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11 Ways to Teach Your Kids About Money

Written by: Corey Janoff 

As a parent and a financial advisor, I feel a duty and obligation to teach my kids about money. It will be embarrassing for me if my kids aren't knowledgeable about money and finances by the time they are adults.  Many of you are probably curious to learn effective ways to teach your kids about money as well. We all want our kids to grow up to be successful adults who make smart decisions, financial and otherwise. Today, we will walk through 11 ways to teach your kids about money so you can get them started on the right foot. 

1. Talk to Them About Money & Purchases 

It all starts with communication. You need to talk to them. When you want to teach your kids proper manners at the dinner table, you speak to them about how to act at mealtime. If you want your kids to learn about money, talk to them about it.   

When you're at the grocery store, point out the cost of things.  For example, if you are buying Cheerios, you can look at the cost for the regular-sized box and the family-sized box.  Show them the difference in gross cost between the two sizes and show them how to identify the cost per ounce (hint: it's usually listed on the shelf's price label in smaller print). The regular size maybe 12 ounces and cost $4 for the box. The family size maybe 18 ounces and cost $5. While the family size is more expensive than the regular size, the cost per ounce is actually less ($0.27 versus $0.33).  However, we don't want to be wasteful, so if you aren't going to eat the entire family-sized box of Cheerios before they go stale, you are probably better off with the regular-sized one for a lesser total cost, even though the cost per ounce is higher.  

As kids get older, you can open up more about the cost of goods and opportunity cost. Opportunity cost is money spent on one thing cannot be spent on another thing. With limited resources, we have to make decisions on what to purchase. Maybe you tell your kids they can spend $200 on new clothes for the upcoming school year and go shopping with them.  They could either buy a lot of clothes on the cheap or fewer clothes from a brand name.   

2. Establish a Token System or Sticker Chart (Young Kids) 

This is actually something we are doing currently for our four-year-old. The idea of money is a somewhat nebulous concept for young kids. Creating some sort of easy to understand tangible currency is helpful.   

We got a jar and some disc-shaped wooden tokens that are about two inches in diameter. If our son listens and does what we ask of him, we will give him a token. If he plays nice with his younger brother without hitting, shoving, scratching, choking, or otherwise harming baby bro, we'll give him a token. If he helps clean up all of his toys when we ask, we'll give him a token if he puts up a fight, no token! 

He can use his tokens to buy things he wants. For example, this toy Mack truck and Lightning McQueen car from the movie, Cars, at Target that he really wanted. We told him that he needed to earn 15 tokens before he could have it.  It took him about three weeks to earn enough tokens (the struggle is real in our house).   

Some parents will do a similar thing with sticker charts. Put a chart on their bedroom door or the fridge and reward your kids with stickers. Once they get enough stickers, they can get ice cream or get a new toy or something. Whatever you want to offer.   

This helps teach the concept of earning things and exchanging currency for stuff you want. 

how to teach your kids about money

3. Give Kids an Allowance 

As kids grow a little older and can understand paper currency, you can graduate from the token system and start offering an allowance. You could tie the allowance to household chores or simply give them a set amount per week.  Make sure it is in cash so they can physically hold and count it. 

Teach them about the importance of saving some of that money over time. Maybe with a six-year-old, you start out giving them a dollar per week. Perhaps that feels too stingy, and you make it $5. Whatever you want.  Like the token system, they will have to save up their money to buy the things they want, leading to the next point. 

4. Make Kids Pay for Things They Want 

We don't want our kids to grow up spoiled and think they can automatically have whatever they want. We'll provide the necessities, but for certain "wants," we will make them pay for it.  

Do you want to get that new video game? Start saving.   This is no different than what we discussed in the token system or the allowance section above. The whole point about giving them money is to teach them how it works. You can either spend it immediately on something inexpensive that you want today, or you can save up over time for something grander.   

 effective ways to teach your kids about money

5. Play Monopoly or Other Board Games 

Monopoly was one of my favorite board games growing up (still is).  In addition to being a classic, it does a good job teaching money concepts.  Accumulate cash to buy properties. Put houses and hotels on the properties to charge people rent.  The more houses/hotels you own, the more money you get when people land on your property.  Certain properties cost more but also generate larger rent payments.  You have to invest money to make money.  Trade properties with other people to create a monopoly on a section of the board and watch the money pile up.  Make your kids be the banker to learn necessary math skills (but keep an eye on them, so they don't cheat!).   

There are plenty of other money board games out there you could explore to find ones that interest you and your kids.  

6. Video Games That Incorporate Purchasing Goods 

Video games can be a great educational tool if you get the right games. I learned to type fast from a computer game where words would fall from the top of the screen, and you had to type them to shoot them out of the sky.  The words would get longer and fall faster as the levels got harder. 

Math Blasters was a great computer game I grew up on to learn math skills.   

Plenty of other awesome computer and video games incorporate currency into the game where you can buy things to improve your success.   

