How Do I Teach My Kids About Money?

Two kids, two temperaments

Some kids are natural savers: they count their money, hate to part with it and feel safest with a full piggy bank. Others are natural spenders: money is for using, and the joy is in the buying. Most families have some of each, sometimes in the same set of siblings.

Neither temperament is a problem. Each is half of a healthy relationship with money. The saver needs to learn that money is also for living. The spender needs to learn the power of waiting. Your job isn’t to change who they are; it’s to teach each one the half that doesn’t come naturally.

The one habit for every kid: Spend, Save, Give

Whenever money comes in, from an allowance, a birthday or a job, it goes to three places:

• Spend: for things they enjoy now.
• Save: for something bigger, later.
• Give: for someone or something they care about.

Use three jars for young kids, three accounts or app buckets for older ones. Choose the split together. Many families start with a third each and shift more toward saving as kids get older. The point isn’t the exact numbers. It’s that every dollar gets a decision.

For the saver: permission to enjoy

• Plan a purchase on purpose. Help them pick something worth spending on, and celebrate when they buy it.
• Talk about why we save. Saving is for something, not for its own sake. Ask what the money is for.
• Model it yourself. Let them see you enjoy money you’ve planned to spend, without guilt.

Careful savers often grow into careful adults who find it hard to spend, even in retirement. How Do I Enjoy Today Without Shortchanging Tomorrow? covers the grown-up version of the same lesson.

For the spender: the power of waiting

• A goal they can see. A picture on the fridge, a chart they color in. Waiting is easier when the reward is visible.
• A 48-hour rule. Anything over a set amount waits two days. Often the urge passes; when it doesn’t, the purchase is a real choice.
• Match what they save. Add a little to every dollar saved, the way an employer matches a 401(k). Waiting suddenly pays.
• Let small mistakes happen. Buying the toy that breaks in a week costs a few dollars at eight. The same lesson at 28 costs far more.

What to teach at each age

Ages 5 to 8. Money is earned and it runs out. Needs versus wants. The three jars. Let them hand over the money at the store.

Ages 9 to 12. Making choices: comparing prices, saving for something that takes a few months, and the idea that waiting can be worth it.

Teens. Earning, a bank account and a debit card, the real cost of a car or a phone, and what a credit card actually is. A first job is the moment to start investing: with earned income, a parent can open a custodial Roth IRA, limited to what they earned that year or the annual IRA limit, whichever is less. A few hundred dollars at 16 has decades to grow. Can My Kid Open a Roth IRA? covers how it works, and our Roth IRA for Kids calculator shows what it could become.

Young adults. A first paycheck plan, an emergency fund (How Much Should I Keep in an Emergency Fund?), the employer match (Which Account Should I Fund First?), and how to use credit without carrying a balance.

Talk about your own money

Kids learn more from what you do than what you say. Share a little more than feels natural: how you decided on the car, what you’re saving for, a money mistake you made and what you learned. You don’t need to share your salary. You do need to show that money is something your family talks about, calmly and on purpose.

When the lessons go beyond the jars

As kids grow, the money questions get bigger: college, a first car, helping them get started. 529 vs. Roth IRA covers saving for education, and What Do Kids Really Cost? covers planning as the costs change. And if you’d like to pass on what you’ve learned in your own words, What Do I Want My Kids to Know? is a set of questions to answer for them.

Nothing on this page is a recommendation to buy, sell or hold any security, or tax advice about your particular situation.