How To Raise Money-Smart Kids

The following guest post is from Neal Frankle of Wealth Pilgrim. Wealth Pilgrim is a fantastic resource, and on my list of daily reads. After reading the post, head over to Neal’s site and sign up to receive his posts.

If you have kids, you likely worry more about them than you worry about yourself.How do you make sure they don’t fall in the same financial traps you fell into?

I know how you feel.I have 3 kids. The oldest is 22. The middle one is 19 and my youngest is 11. I worry about them.

I was fortunate enough not to have made huge financial blunders growing up – I didn’t have any money to be stupid with. I never had to worry about getting out of credit card debt. I didn’t even have a credit card until I got married.

Because I was so broke growing up I was super careful and never spent money I didn’t have.Fortunately, my kids haven’t grown up under the same circumstances.

That’s why I worry.

They really don’t know how hard it is to make money. And they don’t know what it’s like to go without.I want to make sure they don’t fall into the traps other people do.

The question is how? Here’s the approach I’ve taken so far:

1. Talk

I’ve told my children about my experiences growing up and I think that’s helped. I’m also lucky to be in the business. I talk about how to spot and avoid scams.

But it’s been more important to tell them about our situation in real-time. When my business suffered in 2008 I told them what was happening and what it meant to us as a family.
Of course I tried to put it in perspective. I explained that we weren’t going to be homeless and we weren’t going to go hungry, but when things got lean, we had to scale down.

I later learned that by doing so I did them a favor.

They already knew there were problems. By talking about it, they were able to reduce their anxiety. Things weren’t as bad as they’d imagine.

2. Stay Calm

Kids think of money like you and I think of water. You go to a faucet. You turn it. Water comes out. It’s a no-brainer.

For kids, we are they faucet. They don’t understand how we earn money and what it takes. I can’t expect my kids to really “get “ that until they experience it for themselves. With young kids, I have to remember they have limited experiences and just can’t really understand it fully. That’s why I encourage them to work as soon as they can. With or without a college degree, any job can be a great job.

3. Encourage them to love spending money.

You probably think I’m nuts…but give me a chance to explain.

Too often, kids think of saving as the opposite of spending. Not so. You can either spend money now or have more money to spend in the future. You can either spend money on something you don’t value or wait and spend money on something that’s truly important. Frame it that way and you’ll see your kids embrace a new attitude towards current wasteful spending.

Once kids understand that money ain’t like water, this concept will be clear. They’ll understand that money is a limited resource and must be spent wisely.

4. Put them on a budget

Give them a fixed amount and let them do with the money as they sit fit. Advise them often, but let them make their own decisions and accept the consequences. When they blow it, don’t bail them out.

If the kids are in college, divide up the support you send into 12-monthly installments. Don’t pay for tuition, room or board. Add it all up, divide it by 12 and put that amount in their accounts each month. Let them learn how to work within a fixed income.

5. Jobs.

If you can, let the kids work for their money. Even if they are full-time students, they can find things they can do to earn money. Encourage them to be resourceful. They can even use Craigslist to find jobs. The bottom line is to give them as much experience as possible in handling their own affairs and refusing to bail them out.

What have you done to raise money smart children?


  1. One of the best things that you can do for your kids is talk to them about money, especially younger children. Teach them and show them how to handle money in this world. Let them know that the world is going to try to teach them that debt is cool, but it can harm them in the end.

    The worst thing that you can do for adult children is to give them a bailout. Pain might hurt, but it’s good for them. Offer advice and real help, but don’t give your kids money unless they’re heading in the right direction financially.

  2. Great post.

    I too struggle with showing my kids the value of a dollar. When I was a kid, I sure understood it first hand since dollars were few and far between. However, my kids have it much easier than I did. They don’t get everything they want by any means, but they do not understand what it means to struggle.

  3. We let our kids make as many choices with their own money as possible. We start by setting up a savings account so they don’t always have quick access to their money, which helps a great deal. That’s a lesson most adults could learn from – but credit cards make it seem like money is always “available”!

  4. Huh, I’d never thought of kids viewing money the way we view a faucet, but that makes perfect sense. They really do need to get a sense of what it takes to earn money. I worry about the “attraction” of debt to kids. They see things like $x per month and it can be hard to explain why that is a bad thing.

  5. I have 3 children 11,11, and 8. My wife and I have started to include them in our budget talks. We try and find money topics that interest them.

  6. You also have to allow them to make mistakes in a controlled way. For instance, let them spend money they have saved on something that you know it’s not a good investment or short term discretionary expense, like candy, toys, etc, that may not last, but would prevent your child from getting something “better” later. this is how they learn to save and stay within budget.

  7. I’m actually 22 myself and find your advice very similar to the way my dad has taught me about money. There were times in my life where my family had very little money and also times when I had enough to spend freely…maybe too much so.

    However, now that I’m ready to leave college, I’ve started setting up my own budget, even though I’m still funded by the parents. I set up a mock budget of what I would realistically earn once I graduate and then factor in how much I want to put into savings, how much insurance, car payments, gas, utilities, etc would cost and then whats left would be my food and spending money (all on an excel sheet I created). I started doing this a few months ago because my father pointed out that I was spending 2x more on food than both my parents put together. This not only gained my father’s respect but also made me feel ready for the future.

