Instilling financial responsibility in kids

Today’s post is a guest blog post written by Rachel Everly. She loves to write on finance and education with topics towards student welfare making students self-reliant.


Raising kids right is a huge responsibility and requires a lot of time and effort if you want a well-rounded child. Most parents in our circle take care of all the basic training that their child may require, such as teaching them good behavior and manners, sending them to school to gain education, helping them acquire hobbies, allowing them to pursue their interests, and so on. Together, all these trainings develop the child into an accomplished person.

One thing though that many parents fail to look into is the fact that children need to be taught about finances as well and this is, in fact, a very important responsibility that needs to be fulfilled, yet is ignored. Parents are plain reluctant to talk to their children about money. A survey relates that they are more willing to talk with their children regarding issues such as dating, sex, drugs and alcohol than money. And why is that? Because parents either do not realize the importance of instilling good financial sense in their kids, or they feel that they are not qualified enough for it. Some even think that the school will provide them with the necessary financial education. While some schools (mind you, not all) do give their students some basic lessons regarding money topics, the lessons are exactly that: basic. It is your responsibility to impart money management information to your kids so they become financially independent.

Learning experiences

Children are continuously observing you; far more than you think. And it is your behavior that they learn from and adopt so it is up to you to act responsibly if you want your children’s learning process to be enhanced. If you involve them in your financial decisions they will understand how money is managed. For instance you are planning to make a big purchase – of a lounger or even a car – and before actually buying it obviously you would list down all your options, see whether it is coming under your set budget, and if not how you can adjust accordingly. When you will involve your children in this process they will see how you developed a budget and compared the various alternatives available to you as per your allocated budget. They will understand how to make responsible financial decisions.

Learning from mistakes

Yes, you should guide your children regarding their financial behavior but don’t interfere in every financial decision or purchase they make. Let them be independent. Give them suggestions but do not stop them from making wrong decisions (obviously only as long as they are not causing them harm). Let them learn from mistakes. When they will make mistakes they will try to understand what they did wrong that led to the unwanted consequences and how they can avoid it later on. They will make sure not to travel on that path again. And that lesson would be better than what you could have given them verbally.

Family finance

Allow your children to be involved with your smaller financial matters. If there is a problem you are facing regarding finances discuss it with them. Obviously it is not a good idea to worry them for no reason about something that cannot be solved or controlled, but the lighter matters can be discussed and it is surprising how cooperative and supportive children can prove to be.

Importance of saving and planning

Make your children aware of terms like “family budget”, “allowance”, “expenses”, and “savings”. Show them what the difference is between their wants and needs. Using examples would allow you to make the lesson better and comprehensive. This really helps with understanding the value of saving and planning. Give them suggestions on how they can use their monthly allowance. Tell them that saving a certain percentage of their money will allow them to accumulate enough to be able to purchase that bike they have been wanting. They could use the rest of the allowance on whatever they want. This would instill in them the value of saving.

The habit of saving proves to be extremely useful when it is time for your child to attend college as that is an extremely expensive period of one’s life. The rising cost of higher education ensures that students take loans for their program and sometimes even for living expenses. This tends to really burden them later on after graduation. By teaching your children about saving you are really doing them a favor and they would be grateful to you when they would manage to minimize their debt by saving during college.

Money is not everything

Although teaching your kids the value of money is important make sure that they do not consider it above everything. While it is important to have money to be able to support yourself there is something beyond that as well. You do not work just for money but also so that you are able to contribute something on your part. Similarly, children should be made to realize that the odd home chores you are sometimes paying them for are not only for money but also because they need to help around and contribute to the family. It is not just about money.

