How To Teach Financial Responsibility To Your Kids [Is It Ever Too Early?]

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Personal finance expert Suze Orman is currently worth roughly $75 million, but did you know she was once in credit card debt to the tune of $250,000?

Even the best of personal finance experts may have once been financially illiterate at some point in their lives.

You may have experienced firsthand the effects of your own bad money management. It could have happened when you fell behind on rent payments or got into credit card debt.

If you want your children to avoid the same problems, you should begin teaching financial literacy as soon as possible.

When To Start Teaching Kids About Finances?

Believe it or not, many of our financial habits are formed before the age of seven. It just may not have been framed into a financial context at the time.

It gets increasingly difficult to guide your children in the right direction if excellent habits are not cultivated early.

Teach Your Kids That Money Is A Finite Resource

One of the most important lessons you can teach your children, regardless of their age, is that money is a limited resource.

When they have to work for their money, same as you do, they will learn to be more cautious with it.

One of the simplest yet most effective ways to do this is to give your children a weekly allowance, which can help them learn to manage money and make mistakes along the way.

They’ll be faced with decisions to make, and they’ll learn to get in tune with the emotions of their purchases, whether it be joy, regret, remorse, etc.

All of these emotions are good, because they aid in making better decisions in the future.

Teach Your Kids To Earn An Income By Doing House Chores

Making children earn their allowances by doing household tasks can be an effective teacher of money habits.

You don’t need a large sum of money in your wallet to compensate them for the odd jobs they undertake around the house. To start out, depending on the age they are, you can go as low as 10 cents! Of course, if your kid is already going to school, you can start much higher.

Nowadays, with a few simple taps on your phone, you can allocate a monetary amount to each assignment and send payments to their accounts, if you prefer the digital method.

Let’s take a look at some reasons why requiring household chores to earn money can be a great idea for your family.

It Shows Your Kids That They Get What They Earn

When kids grow up and fly the coop, they can really benefit from making the mental connection between revenue and personal work.

When children are required to complete chores regularly, they rapidly learn that work is required in exchange for money.

Realizing that things in life aren’t always free is a great way to teach your kids to spend money wisely.

Chores also give your children a glimpse into what a job entails, including expectations and results.

Your kids will learn that an employer might evaluate wages, set payment schedules, and take disciplinary action if duties are not accomplished to the employer’s satisfaction. They just won’t yet realize the connection until they join the workforce.

Additionally, your child will learn how to manage chores on a busy day much more effectively. When they learn that doing chores efficiently is required to have leftover free time for leisure or hangouts with friends, you can bet they’ll accomplish things much more quickly and without hesitation.

Giving Your Children Tasks Will Teach Them About Value

Picture this scenario. A parent rewards the child for housework. The child comes to understand that their acts have monetary value.

This teaches the child that his or her efforts are appreciated and that not all jobs compensate equally.

Children then learn to associate item costs with their financial standing. This will motivate them to seek jobs that pay adequately in relation to their life goals.

Your Child Will Develop A Sense Of Responsibility.

When children with duties perform well, they receive praise from their parents. On the other hand, when they fail to complete chores, children are scolded.

Children learn that positive reinforcement comes from doing a good job, and that they must be responsible in facilitating people to recognize their hard work.

This sense of responsibility will influence the way they approach future jobs and think about their compensation in relation to their value as a worker.

Likewise, they’ll be a lot savvier in the way they use their money to purchase things, whether it be for basic necessities, leisure, or even the purchase of assets for long-term investments. They’ll be able to form a budget on their own and oversee the proper execution of it.

Talk To Your Kids About Money

Don’t Sugarcoat The Topic Of Money

There probably aren’t many parents who have had honest discussions regarding their financial situation with their children.

If you have any regrets going into debt or taking a mortgage you couldn’t afford comfortably, let them know! You don’t have to frame it in a way that puts any worry or burden on them, but simply tell them that it’s a life lesson you’ve learned and you’d love for them to learn ahead of time from your mistakes.

