Money Lessons Learned from Kids

The other day my son wanted to buy a “prize.” He had some allowance and gift money saved up, and all he needed from Dad was the transportation.

When he was much younger, Dad kept up with his allowance and gifted money and doled out just enough to pay for whatever toys he picked up in the store. However, these days I’m trying to shift that responsibility to him, and teach him to not only spend his money wisely, but manage it wisely (to include safely transferring it from wallet to cashier and back).

Spending Cash Hurts

It probably sounds elementary, and in a way it is, but I strongly believe in something I’ve dubbed “transactional pain.” That is, the twinge you feel when you hand over cash from your wallet to someone else who buries it in their cash register drawer and slams it shut, leaving your wallet a little thinner.

This transactional pain is hard to duplicate with plastic, and it is certainly hard to replicate when someone else handles the transaction for you. You need to see it, feel it and experience it for yourself.

Over time, I’ve noticed my son has become more frugal during these infrequent trips to the store for a “prize.” Just the other day he spent nearly 10 minutes in the toy aisle agonizing over buying one Lego set or two.

I explained that if he bought two it would leave him with $10, but if he bought one he would still have $30. I assured him that he could buy both if he wanted, since the bulk of this money was left over from Christmas. The choice was his, even though deep down I wanted to steer him in a certain direction.

He decided he wanted both toys and we headed for the checkout. He was quiet, and I knew what he was thinking. About half way through the store he said, “Dad, I don’t really need both of these. I want to put one back and save my money.” Naturally, I told him that was a smart move and we returned to the toy section to put back the second Lego set.

Future Frugal or Future Cheapskate?

I shared the story with my wife and we joked that he will probably grow up and have more money than all of us, but we also don’t want to raise a Scrooge, or a cheapskate. That’s why, if you will indulge my recounting another moment of parental pride, the next money decision from my son made me even more proud.

Over the weekend my daughter shared with us that a school fundraiser she had participated in didn’t do so well and the organization for which they were raising money was hurting. Her teacher asked students to take the forms back home and ask if anyone else might be interested in buying a discount card (local business sponsor this endeavor by offering discounts for holders of this card throughout the year).

The cards are $10, and nearly everyone we knew that wanted one bought one during the first round (yes, even Mom and Dad). Hearing my daughter’s passionate pitch my son responded, “I’ll buy a card from you. I can save money at Krispy Kreme!”

This drew laughter from the dinner table and I explained to my son that Mom and Dad already had a card, and really only one member of the family needed one to get a discount if we went out to eat (or bought a box of doughnuts). He frowned, insisting that he wanted to help his sister.

When You Can Afford to Give, Give Freely

I immediately backed down, recognizing a teachable moment, and told him if he wanted to support the cause with this own money he could give $10 to his sister in exchange for his own card. He excitedly ran off to get his wallet, not asking how much money he’d have left, and without agonizing over his giving decision.

It was one of the times when you look back over all the lessons you try to teach your kids and see that maybe, just maybe, one of those lessons stuck. If my son grows into a young man who continues to give to worthy causes without hesitation, to help his family, and to agonize over buying toys, well, I have to say my wife and I have succeeded as parents.

Let’s just hope these ideals survive the teenage years!


  1. Great lessons. If you don’t mind me asking, how old was your son when you started allowance? And how old when you started this new money management system?

    • Seems like he was around 5 or 6 when we started allowance, which may have been a little early, but he saw an older sibling getting it and took interest. We waited a couple years before shifting some of these money-management concepts to him.

      My oldest child was ahead of the frugal curve, though. She had a bank account by 10 and nothing thrilled her more than making deposits and getting a quarterly statement.

  2. Awesome story. I bet that was a proud moment for you. I don’t yet have kids, but I would certainly feel good as a parent if I somehow managed to help he/she learn how to give to others. I need to do a better job myself before I’m ready to be looked at as an example, though. Even saving alone is a good thing to be learning at that age. Yes, you don’t want him to be a cheapskate, but saving for the future and to better take care of you and your family is a great thing, in my mind. It’s better than being foolish and throwing everything you make away only to be left with nothing. Thanks for sharing.

  3. I absolutely agree with all of this! About the gift cards, though. We have the option of buying coupon books (which we would never use)from a charity that fundraises through the school where “up to 50% of the amount” goes to the charity. Note the “up to” – is that 1% or 49%? We choose to donate the price of the book directly to the charity. We ensure that all of the money goes to the charity and our child feels good about donating.

  4. Kids have an amazing knack of making complex issues simple with their view on life. I think it’s great that your kids are growing up to understand the value of money and how to spend it wisely, although finding a balance between spending and saving is key!

  5. Funny that you son struggled with a Lego purchase. This is the same prize that motivates my boys. I will have to take heed of the rest of the lesson and allow my boys to actually pry the dollars from their wallets rather than from my pocket to the register. Also, great lesson on the gift card. Sometimes giving to a cause we believe in is worth the effort and dollars spent. It is important to teach frugality and equally important in knowing when to give.

  6. An allowance is an absolutely essential component of helping kids develop responsibility, particularly with regard to money. There’s nothing worse than the dole system – e.g. your kid asks and you dole it out. This doesn’t teach children about the scarcity of money. An allowance makes your kids choose between competing priorities and helps them understand the idea of trade-offs.

    • I agree with you Joe. An allowance allows kids to make mistakes with their money, and suffer the consequences at an early age. This decreases the chances of them making those same mistakes later in life, where the consequences are far worse.

  7. That’s pretty cool! I was taught as a kid to automatically give 10% of all the money I earned and then I gave a 5% ‘offering’ on top of that. I did it faithfully but I don’t know if I would have given $10 from another part of my ‘budget’ like your son did. Learning to give this way did instill an appreciation for giving though and I do still try to donate though I’ve gotten away from the 10-15% mark.

  8. I am frugal but growing up, my kids were given allowance with total freedom. My thoughts after my very strict Catholic school upbringing were to let them suffer the natural consequences of their choices. Something I was never permitted to do.

    As I know now, this is very bad parenting. I am sorry for my mistakes as a parent and fortunately they have forgiven me. I still want to believe that children should not be burdened with difficult money decisions and should not forced to choose suffering over enjoyment. Childhood should be a joyful time with the tough financial decisions left to adults.

    One of my children has turned in to a very frugal young lady with a huge financial aid debt, one is very frugal yet still does not work or go to school at 25 (just lives off his savings,) and my high schooler, the youngest, still asks me for whatever she wants after she blows her allowance on things intangible things. And I still find ways to give her whatever she asks because I can’t say no.

    Needless to say my total debt is triple my annual income with little to show for it. At my age, and with the mistakes I’ve made, I can’t change no matter how much I might want to. I live a frugal life except when it comes to them. At least some has rubbed off on them. Sometimes love has to be enough. When one of my children asks for something we cannot afford, I get it for out of guilt because it is my own fault they are this way.

  9. I used the same words with my kids. I also mention what else could be purchased if he buys something cheaper. the quality vs quantity discussion is also a good topic.

  10. I bet you were incredibly happy and curious when you saw your boy have that puzzled look on his face when he had two toys in his hand….

  11. I sometimes wish my daughter would be more frugal, and actually choose to save some of the money that we give her, as well as some she is beginning to earn (babysitting, etc.).

    But one thing she seems to be is generous. I want her to be both frugal and generous when she grow up.

    Are frugality and generosity mutually exclusive.