How to Raise Money-Savvy Kids

Imagine this: one day, your child is managing their own finances, making wise choices, and steering clear of debt like a champ. Sounds like a fantasy, right?

But it’s not just a pipe dream. Instilling good money habits in your kids now will pave the way for their financial well-being in the future. However, let’s face it — discussing money can be challenging. Where do you even begin? And will they really pay attention to what you say?

Here’s the reality: children absorb a lot about money by observing their parents, often without us even realizing it. So, if your goal is to raise financially savvy kids, it’s essential to guide them with positive habits before negative ones take hold.

Let’s explore the 7 best habits you can instill to ensure they achieve financial success throughout their lives.

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1. The Habit of Saving First, Spending Later

Many kids see money and think: “What can I buy?”. But we want to change that mindset. Teach them to save before they spend. A simple way to start is with a piggy bank or a savings jar. Whenever they receive money — be it from an allowance, a birthday gift, or chores — encourage them to set aside a portion first.

You might be thinking: “But my child will just want to spend everything!”. That’s perfectly normal at their age. Start small. Even if they save just 10%, they’re developing the saving habit, which will strengthen as they grow.

2. The Power of Budgeting

Budgeting may seem like an adult issue, but it’s a valuable skill for any age. The next time your child wants something at the store, involve them in the budgeting process. Show them the costs of items, how to plan for future purchases, and, most importantly, how to keep track of their spending.

Just think how much easier their teenage and adult years will be if they’re already skilled at managing their finances! We’ll delve deeper into setting limits and making wise spending decisions shortly.

3. Patience Pays Off: Delayed Gratification

One important lesson that extends beyond just finances is teaching your kids to wait before they spend. In a world where everything is available at the snap of a finger, it’s crucial to instill the idea that good things often require patience — especially when it comes to money.

Work with your child to set a goal for a larger item they desire, like a new video game or a bicycle, and assist them in saving for it. This not only teaches them the value of patience but also helps them appreciate their hard-earned money.

4. The Difference Between Needs and Wants

Grasping the distinction between needs and wants is essential for financial success, and it’s a challenge even for adults! Help your kids identify what they truly need versus what they merely want. You can make it engaging by reviewing their wish list together and discussing what’s necessary and what’s just nice to have.

Once they get the hang of this concept, they’ll be better equipped to prioritize their spending and make smarter financial choices.

5. Smart Spending Choices

We all recognize that learning to spend money wisely is a skill that develops over time. However, your kids can start picking up these lessons early on. Encourage them to compare prices, seek out deals, and think carefully before making a purchase. You can involve them in grocery shopping and explain your reasoning behind choosing one product over another.

You might think: “But my kids won’t care about comparing prices!”. That’s perfectly fine! The aim isn’t to turn them into expert bargain hunters right away. It’s about planting the idea — eventually, they’ll start to grasp the importance of making their money go further.

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6. The Habit of Giving Back

Money isn’t just about earning and spending; it’s also about sharing. Teaching your kids to give to those in need helps cultivate empathy and gratitude. Establish a family tradition of donating a portion of their savings to a charity or cause they are passionate about. This practice helps them grasp the broader significance of wealth and its potential to create a positive impact.

7. The Concept of Earning Money

One of the most valuable lessons you can impart to your child is that money doesn’t just magically appear — it’s earned. Whether through chores, assisting a neighbor, or running a lemonade stand, encourage your kids to discover inventive ways to earn their own money. This will help them value it and understand that building wealth requires effort.

Here’s an added benefit — when children learn to earn money early, they are more inclined to seek financial independence as they mature. But how can you ensure these lessons resonate in the long run?

Bringing It All Together

Teaching kids about money can seem daunting, but it doesn’t have to be. The secret lies in consistency and integrating it into daily life. You don’t need to hold formal “money talks” — instead, look for opportunities to incorporate these lessons into your everyday activities. The next time you’re shopping, paying bills, or discussing family finances, use those moments to impart a lesson.

And keep in mind, they’re observing you, so lead by example. Demonstrate how you budget, save, and spend wisely. Kids absorb everything — if they see you managing money responsibly, they’ll be inspired to emulate your behavior.

Raising financially savvy kids takes time, but these 7 habits will guide them toward lifelong financial success. By teaching them how to save, budget, make informed choices, and even give back, you’re providing them with the essential tools they need to thrive financially.

Ready to get started? Consider introducing one of these habits this week and observe how your kids react. Taking small steps today can result in significant financial successes in the future.

BONUS TIP: Financial Literacy Books for Kids

Books are an excellent avenue to introduce main concepts of money, such as saving, investing, and building wealth, in an uncomplicated way that kids of tender ages can easily assimilate. Below are my top recommendations for books you that will get your kids interested in money management:

• Investing for Kids: How to Save, Invest and Grow Money : A comprehensive guide that teaches kids the basics of investing and saving, making complex topics accessible for young readers.

• Rich Dad Poor Dad (Simplified for Kids) : Adapted from Robert Kiyosaki’s famous book, this version introduces children to the mindset of financial independence and wealth-building in a simple, relatable way.

• What is Money? Personal Finance for Kids : This book breaks down the basics of money, from earning and saving to understanding financial decisions, perfect for kids just starting to learn about personal finance.

• Financial Literacy for Kids: 20 Original Stories to Learn How to Control and Grow Your Money : This book offers 20 engaging and original stories that teach children essential money management skills. From saving to investing, each story provides valuable lessons on how to control and grow their money, making financial literacy fun and accessible for young readers.

By introducing these books to your children, you’re not only fostering a healthy attitude toward money but also giving them the tools to build financial independence early in life.

Recommended Further Reading

Want to dig deeper and increase your own knowledge so you can pass it on to your family? Here are my recommended books you should read:

• The Psychology of Money: Timeless lessons on wealth, greed, and happiness by Morgan Housel
• Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert T. Kiyosaki
• Think And Grow Rich by Napoleon Hill
• Family Wealth — Keeping It in the Family: How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations by James E. Hughes Jr.

Click HERE to Find the Best Budget Planners for Your Child to Start Learning These Skills

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