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Take Time to Educate Your Children on Money Management Skills

To improve the next generation’s financial aptitude, parents must educate their kids

Sara Hemmings //July 30, 2019//

Take Time to Educate Your Children on Money Management Skills

To improve the next generation’s financial aptitude, parents must educate their kids

Sara Hemmings //July 30, 2019//

While parents educate and guide their children on numerous matters, teaching kids about money management is often ignored. To make matters worse, many schools neglect to focus on teaching children about finances.

Providing children with knowledge about money and personal finances will help ensure their success in later life. With the mortgage crisis which totaled at $3.9 million foreclosures, the $1.1 trillion owed in student loan debt and the $845 billion in credit card debt, adults may not always know enough about money management. That is why it is imperative for parents to begin educating their children about money, in order to help the next generation’s financial aptitude. It is also important parents have the resources available to assist them in doing so.

Listed below are some important tips to consider when teaching your children about handling money. 

Talk Openly

Money does not need to be a taboo subject, and the less you discuss it the more it becomes one.  Share openly and explain how money is used in your daily life, whether at the grocery store or when contemplating a larger purchase.  Be a good example and model smart money management skills, children will learn by example.


Studies suggest that 40% to 60% of children receive allowance, beginning at the median age of eight. However, of those who receive allowance, only 1% of those children save a portion.

Allowance can be an important tool for helping children understand money and the concept of working to earn something they want.  However, some believe that rewarding children for chores that are part of being a household is unnecessary, therefore, another possibility is setting up a “custodial allowance.”  This “account” is for the children with a preferred limit on how much they can spend each week and includes the opportunity of saving. Whenever the child wants something at a store that the parent doesn’t want to buy, use the custodial allowance account. This helps children learn the value of money, that money is not limitless and that often they will have to prioritize what they spend it on.

Another strategy when giving allowance is to give your kids a set amount but designate a portion of it that they must save and a portion they can give/donate to a special cause of their choosing. Begin by directing the percentages for them, as they get older and begin to understand the benefits of each category, allow them to decide how much of each allowance they want to designate to each. From time to time, offer incentives for what you would like to teach your kids to focus on more often. For example, randomly doubling the amount in the “give” category or offering interest on the amount they save.

Needs Versus Wants 

Money doesn’t grow on trees. Children need to learn the importance of differentiating needs versus wants.  This lesson is a great way to learn that there are choices and limits in life.  Children need to differentiate between spur-of-the-moment purchases and saving for something that they need. 

Do not be afraid to say no when asked for money. By teaching children that they won’t always get what they want, they learn the importance of work and the value of the dollar.

Technology and Apps 

There are many new technology gadgets or apps to help with money management. Parents can load funds onto the cards and then monitor their kids' spending through an app. Make sure your kids are involved as you monitor and review their spending habits so they can learn along with you.

Saving, Spending and Giving

A good ratio for how much to save, spend and give is 1-1-1.  Young children can start with having three different piggy banks or jars and divide their allowance or money that they receive by three.  A great suggestion is to pay interest on the money that the children save.

Make it Fun 

Children will remember the lessons better by creating teaching moments about money that instill an atmosphere of fun.  Ideas of instilling an entrepreneurial spirit is important, whether running a lemonade stand, pet sitting or snow shoveling.  Create charts and other fun techniques while goal setting for a special purchase.

Adolescent and High School Aged Kids

Important matters to teach older children about include accounting and taxes, investing, learning to apply for scholarships and loans and how to make big purchase decisions (e.g. buying a car).  Open a custodial brokerage investment account to teach them about investing and saving for the future.


Remember, it is not only in their best interests to teach your children about money, but in your Money management may be one of the most impactful principles to teach your children. When taught how to budget, invest and save we can raise our children to be independent and successful.  financial interest as well. Teaching gratitude for the money and resources they have may be one of the most important and impactful lessons you can teach your children.

Sara Hemmings is a financial advisor with the global wealth management division of Morgan Stanley in Loveland. She can be reached at 970-776-5506 or [email protected].