Life Skills: How to Teach Your Kids Money Management

Teaching kids life skills is one of the primary responsibilities we parents have to our children: and yet, it can be such a tricky and emotionally charged area. Organizing, Time Management and Money Management are critical to life’s success, but aren’t typically taught in schools, or handed down easily from parent to child.

So, what is a parent to do?! In this 3-part series on Teaching Kids Life Skills, we covered Organizing and Time Management first. I saved money management for last, as this topic may feel the most fraught. If your parents never taught you the basics, or it was treated as a “secret” growing up, you may be at a loss on how to teach your kids.

The good news is, people today are speaking more openly about money than ever before. And there are tons of resources available. One of my all-time favorites is the book, “The Sink Or Swim Money Program” by John E. Whitcomb, which breaks down teaching money to your kids in a very innovative way.

Experts agree that you can start building your kids money management as soon as they begin developing executive function (around three-years-old). Each lesson should co-mingle the fact that managing money is an attitude, a technical skill, and a habit.

Here’s an age-by-age guide to money lessons:

Pre-school kids (3 to 5-years-old)

Introduce your kids to money as a resource and demystify it by talking about it in everyday life. Teach them to identify coins and understand basic math: five pennies to a nickel, two nickels to a dime, ten dimes to a dollar, and so on. Then, help them grasp the connection between money and things. You can start by giving them a toy cash register and playing “grocery store,” before you go to the real supermarket with a list and budget. Involve your child: can you both stick to the plan?

School-age kids (6 to 12-years-old)

Give kids a chance to learn about spending, saving and using money to achieve various goals. When shopping, narrate the thought process behind your choices (“I’m choosing this pasta over that one, because they are both good but one’s on sale. I’ll pay a little more for these trash bags because this other, cheaper brand rips”). Experts recommend giving kids a chance to earn an allowance, through chores, and setting up a three-jar system — Spend, Save and Share — to practice divvying up dollars for different purposes. Help your child set a goal for each and use clear jars so they see their money adding up.

Teens and young adults (13 to 26-years-old)

These are the years to train your children how to make independent financial decisions. Help them set up their own bank accounts – perhaps replicating the same Spend, Save and Share system – and learn how to manage a budget. (John Whitcomb suggests a working through several different budgets, eventually having your teen manage their entire clothing budget for a year). Teach your kids about interest rates, credits cards and loans (including student loans) and the importance of paying on time to minimize fees and build credit.

With any life skill, if you never mastered it before—having kids is a great excuse to develop that knowledge. You can learn alongside your kids, and using your values as a guide, have confidence that you do have valuable knowledge to share.