Raising Money Smart Kids

By Barbara Miller, Financial Counselling Supervisor with LSS Financial Counseling

In the wake of Money Smart Week, we refocus on being financially prepared. What a fabulous idea since so many people struggle to reach financial stability. And what better way to raise your kids than to give them the tools they need to understand how money really works.  This article looks at some simple yet proven ways to help your kids become financially literate from the start.


Start Young for best results

A couple of behavior experts at the University of Cambridge (Sue Bingham and David Whitebread) looked at out how children learn about money. They discovered that the two most important money habits, the ability to plan ahead and the ability to delay gratification, are typically developed in early childhood. The best window of opportunity is from ages zero to seven since it’s difficult to reverse bad habits later in life.

Sounds easy enough, right? But in general parents are often uncomfortable talking to kids about money. Unfortunately, this often results in lost opportunities since parents can be the most influential factor affecting kids’ money habits.

The best way for kids to learn is by hands-on experience. Rather than lecturing your kids, include them in activities that show them how to use money. Even better, let them make some of their own financial decisions to reinforce the money lessons.

Important Money Lessons:

  1. Take your kids to the grocery store.

Using a grocery list teaches the value of planning ahead and shopping strategically rather than impulsively grabbing things off the shelf. Having your child participate in compiling the list can show the importance of prioritizing rather than focusing on wants. It also offers the opportunity to discuss sale items, which sizes are the better buy, and how you make your grocery-buying decisions.

By being a part of the decision-making process, kids learn to understand there are trade-offs when spending money. In turn, this may also help kids learn to delay gratification.  

  1. Teaching kids to save

If you want your kids to save as adults, then start them early. The researchers found that young children like to save because they enjoy acting like adults. This means your kids need positive role models. Making sure they save a portion of every dollar they get builds strong saving skills that will benefit them forever.

  1. Let your kids make financial decisions (and mistakes)

According to the research, the idea that money is a limited resource that can only be spent once is a struggle for kids to understand. Parents can bolster this concept by giving children a small sun of money to spend when they’re at the store. The trick is to not give a penny more when your child wants it, or doesn’t like his first purchase.

  1. Earning Money

Two basic concepts we all must learn are 1) our incomes determine what we can afford, and 2) we can’t afford everything. Paying your kids to do extra chores around the house teaches them how to trade their time and effort for cash. Then, once kids start working and earning a paycheck, they will have a better idea what to expect and how to manage their money.

  1. Teach delayed gratification

This can be a difficult challenge for even the most creative parents! Help your kids set savings goals like buying a toy or a game. Then, put a colorful chart on the refrigerator to track their progress. The visual aid keeps them engaged and interested in the process.

Or, teach your kids strategies to make the waiting time easier. When they’re tempted to spend their money instead of saving for that special toy, let them do it. But don’t help them pay for the toy when they have to wait longer because they already spent the money. This helps kids learn there are consequences to our spending decisions.

Financial literacy is not rocket science. If it was, I couldn’t do it and wouldn’t expect it of you (or your kids). The most important steps for parents teaching their kids are to start young and teach by example! And never underestimate your power to help your kids grow into money smart adults - it is the best gift you will ever give your children.