How to teach your child about money while the stakes are still low

How to teach your child about money while the stakes are still low

In 2019, as many as one in four Europeans and Americans had no savings at all. Of those Europeans who did, 42% had no more than three months’ take-home pay. This means that an unexpected event could easily push them over the edge. It’s a worrying trend to see society living from day to day unable to plan properly for the future.  

How can we ensure that our children buck this trend? 

According to a report on financial confidence in children, “higher confidence is associated with frequency and level of savings, keeping track of money, being involved in financial choices, being cautious about borrowing, feeling in control of money, having more life goals, shopping around, and getting questions about financial ideas and products right.” In other words, being confident with finances leads to better decision making, and better outcomes. 

Practice makes perfect

Empowering kids to make financial decisions can have a major impact on their confidence in handling money in the future. Some simple, age appropriate practice with money can shape later attitudes to personal finance. 

The author Nathan Dungan suggests that when your child receives a monetary gift, payment for chores, or their regular allowance, this should be split between three containers, marked as “share”, “save” and “spend”. This means that kids can enjoy their money, while keeping an eye on future saving goals, and being aware of the importance of charity and generosity. Watching the amounts grow in each pot will give your kids the same buzz as the traditional piggy bank, but with a little more financial knowledge built in. 

Some other options include:

  • Offering small payments for going above and beyond on household chores to underline that money is earned.
  • Setting a savings goal with your child. Then reward them with an “interest” payment if they manage to meet their goal.
  • Allowing your kids to take responsibility for choosing one or two items at the grocery store for the family. Give them a small set budget they need to stick to.  

Let mistakes happen 

With younger kids, the stakes are low in handling small sums of money, and the payoff in terms of confidence is huge. Leaving it until later when the stakes are much higher – applying for a credit card or making an investment – can lead to uninformed decisions with big consequences. A 2018 study by Ashley LeBaron, a doctoral student in the Norton School of Family and Consumer Sciences in the UA College of Agriculture and Life Sciences noted: “I think it’s hard for parents, sometimes, to let their kids make mistakes…It’s tempting to just shield kids from everything related to money, but it’s really important for parents to get money into kids’ hands early on so they can practice working for it, managing it and learning how to spend it wisely.”

So don’t be afraid to let kids learn through both positive and negative experiences. Not being able to buy that toy because you blew your budget on sweets isn’t going cause long term pain. However, it will teach a lesson for next time around. 

Talking about Money isn’t taboo

Adults may balk at the idea of discussing finances with their friends, but at home it’s valuable for your kids to understand that finances play into many adult decisions.  

This doesn’t mean you need to discuss the contents of your bank account with your child. Checking in with them to explain why you’ve made certain decisions in certain contexts will encourage honesty and understanding. This can be something as simple as explaining buying choices based on price at the supermarket or explaining why you might get something repaired rather than throw it out. 

With older kids who are at the stage of making more important decisions with larger financial repercussions, such as university selection, don’t be afraid to explain parameters from the outset. It’s important for kids of any age to understand that money isn’t infinite.

Practice what you preach

Research shows that kids learn from observation, instruction, and practice. The way your family deals with making small daily decisions about money will teach your kids more than any class. Don’t be afraid to introduce some changes in how you talk about and handle finances with your kids. This will have big impacts later on as your child becomes more independent. 

LeBaron says: “The best approach is a combination, where parents are setting a good example, they’re having open, ongoing conversations about money, and kids have the opportunity to practice…If parents are doing all three of those things, there’s a really good chance their kids are going to learn important lessons about money.”

More from International School Parent

Find more articles like this here:

Want to write for us? If so, you can submit an article for consideration here:

Share now

Find the perfect fit


Swiss International Boarding School Swiss International Boarding School Leukerbad, Switzerland
Surval Montreux Montreux, Switzerland
Geneva English School Genthod and Versoix, Switzerland
Singapore American School Singapore, Singapore
TASIS The American International School in England Thorpe, United Kingdom

Read our latest magazine for free!

Our International School Parent magazine is free to read online or download on your computer, tablet or smartphone. Check out the latest editions

Our Trusted Partners

Swiss International School
Swiss Group of International Schools
Health first logo
Geneva International Schools
Tutor Switzerland