5 Ways to Raise Money-Smart Kids

The following guest post is from Kyle James of Rather-Be-Shopping.com. Learn more about Kyle following this post and a sampling of the best coupons from his website.

Have you ever tripped over a pile of toys in your kid’s room? Toys that seem to multiply but yet never really get appreciated or played with very much. Or perhaps cleaned out the minivan only to find a toy under the seat that seemed so important to your daughter at the time you bought it for her, but was quickly discarded for the next best thing? Both of these scenarios happened to me and I knew there had to be a better way.

A better way to teach my three young children the value of money and the proper value of the “stuff” that money buys. One of my biggest concerns, as a Dad, is sending my three kids out into the real world with no money smarts, which leads to a life of zero savings, and worse yet, a life of battling credit card debt. Here are the five things my wife and I did to turn things around in our home.

1. Teach Them To Value Money – A couple years ago, my son really wanted a Nintendo DS. The sticker price of $150 was shocking to me. But I told him, “Sure you can have one, you earn the money and save up, and I will personally take you to the store to buy one.” I then planted the seed of recycling and turning in our cans and bottles for money. He jumped all over it. Not only did he save and sort our recyclables, he also hit up all his grandparents for theirs.

After he had a sizable haul, we would take them down to the recycle station and he would unload them and even sign the receipt. He finally saved up enough money for the Nintendo DS. It was a great experience for him and taught him that money does not just grow on trees. It has to be earned by hard work and dedication.

2. Give An Allowance – My kids are just now getting to the age where they can start earning an allowance by doing chores around the house. This is also a great way to teach the value of an earned dollar.

The psychology of money is amazing to me. I have noticed in my kids that when they earn money they are less likely to waste it on something trivial. They will want to save it in their dresser drawer for something special that equals the value they have put on the money. Whereas if I give them a couple dollars to spend at the store, they will buy some candy or toy that usually ends up on the floor of the minivan.

3. Savings Account – When each of our kids were born, my wife and I opened a savings account for them. We add birthday money and Christmas money from the grandparent to their accounts every year. When the statements come, I make a point of talking to them individually about how much money they have and how much interest they have earned. They get very excited with the news that they have earned $1.75 last month by doing nothing at all.

The idea of saving money for things like college, or their first car, has to be planted early and often. My hope is that it will help to remove the sense of entitlement that is so prevalent with kids today.

Editor’s Note: ING Direct, one of my favorite online banks, recently added a kids savings account offering that may be of interest to parents looking for a safe place to park accumulated allowance money.

4. In Order To Receive, You Must Give – It happened the other day in the car and it gave me goose bumps. My 6 year old daughter was whining about why she could not have some toy. Tired of her whining and without thought or hesitation I quoted Rich Dad, Poor Dad, “If you want something, you first need to give.” Silence. I let that thought just hang in the air for at least 15 seconds. I could see in her eyes through the rear view mirror that her mind was working overtime trying to understand the concept.

This led to a great conversation about giving, whether it be toys you don’t play with to a charity, or time spent teaching your sister how to ride a bike, and how these things will bring you much more in return than you could ever imagine. I then explained that by being generous, people are going to want to be generous to you. By taking time to help someone else, others are going to want to take the time to help you when you are in need.

5. Personal Responsibility – They are responsible for the money they receive from allowance and otherwise. When it’s gone, it’s gone. So I tell them that it’s their responsibly to save it wisely or spend it wisely if that is what they choose to do. And definitely don’t leave it laying around the house or it may end up back in my wallet!

The idea of personal responsibility carries over into other aspects, like “You say you want dessert tonight? OK, well, let’s look around the house and make sure all of your responsibilities are taken care of. Then we can discuss dessert.” You do this enough times and you stay consistent, they will take care of their personal responsibilities long before they come to you asking for something.

Do you have any tips to add when it comes to raising “money smart” kids? I look forward to our comments. Another aspect of being money smart is using coupons when you do make a purchase. Here are some of the better online coupons on my website right now. Thank you Jason for letting me contribute to the Frugal Dad blog.

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About The Author: Kyle James owns and operate a website called Rather-Be-Shopping.com which specializes in online coupon codes for over 700 stores, organized in 25 shopping categories. He also has a blog, where he writes about frugal living tips, creative ways to save money, and other musings about the adventures and mis-adventures of raising 3 active kids.


  1. The most important thing you can do is model good financial responsibility for your children. They learn much more from how you handle these things than what you say. My children are successful adults and that is their explanation for their success.

  2. My daughter earns money for doing chores around the house. We also donate old toys and clothes to Goodwill and she gets really excited helping out with that. She knows that there are people less fortunate than us and loves knowing that her old stuff is going somewhere good.

  3. We started putting our kids “on budget” when they were in high school. I totaled up all the things we purchased for them over the course of the year (haircuts, shoes, clothes, etc) and then divided it by 24, the number of paydays.

    Each payday, they automatically got the amount deposited in their checking account. They learned to keep a check on hand to pay for something at school, at an ATM card for purchases, and where to get free ATM withdrawals.

