6 strategies for teaching kids about money

Not to say I’m bad with money, but like most parents in 2022, I rarely carry actual cash. She watches me make nearly all purchases either in-store with a card or online, and often with my phone. And although Matilda has started to take note of how well I can spend money (and truly, I am gifted in this area), I’m finding it much trickier to explain concepts like financial security or fiscal goal-setting to her.

Like most parents, I want my kid to have a solid sense of financial literacy and good money habits in adulthood. So, with this in mind, I asked two money professionals for their advice on teaching kids the basics around earning, saving, spending and giving. Here are their top six tips.

How to teach kids about money

1. Share your spending strategies

To start, it can be as simple as explaining your day-to-day spending decisions, says Robin Taub, author of The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life. “For instance, if you’re going through the drive-through and using your phone to tap and pay, your kids might think that’s cool and have questions about how it works.” 

If you buy groceries online, invite little kids to sit with you as you compare products and clip virtual coupons. When you’re in an actual store, explain how you compare two brands of shampoo by price and volume, for example, to get the best value. Older school-age kids might be interested in why you often shop at the same store, and this could be another savvy-shopping lesson to share, if the decision is tied to a store rewards program or lower prices.

Taking a few minutes to explain your spending strategies is worthwhile because you’ll start to build your kids’ body of knowledge and understanding, says Taub. “All of those moments compound, in a good way.”

2. Offer a good old-fashioned allowance (or hybrid-allowance)

Giving kids a weekly allowance is a classic way to teach good spending habits, and it has another big impact. According to the experts, there’s a big upside to doling out weekly spending money. “Allowances are one of the best ways to introduce conversations about financial literacy, bank accounts, savings and even taxes to your kids,” says Gaurav Kapoor, CEO and co-founder of Mydoh, a new money management app for kids. Many parents start giving allowances when their kids are eight to 12 years old. If you do, consider opening bank accounts for them, too. That way, you have the option to transfer money to their accounts, instead of handing over cash and coins, and they can learn how a bank account works, too. 

Some families find that paying kids to pull their weight around the house creates a transactional relationship. And it’s one that can feel disingenuous, since nobody is paying the parents to unload the dishwasher or fold the laundry. 

If you are not comfortable with assigning a fee to household chores, consider a hybrid-style allowance system: Each week, kids are given a bit of cash to manage, though it’s not specifically tied to how often they make their bed or vacuum the living room. This is spending money for kids to manage that can be allocated to movie tickets, video game upgrades, Pokémon cards—or that they can choose to save for larger purchases.

To layer in lessons in work ethic, Taub recommends offering additional (and age-appropriate) chores to tweens and teens outside the scope of family responsibilities that kids can volunteer to do for extra money. These could be occasional jobs, like organizing the linen cupboard, or seasonal chores like mowing the lawn. 

3. Create a beginner budget

Although kids’ early interactions with money will likely centre around spending, it’s a good idea to introduce the notion of saving, too. Little kids can grasp the concept by saving up for a toy they would really like to buy. Older kids might have bigger goals they can work towards, like buying a new tablet or bicycle.

You can also help older kids set a budget and track how much money they have coming and going. They could use a budgeting app or even separate cash. This can be achieved using an app, or even separating cash into three jars or envelopes for spending, saving and giving. Aside from offering this learning tool, let them spend their money as they see fit. “It’s best to let them make choices, even make mistakes, and live with the consequences,” says Taub. That’s how they will learn best. 

4. Encourage money-making opportunities

Giving kids opportunities to make money is key. You could help them to set up a neighbourhood bake sale to benefit a local charity, for example. They can even organize a car wash to fundraise for a big personal goal, like an expensive music camp they want to attend. There are many ways to frame this, says Taub. “A spring yard sale is another classic way to introduce a range of financial concepts and give pre-teens and teens some additional financial autonomy,” she says. 

To get a yard sale up and running, kids will need to organize items, assign values, plan the event, put up posters, haggle with customers over prices and so much more. A 12-year-old will need a lot of support in this endeavour, but a 15-year-old could probably do it all from start to finish, and even accept transactions on the Square app (an app that allows you to buy, sell and send money through Apple and Android mobile devices). The learning opportunities are endless.

5. Include social responsibility

If making charitable donations is important to your family, share that value early on by discussing the importance of giving. It’s a chance to teach social responsibility alongside fiscal appreciation. You could make it a family project to determine how much everyone will pitch in and what cause you’ll give your hard-earned dollars to. This could be a topic that comes up annually around the holiday season, or it could be a quarterly talk, so you can keep your family’s giving strategies fresh in everyone’s minds. 

6. Make learning about money fun

We already know that children intuitively learn through play, so gamifying early lessons in financial literacy makes sense. “The Play feature on Mydoh helps kids learn money basics through over 50 short lessons and fun financial trivia,” says Kapoor. “They’ll learn about everything from loans and savings, to how money can be used negatively, to peer pressure.” Plus, kids can get a Smart Cash Card, which works similar to a pre-paid Visa, and operates through their Apple Wallet. They can use it to make actual purchases online and in-store, up to allowable limits supervised by Mom or Dad. 

And there are other apps that parents can try too, like PiggyBot (a virtual piggy bank that serves as a digital IOU for parents to track kids’ earnings), Bankaroo (which simulates a banking experience) and FamZoo (which offers prepaid cards alongside a finance app for families).

For IRL gaming options, you can opt for something money-oriented, like Monopoly or The Game of Life, at your next game night. “That way, you’re doing something fun as a family but sneaking in some lessons, too,” says Taub. (There is also a digital version of Monopoly, if you can’t tear them away from the screens!)

“While I personally think talking about money is always fun, I do realize that not everyone enjoys it as much as I do,” says Taub. “Just remember that you are making these conversations and learning opportunities a priority for your kids because you want them to have good habits that will support them for the rest of their lives.”

I don’t plan on opening a bank account for Matilda until she hits double-digits. Until then, she’ll continue to collect coins in her unicorn piggy bank. But now, that includes not only stashing them, but also talking about all those toonies and what they are worth, how she might use them and what she might like to save for. I’m hopeful that she’s also accumulating a wealth of knowledge that she will eventually be able to take to the bank.  

More on kids and money:

• RESP vs RRSP and TFSA: What’s the best option for education savings?
• How much money does the government contribute to an RESP?
• Student Money: How to pay for school and have a life—a guide for students and parents
• My three kids chose different educational paths. How do I withdraw RESP funds in a way that’s fair to them and avoids unnecessary taxes?

About Karen Robock

Karen Robock is an award-winning journalist who writes about parenting, wellness and travel—and, occasionally, how you might pay for it all. Her work has appeared in Canadian Living, Reader’s Digest and Prevention magazines.