Raising Money Savvy Kids: 4 Essential Tips for Parents

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Last Updated on October 1, 2023 by Rebecca

Want to raise money savvy kids?

Teaching kids money management skills from a young age can set them up to make smart financial decisions as adults. Giving kids a good financial education often starts at home, since financial literacy isn’t a subject that’s regularly taught in schools. 

What does it mean to be money savvy?

​In simple terms, it means having the financial skills necessary to make good decisions with money. As a parent, you can raise money-savvy kids by helping them develop good money habits and teaching them the best ways to manage personal finances. 

​Benefits of Raising a Money Savvy Generation

In a money-hungry world, people who understand how finance works have an advantage. Teaching kids financial responsibility and money skills from a young age can help them build a foundation for a strong financial future. 

Here are some of the benefits of raising penny-wise kids.

  • ​Young adults who learned about money from an early age tend to have better interpersonal and romantic relationships as adults, according to a BYU study.
  • Statistically, money patterns are set by age 7 so the sooner you begin having money talks with the kids the easier it becomes to teach good saving and spending habits. 
  • Adults who received a good money education as children find it easier to understand financial topics, they tend to have more long-term savings and they’re less likely to be deeply in debt.
  • Helping kids understand financial concepts at a young age can help them enjoy financial freedom as adults and be less likely to depend on you financially when they’re older. 

Are kids today prepared to manage their finances? One recent college graduate survey found that just 35% rated their money skills as excellent while the vast majority rated them as fair or poor. And according to another survey, roughly 11% of adults say that lacking financial literacy has cost them $10,000 or more

That’s a pretty decent dollar amount to lose and if you don’t want your kids to be one of the 11%, then giving them a workable strategy for managing money at a young age is a must. 

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Tips for Raising Money Savvy Kids

Building financial security and knowledge is an ongoing process and it might feel a little overwhelming, especially if your parents never gave you the money talk as a kid. The good news is that raising money savvy kids doesn’t have to be stressful. 

Here’s how to do it, step by step.

1. Start the conversation

​The longer you put off having the money talk with kids, the more of a learning curve they might face when it’s time to manage their finances. So the sooner you start the conversation, the better. 

Here are a few tips for getting kids interested in learning about money. 

  • Use real-life examples. Taking kids grocery shopping isn’t always ideal, especially if you have younger children who are impatient to leave. But even a simple trip to pick up milk can be a great opportunity to teach kids how exchanging money for things works. 
  • Talk about trade-offs. One of the most basic financial concepts is understanding the difference between wants vs. needs. Unfortunately, it’s something many adults still struggle with. You can simplify things for kids by using examples from your own life. For instance, if they want to go to Disney then explain to them that you’ll need to cut other things, like going out to eat, in order to save the money you need for the trip.
  • Share your financial history. Talking about your own experiences with money is a chance to show kids what did–and didn’t–work for you. For example, if you struggled with student loans or a poor credit score, you can discuss how that affected you financially. If you grew up without a lot of money, you can also share how that taught you to be grateful for the things that you did have. 

The older your kids get, the more intensive the discussions can be. For example, if you’ve got teens it’s a good idea to talk to them about how much college costs and what getting a degree is really worth. ​And of course, you’ll want to teach teens about budgeting.

And you don’t have to stop there. If your kids are in college or they’ve just graduated, you can keep the conversation flowing by talking about things like saving money for a down payment on a home or setting up a Roth IRA to start saving for retirement. 

Pro tip: Struggling to stay on top of expenses? Consider using a personal finance tool like Empower to track all of your financial accounts in one place.

2. Give them a chance to get hands-on

tips for raising money savvy kids

Raising money savvy kids means that at some point, you have to give them money of their own to manage. And once they have that money, you can guide them on how to make the most of it. 

  • ​Give them an allowance. Should kids get paid for doing chores? The answer is different for every family but if you want to have money savvy kids, they need to know how to earn money. You could institute a chore system that allows them to earn a flat rate per chore or a base rate, plus a weekly bonus for doing extra chores so they can get an idea of how making money works. 
  • Open a bank account. Kids need to be 18 to get their own bank account but as a parent, you can set one up for them. You can open a savings account but if you want them to be able to spend, you might consider getting a prepaid debit card for kids instead. Greenlight, for example, is a great option for parents who want to give kids the flexibility to spend but still have control over where they can use their cards. 
  • Offer a matched savings plan. Getting kids into a savings habit can be a struggle but offering a matching contribution can be a great way to motivate them. For example, you could match $0.50 for every dollar they save or you could match a certain percentage at the end of the year. If you have teens who earn income, you can open a custodial IRA on their behalf and chip in money similar to a 401(k) match.
  • Help them make a budget. Budgeting is an important skill for kids to learn and you can get them started with learning how to plan their spending at an early age. Helping kids pick a specific savings goal, for example, can help them learn to budget for savings. You can also go over wants and needs to help them make a realistic budget. 

