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Teaching Children About Money

Authored By: Genisys Credit Union on 10/1/2020

Whether it’s your own children, grandchildren, nieces and nephews or the child of a close friend, one of the most important things you can teach is how to manage money and invest for the future.

Plus, they will learn how to develop good financial skills, like being more frugal, saving money and potentially staying out of debt. 

Starting these habits early can also help with future expenses you may have down the road. 

The Three-Jar Allowance

To learn how to manage money, children need some money to manage. Typically this money comes from an allowance or from doing small jobs for friends and neighbors. As a first step, you'll have to decide how much the allowance should be and whether it should be linked to jobs they are required to do.The overall goal is to use the allowance as a way of teaching how to create a spending plan and live by it. 

As fair warning, both are matters of heated debate, so it's worth doing some research and weighing what you're comfortable with. For example, if you expect an older child to use some of the allowance for necessities, like clothing and school supplies, you may decide he/she needs a larger amount than if you'll be paying those bills yourself. Whatever you decide, though, remember that the overall goal is to use the allowance as a way of teaching how to create a spending plan and live by it.

One popular suggestion, especially for younger children, is to illustrate the concept of budgeting by using three clear jars that represent current expenses, short-term savings, and long-term savings. Separating cash into jars makes it easy to compare the results of spending and saving. But don't wait too long to open a savings account for their short-term savings at your local credit union.

Spending V. Saving and Investing

To help children decide how much should go into spending and how much into saving, you can help them figure out how much they'll need for regular weekly expenses, such as lunch money or whatever else you agree on. You might suggest keeping careful track of a week's worth of spending and use that amount as a starting point.

Next, talk about money for short-term savings goals. Children's goals vary substantially, based on their age and concept of time, but might include toys, sports equipment, electronic devices, special clothes, or other big-ticket items. You may want to suggest saving for one item at a time and help them figure out how much they'll need to save each week to reach their goal in a realistic amount of time. 

Monitor and Adjust Where Necessary 

Part of the conversation should focus on the fact that budgeting always involves making adjustments. The goal isn't to get it right the first time, but to come up with a workable allocation of money. To learn more about setting up a successful budget, review our latest MoneyFit video.


If you want to teach your children valuable lessons about money, the key is to be committed to the approach you adopt and knowing what you want to accomplish by using it. For more tips, visit our toolbox to view resources to help your child develop great money habits.



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