Be sure to tell your kids what you felt and how you dealt with it at the time, versus what you wish you would’ve done instead. Give them the aftermath of it all.  

Don’t be afraid of letting them know your financial failures. Be truthful about it.

This also helps your kids to know that it’s safe to open up to you regarding any mistakes they might make, whether it be finances, relationships, grades, etc.

In time, they’ll learn to respect your honesty, especially when they get older and come face to face with many of the same life dilemmas you’ve faced earlier on.

Teach Them Good Spending Habits

Expose your children to concepts such as saving, planning, and avoiding debt at an early age.

Encourage your children to budget in real life (in accordance with their ages) to help them unlock the concept. Feel free in this digital age to use apps to track spending habits.

Over time, making a budget will come effortlessly to them. By the time they reach their teen years, they’ll be significantly ahead of their peers.

Talk About Financial Goals Together

Invite your children to participate in family finance meetings. Discuss the goals beforehand that might have with your partner.

Let your children put in a thought or two and encourage any questions throughout.

Involving your children in these meetings teaches them a lot about financial discussions and the art of budgeting, prioritizing, and compromise.

For example, new designer handbag, or pay off debt for the month?

Having an audience while having these financial discussions may help keep you accountable as well and make you realize how profound the effects of your choices may be on the development of your child’s financial future.

Kids Understand Finance, Even Though They’re Young

Kids Understand That Numbers Equals Money

Most children can count by the time they are two years old. They have grasped many fundamental financial concepts by the age of seven.

They understand that the value of a coin is not determined by its size. A dime, for example, is worth more than a nickel despite its larger size.

Exchange And Equivalence

Children begin to comprehend the concept of “exchange and equivalence” at a young age.

When shopping, they will learn that money comes in various denominations (one-dollar bills, five-dollar bills) and that there isn’t always enough money to pay for everything.

As the saying goes, you can’t have your cake and eat it too. You either keep the money or you get what you pay for.

Make Them Buy Things

Toys, Electronics, Gadgets

Taking your kids down to the toy (or electronics, depending on their interests) aisle is one of the best ways to educate them on the concept of how much work and how many dollars are needed to obtain an item.

Have them take a look around and set their eyes on a prize. They’ll be sure to keep it in mind as they do chores around the house and attempt to manage their allowances on their own.

Special Treats

Does your child have a finicky palate? Do they eat only if it’s a five-star certified food item (in their eyes)?

Allowing children to pay for a fancy cupcake or ice cream every so often will demonstrate how expensive these guilty pleasures can be.

However, if they truly think it’s worth their money, they’ll learn to spend on the things they love and enjoy it despite the price tag. This can help them discern what’s worth spending on and what’s not over the long run.

Items For School

While you’ll probably end up purchasing most items for your child’s school year, it’s a good idea to have your kid purchase a few of the items he or she will need.

This could be as simple as a pack of pencils or as complex as a graphing calculator.


Now that your child has some money, teach them to treat other people with it. It doesn’t have to be expensive. Next time you go to Costco, ask them if they would like to treat you to a soda or a hot dog. Teaching your child the value of generosity will benefit them in the long run.

Apply Gamification With Money And Budgeting Apps For Kids

Gamification is a strategy of motivating certain behaviors or teaching lessons through challenges, usually via a phone app.

Especially in this day and age, it can be a useful and effective method. Instead of making the learning stressful, make it entertaining. Here are some apps we recommend:

  1. RoosterMoney – an allowance app. You can choose to reward with money or with stars as currency.
  2. iAllowance – disburse allowances on a schedule and set money goals.
  3. FamZoo – control chores, allowances, and spending/savings all in one app.
  4. PiggyBot – (Update: Unfortunately, this app is no longer available.)
  5. Bankaroo – a virtual banking app with budgeting and allowance features.

Browse through some of these apps and see which ones you and your kids jive with. It makes learning about personal finance and money management that much more fun!

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