Teaching children about financial responsibility

Summer break doesn’t mean that learning has to stop. It’s the perfect time to share some wisdom on a critical life lesson - financial responsibility.

Money can be an abstract concept for kids now that so many financial transactions have moved online. Today’s paperless world doesn’t offer younger children the basic concepts of cash spending that we were exposed to while growing up.

Here are a few ways to help make money real for your kids.

Allow for an allowance

An allowance gives kids the chance to manage their own money, and make choices about what they can afford and what they need to save. These learning opportunities can help them make better financial choices as teenagers and young adults.

The amount of allowance will naturally vary depending on your family’s situation. However, some experts recommend giving kids a weekly allowance of one dollar for each year of age. Using that reasoning, a six-year-old would earn $6 a week and a 10-year-old would receive $10.1

Show your children how their money can be used for different purposes. A popular method involves splitting the allowance across three envelopes—spending, saving and sharing—to teach them about three basic categories of personal finance.

Remember, you may disapprove of some of the ways your kids choose to spend their money. Those situations are to be expected, and are all part of the learning experience of fiscal responsibility.

Take it to the bank

At some point, your kids will outgrow their piggy bank and need to open their first bank account. A bank account can teach children how to save for bigger financial goals, while introducing the concept of compound interest. Find a local bank or credit union that doesn’t impose account minimums or monthly fees.

After opening the account, help your kids understand typical banking functions, such as making deposits and withdrawals and using the ATM. Be sure to celebrate this act of responsibility as an exciting childhood milestone.

Make lemonade

What better way to learn about commerce than by running a small business? Help your kids choose a self-starting business such as a lemonade stand, car wash or lawn-mowing service. Discuss the different aspects of running a business from cost of goods to pricing and marketing. In addition to a little cash, they might also catch the entrepreneurial bug.

As they get a little older, they might want to explore a “real” job as a cashier at the local frozen yogurt shop or a lifeguard at the neighborhood pool or rec center. Applying for, interviewing and keeping a job are important life skills that teach teens about the value of money and hard work. A paycheck also serves as a way to learn about payroll deductions and taxes. Depending on how much they earn, you could even start discussing the importance of setting aside a few dollars now for a rainy-day fund, retirement or even charitable giving.

Cozy up to a budget

Teenagers like to spend, which is why a lesson in overspending is so valuable. Get them started on a simple budget by tracking how and where they spend their money for a month or two.

Next, have your teen tally up all the sources of income on a monthly basis to see if expenses and income match. If they don’t, help them identify areas to cut. Resist the urge to help them make ends meet—even if it’s just $5. Figuring out how to stretch funds is the whole point of budgeting.

A financial education that starts early and evolves as kids grow can build a solid foundation for a lifetime of financial responsibility.


1Lieber, Ron. “You’re Doing Allowance Wrong.” Slate. February 24, 2015. http://www.slate.com/articles/business/moneybox/2015/02/kids_allowances_you_re_doing_it_completely_wrong.html