Teaching Children about Money
written by Mike Ballew May 21, 2023

As parents we have a responsibility to teach our children about money. However, figuring out the best approach can be challenging. This basic outline is designed to help you effectively teach your children about financial matters.

Teaching Young Children

Who as a parent has not experienced something like this: your child asks for an expensive item and you have to say no because it costs too much. Your child responds, “Just go to the bank and get money out of that machine."

If only it were that easy. Money is a finite resource. As our parents used to say, “Money doesn’t grow on trees." Help young children understand that money is earned through work and that there is a limited supply.

Another simple lesson is where to put money. Teach children to use a wallet to keep their money safe, emphasizing that folded bills can easily get lost or damaged. As evidenced by the fact that I once found a folded $100 bill lying by the side of the road, it’s a lesson some adults haven’t learned.

Educating Young Adults

The best time to teach your children about money matters is when they are 10 – 12 years old. They are old enough to understand but young enough to still listen. Once they go through puberty, you might as well be speaking Swahili. When they become adults and actually need the information you can offer a refresher.

Live Beneath Your Means

The first money lesson is to live beneath your means. Don’t spend every penny you earn. Set aside 20% of your gross earnings for savings. If you believe in faith-based giving (or karma), set aside another 10% for giving. Then live off the remaining 70-80%.

These set-asides must come first. Take those amounts out at the beginning of the pay cycle. The 20% should go toward retirement savings and an emergency fund. If you want to learn more about how to set up an emergency fund, check out our article entitled Emergency Fund.

Wise Credit Card Use

Credit cards are not a magical elixir of limitless money. Yet many adults treat them that way, essentially like a child sees an ATM. Every penny charged to a credit card must be paid back, with interest. 

A little credit in the conventional sense (i.e., making monthly payments until the debt is paid off) is okay when you first start out. You need basic things like a bed and furniture and a reliable car. Just don’t get in over your head. Once you have established the basics, credit should only be used for convenience.

Using credit cards for convenience means paying them off in full each month. That way you avoid interest charges and debt accumulation.

Establish a Budget

Explain the concept of budgeting and its role in managing personal finances, encouraging children to create a spending plan to prioritize expenses effectively.

Household budgets are a zero-sum game. That is, once your level of spending reaches your pay, any additional spending must come at the expense of existing budget items.

Budgets can be helpful to rein in spending when you have the misfortune of being yoked to someone who hasn’t quite grasped the concept of living beneath your means. “You want that house, that car, that vacation? What do you want to cut from our budget so we can afford that?" If you want to learn more about setting up a household budget, here’s our article entitled How to Create a Budget.


Instill the understanding that self-sufficiency is crucial in adulthood, discouraging reliance on parents for financial support. Explain that parents must stand firm when their adult children seek financial assistance for irresponsible spending or to avoid getting a job.

If your children have in mind that Mom and Dad are always going to bail them out, that is exactly what you will spend your life doing. 

The number one reason people fail to save enough for retirement is their continued financial support of their adult children. There are scores of failure-to-launch adults way beyond the age when they should be self-sufficient still sponging off Mom and Dad. If you’d like to see how to make your position clear, check out A Letter from Dad.


Teaching children about money management is a vital life lesson that will benefit them throughout their lives. By imparting these valuable financial skills, you will ensure your children have a solid foundation for making sound financial decisions and achieving financial independence.

Photo credit: Pixabay The Eggstack Blog will never post an article influenced by an outside company or advertiser. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future.
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Eggstack founder, Financial Planning Association member, engineer, and software developer.