Encouraging children to consider their options, is a great way to help them make decisions and take responsibilities. Having a good grasp on your finances does not only ensure that your money is being managed properly but also that you are not violating your spending limits. Instil in them a sense of delayed gratification and how they can experience that once they start saving up for a certain something they really want. Tell them that they should be prepared for the unexpected – such as a flat tire or sudden need for a visit to the dentist – and whether an emergency fund could help them out in such cases. Explain to them the importance of saving up for retirement early on. All these lessons would mature your child regarding finances and their positive decisions later on in life will reflect this.

Thanks Rachel for this great post with some excellent pointers. Definitely need to keep these in mind as Baby T grows up and we teach him about money and personal finance.

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14 thoughts on “Instilling financial responsibility in kids”

  1. Hi,

    Thank you everyone for liking my piece of content. I always think that making your kids financially responsible should be the top priority of parents so as to avoid useless expenditures kids tend to make once they are aware of how the money is earned and how it should be spent.

  2. My son just turned 2 but instilling financial responsibility is definitely a top priority for me when he’s old enough to understand it. I definitely agree that you have to be a good role model when it comes to money. But it’s also a great idea, like you said, to involve them in money discussions so they can have a better understanding as to why you’re doing what you’re doing with your money.

  3. I opened a savings account for my 7-year-old kid. So far, she managed to buy school supplies this year because of her savings. I asked her how was the experience. She said that she felt glad and would like to save more so that she could help us pay her tuition fees. I see a great saver in the making in her.

    • That’s a great idea opening up a savings account for your 7 year old kid. That’s something my parents did when I was younger and I really learned how powerful compound interest is.

  4. Our little ones are slowly learning about money, but it is a topic I won’t shy away from with them. Having had parents with little good financial sense or ways to pass that along, I don’t want them in the same boat I was.
    Instilling chores, allowances and all that plus teaching about savings and that sort of thing will be implemented sooner than later. We’ve already started with our 4 yr old, so he’s learning. Slowly, but learning just the same.

    • Hi Mr. SSC,

      Money is definitely a topic that Mrs. T and I talk a lot and plan to talk about money in front of Baby T as he grows up. Money has always been an open subject to discussed when I was growing up. This open conversation has helped greatly on my knowledge about money. Good job on teaching your kids about money.

  5. I like my mom’s method. First of all, half of all birthday/holiday money went in the bank. I learned not to spend every cent.

    Second, I didn’t get a real allowance until I was in junior high. Instead, I got to keep any money I got when we turned in cans at the recycling center. We’d take walks to find and pick them up.

    Third, I had to pay for half of any expensive toy I wanted outside of regular presents. Given the allowance situation, it took FOREVER to save $50 for this doll. (This was back in the ’80s, so that was an even more substantial amount.) I got it, played with it for a couple of hours, and realized it was pretty boring. It was an excellent lesson about both money and advertising.

    • Interesting stuff, I never got any allowance growing up. For some reason I always knew the value of money, not sure how my parents instill that information in me. Good point on getting kids pay half of the expensive toy. That would really drive home the message that it takes time to earn money…

  6. Thx for this nice article. It gives me some ideas on how to teach my kids about finance. I like the idea that we should allow them to make mistakes in finance. That is what we do in other areas as well. The best way to learn is to experience it.

    One open question for me remains: at what age should I start? Our oldest will be soon. Maybe wait another year?

      • Starting at 3 is an ambitious objective. I will give it a try with our 3 year old. She actually does it with us…sometimes she blocks the doorway, and we need to pay her by clapping hands…really funny.

        The first concepts we showed to the older one is that we need to work for our money. The second one is that sometimes we do not want to spend money on an item she desperately wants. We try to explain here that we find other things more important…
        A few weeks back she wanted to know where all the money went she got for birthdays. I told her it is in the bank, she really got upset. She did not want that. I explained what a bank is, but she only calmed down when I showed her on the tablet her account.

        • Hi Amber,

          Maybe I should clarify. I meant starting at 3 on some easy money discussions and maybe get Baby T familiarized on numbers and stuff. I’m sure it’ll be interesting teaching Baby T about money as he grows up older. 🙂


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