How To Teach Your Child About Financial Responsibility (And Make the Lesson Stick)

Kids know that Lego sets, Barbie dolls, and (of course!) CogniToys Dinos cost money—but they may not understand what it takes to earn that money. The earlier kids learn about financial responsibility, the easier it will be for them to keep good spending habits as they get older. Here, we’ve rounded up a few ways to help teach your little  spenders how to save!

Consistency is Key

Just picture it: Your local toy store is having a sale, and your kid just needs to get something… but they ran out of allowance days ago. They ask if they can borrow money for it, and you think, “well, they’ve been so good this week.” While your kid may *need* money for something on a specific day, in the real world, if you don’t have the money saved, you have to wait until payday. The same should stand at home! Teaching your kids that money only comes on a certain day will help encourage realistic and mindful money practices like budgeting and saving.

Use Bonuses to Reward Self-Sufficiency

While all parents want kids to do their part at home, most don’t expect it to happen without a little nudge. Whether it’s putting dishes in the sink or putting toys back on the shelf, reward these particularly awesome behaviors with bonus dollars! Determine which activities count as a bonus in your house, and assign a value to each bonus completed on a weekly basis —resulting in additional money on payday!

Interest as Incentive

Banks provide interest to encourage customers to keep more money in their accounts. Do the same at home to teach kids about how interest works, and the perks of saving. Whether your “bank of mom and dad” has an interest rate of 1% or 5%, let your kids know that the more money they have in the bank, the more interest (i.e. free money) they’ll earn over time.

Want Ownership? Just Fine!

The hard truth? Earning money isn’t always easy. Whether we make the same mistake over and over at work or miss a big deadline, our actions have consequences. Tracie from Penny Pinchin’ Mom explains how to use fines when teaching financial responsibility:

“Kids struggle in different ways, for one it may be fighting and another it is talking back.  These events are assigned a fine value. On pay day, we first give our kids the amount they are due. But then come the fines.

They must pull out fine payments from the money they’ve earned for the week. This is the hardest part of payday. However, this is teaching them a valuable lesson—there are costs associated with doing the wrong things in life.”

Real-World Examples

A simple way to teach kids about budgeting and financial responsibility is to show them how money works in the real world. For example, get your kids involved in shopping for groceries by giving them a spending limit, then working with them to figure out if they have enough money to buy everything on their list. For younger kids, give them enough money for just one item, but explain you’d like to pay for two. This exercise will help them understand the importance of making smart choices with money as well like doing research, and using coupons to stretch your dollar.

Planning Purchases

One of the best ways to teach kids about spending wisely is explaining the importance of research. Why buy a doll for $12 when another store is selling it for $8? A quick search online with you before making a purchase will ensure your kids are aware of how much money they *actually* need to spend on something they want.

Financial responsibility is one of the most important lessons children (and adults) can learn. While we’ve listed a few, there are tons of ways to teach kids about the importance of how money works. Do you have a trick you’ve used to teach your kids about money? Let us know in the comments, or reach out to us via


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