7 Lessons to Teach Your Kids (or Grandkids) About Money

“A penny saved is a penny earned.” Benjamin Franklin had the basics down, but as you’ve likely learned, you don’t make money by simply putting money away. As you raise your kids, it’s important to teach them the value of money and how to use it well. From saving, to investing to spending, you’ve learned a lot and it could be time to pass these lessons along to your kids.

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Here are 7 important lessons to teach your kids about money:

Delayed Gratification

This can be one of the hardest lessons to teach your kids. Talk to your kids about what they want and why they may have to wait to buy something. If your 5-year-old asks for a big toy, talk to him or her about how much it costs and come up with a plan to save for it. Model delayed gratification by setting boundaries at stores. Before you go shopping, explain what you are shopping for. When your child finds something they would like, tell them it’s not why you’re at the store. This practice is something you can start at a very young age and use as a foundation for smart financial discussions later.

Money is Finite

From the eyes of a child it would be easy to believe money is infinite. They don’t understand where it comes from and the hard work it takes to earn money to put food on the table. As your kids get older, remind them money is not infinite. Help them fill up their piggy banks or coin jars and let them decide how to use the money. Letting them spend it on new toys or frivolous items will allow you to start a conversation about where their money went and how it isn’t coming back unless they work for it. A few bad purchases as a child can help build a stronger financial future.

Compound Interest

Save this lesson for older children who have learned more advanced math. Explain to them how compound interest works, both in their favor and against them. Help them see how putting money away in a savings account can grow their money. Don’t be afraid to teach your kids how having an outstanding balance on credit cards is the opposite of having a savings account. It’s important to understand both sides of the interest equation.

Give Wisely

In life, your child will run into a lot of people who ask for donations. Many middle and high schools have “giving weeks” where the school comes together to support a cause. Teach your child how to donate wisely by researching the organization or cause. Kids are often more generous than adults and will want to give to anyone who asks. It’s important to teach them best practices so they aren’t taken advantage of down the road.

How to Create a Spending Plan

Proper budgeting escapes many adults. A proper spending plan can prevent your child from common financial struggles, including large amounts of debt. While they don’t have bills to manage, sit down with your kids and discuss how they would like to spend their money. Help them create a plan for savings, new toys and needs. Allow them to be responsible for one item they need, such as shoes, so they can understand the negative impacts of not following the plan.


Investing is one of the best financial lessons you can teach your child. Talk to your financial planner about bringing your older children along to a meeting so they can see how investments work in the real world. For younger kids, set up a game within the family. Have each person pick out a stock and watch its performance for a set amount of time. This will open the conversation about the value and risk of investing. Spend time explaining different types of investment accounts to your child so they understand the stock market isn’t the only option.

Needs vs. Wants

At the end of the day, the most basic money lesson you can teach a child is the difference between needs and wants. In today’s culture there are a lot of mixed messages about what we actually need. Have your child write down two lists, one for wants and one for needs. Talk through each list with them and help them understand how some things may feel like needs but aren’t, such as a cell phone or a new pair of shoes when their current pair is still in good shape.

Spending time teaching your children or grandchildren about finances is one of the best gifts you can give them. As a young adult they will be more comfortable handling money and have the tools and habits needed to build a strong financial foundation. We’re happy to help you plan out a future for your child, schedule a consultation today!

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