As kids get older, you might consider adding them to your credit cards as authorized users. Most credit card companies allow you to add kids without requiring additional credit approval once they turn 13. 

Giving a teen a credit card might sound risky, but it’s a good chance for them to test what they’ve learned about money so far. If you’ve taught them a solid decision-making process, then your teen should be able to use credit responsibly when they’re old enough to get their own card. 

Related post: Money Tips for Teens: 12 Smart Ways to Budget, Earn and Save

Grow your money faster! Want to get a great rate on your savings? Open a high-yield savings account to earn the most competitive APY on deposits.

​3. Let them make mistakes

Making mistakes is a key part of any learning process. If you want to raise money savvy kids who are also resilient, then you have to let them fail sometimes. 

For example, your teen son or daughter might want to drop $150 on a new pair of jeans because they’re the latest fashion trend. You know from experience how trends come and go but you decide to let them buy the jeans anyway. 

A month later, the trend is out and a new one is in. Now your child is stuck with a pair of expensive jeans that will probably sit at the back of their closet. 

You can use that as a teachable moment to help them understand the importance of thinking purchases through and not giving in to impulses. And if you’d like to take some of the sting out of the lesson, you could help them look around to see if any consignment shops might be willing to buy the jeans so they can get some of their cash back. 

Ready to start saving? Try the 100 Envelope Savings Challenge and discover that saving money is easier than you think!

4. Practice what you preach

kid counting money

​Raising kids to be money savvy while you’re mismanaging your own money is a little hypocritical. So if you don’t want to be one of those “do as I say, not as I do” parents, then you’ll need to not only talk the talk but walk the walk. 

You can do that by scheduling weekly or monthly family budget dates and including your kids in the discussion. If you’ve got a lot of credit card debt, then you can work on creating a plan for paying it down and switching to cash. Or if you’re behind on saving, you can prioritize setting aside money for retirement. 

Not only can you set a good example for your kids but you’ll also be doing yourself a huge favor financially by improving your money situation. 

Pro tip: Transferring high-interest rate credit debt to a card with a 0% APR could save money and help you pay off debt faster. You can easily compare balance transfer offers on CreditKarma.

raising money savvy kids

Money Savvy Kids FAQs

What is the right age to start teaching kids about money?

The right age to start teaching kids about money will depend on the child but around school age is usually a good time. At this age, kids are learning to recognize different types of money, count money and understand how money works when it comes to buying the things they might see in Saturday morning television commercials or on YouTube. Getting kids a simple student workbook about money can be a great way to introduce financial concepts into everyday life. 

How can a kid make their own money?

Some of the best ways for kids to make their own money include doing chores at home, doing odd jobs for neighbors or starting a side hustle or small business. Some great business ideas for a young person include starting a website and making money writing blog posts, selling cute painted rocks on Etsy or starting a local neighborhood business cutting grass. They can save the money they earn in a piggy bank, like this one from Money Savvy Pig, or in a high-yield savings account at a bank. 

What are some good financial goals for kids to have?

For younger kids, a good financial goal might be saving up money to buy a toy they want. With older kids, the goal might be saving for video games or new clothes. If you have kids in high school, their savings goals might include buying a car or setting aside money for college. When helping kids set money goals, it’s a good idea to help them choose goals that are realistic. And you can help them monitor their progress so they can see if they’re on the right track. 

What is the best age to get a kid bank account or a debit card? 

​A child can’t open a bank account in their own name until they’re 18. But you can open a savings account for them at any age. For example, you might open a high-yield savings account online or at your local financial institution. The best age to get kids a debit card is when they have some pocket money of their own to manage. For example, if your son or daughter earns a weekly allowance from doing chores, you might get them a Greenlight debit card to help them start learning the basics of how to spend and save.

Best Books for Teaching Kids About Money

Final thoughts on raising money savvy kids

If you’re not already talking to kids about money, the best time to start is now. Keeping it age-appropriate and incorporating practical examples from real life can go a long way toward helping kids learn the financial concepts they need to know. The more you set your kids up for financial success today by teaching them about budgeting, saving, spending and debt, the better off the next generation will be when it’s time for them to take the reins. 

What are you doing to raise money savvy kids? 

About the Author

Rebecca is a certified educator in personal finance (CEPF) and a money-saving expert. As a single mom of two teens, she knows all about the importance of family budgeting and financial goal-setting. She shares her best tips about saving and managing money at Savvy Money Lessons. You can also read her work online at Bankrate, Forbes Advisor, Investopedia and other top publications. Learn more

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