Home / Career & Money / Family Finances & Budgeting Raising financially savvy kids: 15 money rules every parent should teach their kids MaaHoo/Stocksy Empower your children to make informed and responsible financial decisions for the rest of their lives. By Stacey James October 13, 2023 MaaHoo/Stocksy Rectangle In a world where financial literacy is paramount, parents play a crucial role in shaping their children’s financial future. Teaching kids about money from a young age sets them on the path to financial independence and responsible money management which can help them make educated money decisions throughout their life. To help you guide your children in their financial journey, here are essential money rules that every parent should impart. 15 tips for teaching kids money management 1. Money doesn’t grow on trees One of the foundational lessons in financial education is helping children understand that money, and even those Amazon boxes on the front porch, don’t magically appear. Money must be earned through hard work and effort. By instilling this notion early on, parents teach their kids the value of labor and the importance of financial responsibility. 2. Budgeting: The art of financial planning Budgeting is a fundamental skill that every child should learn. Encourage your kids to allocate their allowance or earnings into categories like saving, spending and giving. By following a budget, they can gain control over their finances and make informed choices. Related: Millennial compares how far her income goes to her parents’ and is floored 3. Save first, spend later In the world of finance, saving should always come before spending. Teach your children the importance of setting aside a portion of their money for future needs or goals. A simple guideline to follow is the 50-30-20 rule: allocate 50% of income to needs, 30% to wants and 20% to savings. 4. Delayed gratification pays off Impulse buying can lead to financial troubles later in life. While it may feel good in the moment to buy something you want, it is more important to practice saving for something over time. Saving up for a special treat or toy can be a valuable lesson in patience and discipline. 5. Needs vs. wants: Making informed choices Help your children differentiate between essential needs (like food, clothing and shelter) and wants (such as toys or gadgets or anything at the checkout line of the supermarket). Teach them to prioritize needs over wants, fostering financial responsibility from an early age. It can be important to teach your kids about marketing and why good marketing can make you want to buy things and it is important to be aware of those tactics. 6. Earning opportunities abound Encourage your children to explore opportunities to earn money, whether through chores, selling lemonade, assisting with a family business or selling their toys or clothes on second hand websites. Talk to your kid about how you and your partner make money. These experiences will help them understand the connection between effort and income. 7. Banking basics: Learning to save Introduce the concept of savings accounts and how banks operate. Teach your children about interest and how their money can grow over time when deposited in a bank. This early exposure can lay the groundwork for future financial decision-making. 8. Setting financial goals: Dreams with a plan Help your kids set achievable financial goals, whether it’s saving for a bicycle or funding a school trip. This will instill a sense of purpose and responsibility in managing their finances. Related: If your family’s going through unemployment, here’s how to save: Budgeting tips for families 9. Give back: Cultivating empathy Teach the importance of giving by encouraging your children to donate a portion of their money to charity or help those in need. Involve your kids in picking a charity or organization where they want to donate a portion of their money. This nurtures empathy and a sense of social responsibility that extends beyond personal finance. 10. Avoiding debt: A lesson in responsibility Explain the risks associated with borrowing money and the concept of interest on loans. Encourage your children to avoid unnecessary debt and to use credit responsibly when they are older. 11. Money is a tool, not an end Emphasize that money is a tool for achieving goals and dreams, not an end in itself. This perspective encourages children to think beyond material wealth and focus on a fulfilling life. 12. Financial literacy: Gradual knowledge growth As your children grow older, gradually introduce more advanced financial concepts, tailored to their age and understanding. Topics like investing, taxes, and retirement planning can be introduced in age-appropriate ways. 13. Lead by example: Actions speak louder Children often learn best by observing their parents. Demonstrate good financial habits and decision-making in your own life. Talk to your kids frequently and honestly about money. Your actions will leave a lasting impression. 14. Learn from mistakes: Part of the journey Allow your kids to make small financial mistakes and learn from them and discuss financial mistakes that you have made and what you’ve learn from them. These experiences can be invaluable lessons in money management and decision-making. 15. Open communication: A key to financial success To ensure your children are well-prepared for their financial journey, maintain open lines of communication about money. Encourage questions and discussions about financial topics, and be a resource for them as they navigate their financial future. Related: Building an emergency fund: A how-to guide Raising financially savvy kids and teaching kids about money is an investment in their future well-being. Parents can empower their children to make informed and responsible financial decisions throughout their lives. Remember that financial education is an ongoing process, and the lessons you teach today will shape your children’s financial future tomorrow. The latest Career & Money 1.2 million parents forced to miss work every month because affordable childcare isn’t available Work & Motherhood Catch-22: No job, no childcare; no childcare, no job Motherly Stories How moms and daughters can close the investing gender gap together Parental Leave Almost 50% of parents heading back to work after parental leave found it harder than expected, survey finds