    This also taught them how to save for big things during the year, like a special item or the big expenses of Prom in the spring. (My daughter even wore the same dress twice when she realized she loved it more than what was available in the stores…and she saved the $150!)

    Giving them these little choices now (and no safety net because no money means you want to buy new jeans until you have the money) will hopefully help with the big stuff later.

  4. We have a share of season tickets for our local professional baseball team. Instead of fending off requests to buy overpriced snacks and souvenirs each game, we give them a set amount of money at the beginning of the season. They can spend it all at once, a little at each game or a combination. They quickly learn that $6 for ice cream is something they can pass on if they want to buy a souvenir at a future game. We don’t have to debate and they learn about budgeting. It works great. We’ve done this on vacations as well.

  5. We have never made our children donate their own money, nor did our parents force us to do it. They have on rare occasions voluntarily given their own money for some cause that touches their hearts. Our kids go to Catholic schools and they have been compelled to work in food pantries, soup kitchens, and homeless shelters for service requirements, and I do make my 13 y.o. son shovel the old lady neighbor’s driveway because our family’s religion tells us that’s the right thing to do.

    I think it’s standard practice to force the financial giving when it comes to teaching kids about money, but I’m just not comfortable with it. And giving a secular reason like people won’t be generous to you unless you’re generous seems like an even worse idea to me. Life’s not fair and if you teach a kid that money will come to him if he only he plays by the rules (and one rule is to donate), then I think you’re setting him up for diappointment.

  6. Agree Krant. My Dad is one of the most frugal people I know and very finacially responsible. I now find myself doing a lot of the things he did. Even things that as a kid I thought were down right cheap! But he also took the time to talk to me about being money-smart, which gave me a better understanding as I was growing up.

  7. Nice suggestions, although I think there are problems with paying kids for doing chores.

    Funny how little money is worth to small children. My kid has his change in a small yellow clasped purse, and just loves the counting and laying it out. They’re just decorations for him. It’s almost a shame to get them onto the road of worshiping the mighty dollar, but they have to get on it for a bit in order to get off it again without it ruining their lives.

  8. I just heard someone say that every child should learn to save, give and spend. Your comments deal with all of those. Thanks!

  9. This is a great post on an important and difficult topic. I’m especially interested in #5. Parents who allow their kids to fail while they’re young are doing those kids a favor and hopefully preventing failures later in life.

  10. One thing my dad did used to drive me crazy as a kid, but it’s had a lasting impact on me. Whenever I would see something I wanted in a store, if I said so he would reply with, “You got any money?”. My answer was often no, so that got followed up with “You better save up then.’

  11. Philly area, – interesting comment. We try to teach our kids to treat others like you would want to be treated. That was the point I ws trying to make. Definitely not a secular idea.

    Alex, good point. I think it may depend on the individual kid and their age. We will let my daughter pick from a prize box instead of giving her money for her allowance. In the box we will put cards reading things like, ‘Pick dessert of your choice’, etc, works really well for her age.(4)

  12. How about “teaching them how to earn money.” That is one of the best skills anyone can have and one of the best life lessons you can teach a child. Even a young child can learn about working for money. Rather than chores, I would find simple projects around the house that my kids could do and I “hired” them to do the work. Win-win for both of us.

    • Our kids were given a set amount of money each payday (1st and 15th) to take care of the expenses we were already paying for like haircuts, basic clothing, school supplies, etc. We included a little extra for disposable spending for coffee, dinner out, friends’ gifts.

      BUT it was not enough for them to play all the time on our dime. They could do big jobs around the house for extra money but they also did babysitting and summer jobs.

      Our kids had chores they were expected to do as part of the family (because honestly, our son would have preferred to be broke over having money). If you didn’t do your chores, no access to cars and no time out of the house except school.

      This is what worked for our family.

      • i was just thinking it probably wouldn’t teach them much about money if they got to spend all their money on fun stuff. Need to spend it on grudging expenses too.

  13. The other day my 4 year old made her first $5. She washed our cars and her bike. I was so proud of her because she was so focused on completing the job.


  14. I wrote an article a couple weeks ago regarding fun ways to teach personal finance. Basically I highlighted the value of board games like Monopoly and Life. Thinking back, it’s amazing at the financial lessons those games teach you as a kid.

  15. Only thing I do different is giving money/allowance for good grades and doing something beyond the call of duty. The chores are part of clothing and putting a roof over their heads.

  16. It’s funny, I have a strangely non-materialistic kid! I ask him what he wants if he could have anything and he rarely has an answer. He doesn’t have many toys either so it’s not like he’s overloaded with stuff. I have found that if my son mentions something he wants, I ask him if he wants to earn it by doing a few small jobs around the house and he says “nah!” So, it stinks that my seven year old is a slacker but it saves me a lot of money!

  17. When I was a child, I remember that my dad would match all money that I had put into the bank. If I received $20 for my birthday, he would match it. The only thing was that if I put my money in, I couldn’t touch it until I was 18. This was a great way to get me where I am today.

  18. I remember that when i was child my parents give some money on festivals or on my birthday. I was just deposited it to my piggy bag. It was great experience of life. Today, i understand the true value of money when i earned by my own.