Viguers shared, “My kids use a little app called Spendee to record all transactions. They need to reconcile their transactions to their bank (which isn’t connected) before they get next month’s allowance!”
Another tool many parents use is Greenlight, which offers a debit card for kids, managed by parents. Using the Greenlight app, parents can fund their child’s account with allowance once chores are done (there’s the option to fund it without the chores as well). Then, kids can allocated funds to their save, spend, or give accounts.
The teen years are the dawn of independence and the time many teens begin finding ways to make money working, or by negotiating a higher allowance. It’s the perfect time to solidify good money habits.
When Karen Colton’s daughter was 13, she began planning vacations with her mom. Karen would often find an affordable short-stay apartment when they traveled.
She says, “My daughter helped with planning, which included the budgeting. By the time she was 13-ish, she was a pro. Once, we arrived — unexpectedly — in Brugge, and she offered to find us a place to stay. We left her at the phone booth with a tourist lodging guide she got at the tourist info place and returned to find she’d booked us at a cozy apartment that fit into our budget.”
Other parents are turning daily life into “real life.” Holly Ragan paid her kids with fake money to do their virtual schoolwork in the spring. Then she charged them for rent and food. Her older child was paid more because she has more education and spent more hours working.
Older kids develop a love-hate relationship with adulting — that time between being a carefree kid and a responsible adult. I know because I get a good laugh when my daughter and nephew bemoan the fact that adulting is hard.
At this age, they now have to be responsible for their own transportation, food, and clothing — not to mention the taxes taken out of their paycheck. If they’ve developed good money habits as children, they should be pretty good at saving now that the thrill of financial independence (and unbridled spending) has worn off.
Dee Yu said, “When I was in high school, my mom gave me her checkbook and had me fill in the checks monthly to pay for rent and balance the checkbook.” These days most transactions are done online so this method would have to be modified. Still, assigning the bill-paying tasks is a responsibility young adults can take on.
When I gave this task to my kids they saw the reality of paying all the bills. They became aware that making money is great until you have to give a large portion of the money to pay the utility, phone, and car payments. When they leave home and get their own place, they’ll have the awareness and practice of paying bills, so they are not in shock at the reality of life.
Natasha Badie advises parents to start a retirement account like a Roth IRA when they turn 18. Her son got his at age 19. She also said, “They need to learn the rule of 72 (compound interest) and set them up with a financial advisor who will build a relationship with them.”
Ricardo Pina of The Modest Wallet says, “Learning how to make money as a kid is an incredibly important skill for adulthood. … Not only does it help build character, but the skills we learn in our youth can serve to sustain us throughout life. Side hustles and part-time jobs are an amazing and fun way to teach kids about money and how to earn it.”
In addition to teaching good money habits it’s important to teach sound money wisdom, as well. Shaping healthy ideas around money is just as important as teaching kids how to use money. Healthy money messages start with parents who have a healthy view of finances.
Natalie Pine, CFP, managing partner of Briaud Financial Advisors, and her husband, Roger, discovered it’s very important to help shape a child’s “money message” the right way early on.
When their oldest child was in kindergarten, the children received tokens that could be used to pay for little toys in a “store.” Their son saved his tokens for months to buy two rubber snakes. He bought one snake for himself and the other for his little brother.
“We praised our son to no end for being so generous and thoughtful,” Pine said. The couple even bragged to their parents and friends about their son’s behavior.
All the praise came with an unexpected side effect, though — it prompted their son to continue to buy presents for his little brother. Because the praise was focused on the purchasing of the initial gift, the money message received was to buy for his brother to make his parents proud.
It’s good for children to be praised and rewarded for being smart with their money, but Pine says parents need to be careful with what they are actually praising and what message they are sending their children.
There are quite a few fun ways to teach kids good money habits. By making money lessons fun and educational early on, we’ll create a generation of kids who can make sound financial decisions without fear.
My hope is that, in the next 10 to 20 years, there will be many more adults with healthy financial lives as a result.
Samantha A. Gregory is an author, consultant, and speaker. She’s a single-mom lifestyle, money, and parenting expert featured in The Washington Post, The New York Times, Essence, HuffPost, ABC News, and Mint.com. Samantha founded the award-winning RichSingleMomma.com, the first online magazine featuring personal finance, parenting, and personal development content and courses for single moms. She aims to inspire women who are ready to thrive and not just survive in their single motherhood journey. Connect with her on Instagram @richsinglemomma.