    Additionally, when I was younger I felt that when my parents told me when money was tight, it allowed me to better understand the situation and curb my spendings; instead of just being angry with my parents when they wouldn’t buy me something I wanted.

  8. Huh..I thought kids believed that money came from the ATM machine. When you run out, you just go there and get more. It definitely wasn’t intuitive to my son that the bank just doesn’t give out endless sums of money to everyone…that you actually have to put it in first before you can take it back out again.

    I worry about this as well. I’m not sure the best way to teach the value of money when my kids get a lot more than I did.

  9. I loved the faucet metaphor. It really is how some kids think about money. I thought I’d share a few ways my parents and teachers have encouraged money-smart behaviors for anyone interested. (It’s a little long).

    When I was 7 and learning about money in school my teacher was amazing. She set up a “shop” with lollies, school supplies and toys from the dollar store. If we got 10/10 on spelling for example we’d get 50cents etc. She’d stamped the coin values onto coloured paper and cut them out. We all had “money boxes” in our desks that we made at the start of term. Every Friday was “shop day” and we would count up our money and could either spend it or save it for the more expensive items in her shop. It was a great way to learn about money. I was lucky enough to have her again before I went to high school and she still had her “shop”. I went off to high school with a good understanding of money behind me.

    Every time a family member sent my sister or me money in the mail, Dad would sit down with us and explain that we could use it as we liked but we should put some away for the “money tree”. He said money didn’t grow on trees but if we put some away it would grow and grow like a tree did. He was never mad if we wanted to spend it all but he asked that we at least put a dollar away. If we ever asked him for money he would say yes but we had to pay him an amount of interest every day until we could pay him back. I remember being horrified at this very suggestion!

    Mum on the other hand had us enrolled in the school’s banking program from grade 1 onwards.. Every week we’d take our little deposit books with the velcro compartment holding our $2.50. Everyone would proudly put their book in the bank bag and if you were lucky you got to take it to the office. Mum would always explain how to fill out the slips and what the stubs left in our book meant. It had a section where we could see our current balance. When I started my first job at 16, Mum helped me organise my first debit key card for that very same account. I still have the deposit book. I just hope when I have kids, they still have similar programs.

    Finally (sorry this is super long but I had so much to say) instead of taking Drama for two years in school, I was forced to take a Business Principals class instead. I hated it but learnt some excellent lessons like how to fill out a cheque, how to file my tax return, how to balance accounts and budget. I may never need to balance company accounts but I’m amazed at how many kids my age don’t know how to file their tax return!

  10. I think teaching your kids how to earn money and build their net worth is so important. If at a young age their taught to earn money, e.g no free allowance, and instead learn how to ask for work and create a value proposition to make a bigger allowance. As the child gets into high school college, he/she shouldn’t have to ask their parents for money which is very rewarding and offers the taste of financial freedom at a young age. The value of the dollar is learned.

  11. I really liked this article. It has always been a struggle teaching money to my kids. They are now 20,17 and 15. Its amazing the difference in their attitudes, but grew up in the same household. My 20 yr old daughter has been out on her own since 18 and is very frugal. She now understands why I clip coupons, look for sales, etc. She budgets herself and has never wanted my help after she was out on her own. Her sister, 17, is still at home and the exact opposite. Money burns a hole in her pocket as soon as she is paid from her job. I try to help her budget, but she resists. I leave the decisions up to her, but I do put in my 2 cents which I have decided not to do anymore and let her learn her lessons. My son, 15, seems to be more of a saver and likes to think before he purchases.

  12. Great blog, it is so important to teach kids about money, and it especially true what you said about parents being the ‘faucet’ where money comes out of. As children you think you can get whatever you want and sometimes that translates into adult life where people use credit cards to pay for things “they deserve”. We recently talked to about ways in which you can teach your child about money and introduce saving to them at an early age. To watch out the video check out the link below:

  13. Great article Neal!

    I feel the same way, especially with number 3. Encourage them to love spending money.
    My kids play something called “Planet Penguin” online. It has a free account and a membership account that the free acounts can upgrade too (for something close to $5.00 a month). I pay my kids an allowance, so I encouraged them to use their allowance money for the membership cost, since the both wanted that account instead of the free one.

    Needless to say, even with my encouragement, they stuck with the free accounts! They are learning 🙂

  14. I think you can lay some groundwork but in the early years you lead by example. For example, if you impulse shop when upset, they’ll be likely to do the same when they get money. Still the old saw about kids thinking their parents haven’t a clue between the ages of 15-25 holds. They may listen, but the words won’t make sense to them until they’re really on their own. Just like calculas is so much gobblygook until you start to use it for real in a design job. I agree that the best thing is talking, but not lecturing. You have to be open to how they’ve filtered what you’ve told them and pay attention to the feedback. Sometimes what you say and what they heard are not the same.