For example, in some turn-based strategy and role-playing games, when you come across a foe and fight them if you win, you get the money they are carrying. You can take that money and use it to buy better weapons or skills, so you are better equipped to face bigger and worst foes.  You learn about opportunity cost as you can only buy so many things with the money you have. Do you spend your money on a new sword that delivers more vigorous blows or a new shield that better protects you against hits from your opponent? 

Even racing games often incorporate money – you get prizes for winning a race and can use the winnings to buy enhancements for your vehicle to be even more competitive against stronger competition.   

Many video games involve currency and stores, even though teaching money concepts isn't the game's primary goal.   

how to talk to kids about money

7. Make Kids Work to Earn Money 

As kids get into the teenage years and the days of tokens and sticker charts are long gone, make them work for some money. Make them get a part-time job to pay for their gas money or if they want to go to the movies with friends.   

Depending on schedules and extracurricular activities, they may or may not have time to hold a traditional job. If not, you could make them do chores on the weekends. Mow the lawn, weed the garden beds, vacuum, clean the toilets, etc. Manual labor is good for them. Give your back a break.   

There is no such thing as a free lunch.  Teaching your kids the importance of work ethic early on can be powerful.   

8. Delay Purchases 

When I was a kid, we would get catalogs in the mail. If we wanted to buy something from the catalog, you had to mail a form and then wait 6-8 weeks for the item to arrive.  If we saw a commercial for a new toy, we had to beg mom to take us to Toys R Us. We couldn't just go on Amazon and have it arrive at our doorstep within a day.   

If your kids say they want something, make them wait a little bit for it. Heck, that's a good habit to practice for yourself.  Rather than one-click purchases, save it to your shopping cart and wait three days. You'll be surprised how many items you put in the shopping cart you end up deleting because you decide you no longer need or want them.   

The idea of delayed gratification is important.  If we get accustomed to having everything we want instantly, the joy of anticipation gets lost. We also end up spending more than we probably should on unnecessary things.   

If you make your kids wait before purchasing something, they may decide they no longer want it. It also allows you to make them earn it, so they learn they can't just get everything instantly in life. They need to work for it and understand money spent on one thing is money that can't be spent on something else.  

9. Credit Their Savings Account With 1% Monthly Interest 

An awesome strategy I like for older kids to teach them about saving, investing, and compound interest is through the Bank of Mom & Dad.  Open a real bank saving account with them. However, rather than letting their savings sit there and collect dust, credit their savings account balance with 1% interest per month.  You can link your account up to theirs to make transfers easy.   

Every month, log in with them to see what their balance is. Multiply that by 0.01 and deposit that amount from your account into their account.  For example, if they have $100, credit them $1 after one month. If they have $101 still in the account after two months, credit them $1.01 (0.01*101), for a total of $102.01. After month three, if they still have the $102.01, credit them $1.02 (0.01*102.1).   

As they add more to their account and leave it in there, the compound interest can really add up.  Maybe they have a birthday and deposit another $100 after month three, for a total account balance of $203.02. The next month's interest credit will be $2.03.   

It can help track it on a spreadsheet, too, so you can easily see how the interest is growing over time. As the kids start to see that compound growth and increasing interest credits from Mom & Dad, they'll (hopefully) really be motivated to keep saving, rather than spending all of their money the moment they receive it. 

kids saving account

10. Open a Roth IRA and Match Contributions 

If your teenagers (or younger kids) are working and earning a real wage, they can contribute 100% of their earnings to a Roth IRA, up to $6,000/year (current limit at this writing). The Roth IRA might be the greatest investment vehicle ever invented, in my opinion. Tax-deferred growth and tax-free withdrawals in retirement.  Love it. In love with it.   

I would plan on doing a dollar-for-dollar match for your kids and force strongly encourage them to deposit 50% of their gross pay into the Roth IRA. That way, they can keep some of the money they earn for spending while still getting 100% of their pay into the Roth. So, if they earn $3,000 working a summer job, have them put $1,500 of their own money into the Roth IRA, and you match $1,500, for a total of $3,000 going into the Roth IRA.   

You could take it a step further and let them pick the investments in the account too. Get them interested in investing and learning about different types of investments.   

11. Enter a Stock Market Simulation Contest for Kids 

When I was 12 years old, I won an online stock picking contest for kids. We were given a set amount of play money on the platform to buy whatever stocks we wanted. I think it ran over the span of about a month – a short time horizon; kids have short attention spans. Whoever's portfolio performed the best over that span won. I won a t-shirt that arrived in the mail, and it was way too big. Even though the shirt didn't fit, I was pumped to win and have been interested in investing ever since.   

There are plenty of stock market simulation websites out there, and many have actual prizes you can win.  If some for kids existed over 20 years ago, I'm sure there are even more options today.   

Doing is the best way of learning, so what better way to learn about investing than to do it.   

In Summary 

We all want our kids to make smart financial decisions as they leave the nest and are on their own. If we do a good job teaching them about basic money concepts, they can hopefully become self-sufficient adults and not rely on us for monetary support. No kid is too young to start learning about money.  Make money a comfortable topic to discuss with your kids. Talk about it regularly.  Find fun ways to help them learn and enjoy the journey with them.   



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