THE ABCs of Money: 5 Steps to Raising Money Savvy Kids

By Susan Beacham

It has become all too clear to us as parents that in order for our children to succeed in life, they must learn how to manage money. Children who do not learn how to do this may fail to launch or, worse yet, be back in their old room after college - you know, the one you had your eye on for your new office! To help our children learn to manage the money in their lives successfully, we need to teach them five things:


  1. They have choices. There are four things you can do with money: save, spend, donate and invest. Most kids today only know how to spend money. Why? Because that's all we really allow them to do on a regular basis. So, that's what they get good at, and that's the first money habit they learn. Teaching children about money choices helps them learn how to control spending impulses.
    Create or buy a piggy bank that has all four choices visible to remind your children to think about their choices each time they have money available to deposit. This will remind them that there is more to do with money than just spend it.

  2. They need goals. Saving without a goal is like a football game without touchdowns. No fun at all. And if it's not fun, kids will not play for long. Ask your child to draw a picture of a goal - saving for a new bike or making a donation to a local animal shelter - and post it on or near the savings bank. This will help him or her stay motivated to achieve the goal. More about choices.

    Consider matching the savings penny for penny to show your child that you support the goal as well as the approach. More about goals.

  3. They should pay themselves first. Teach your children to "pay themselves first" by asking them to make a deposit in their savings account whenever they receive any money. Assure them that not all of the money they receive as a gift needs to be squirreled away, just some of it. Learning to pay themselves first while they are young will help them to become a working adult who has a certain percentage of their paycheck swept into an investment vehicle before they even get paid. More about saving.

  4. They need an allowance. Set up an allowance that covers some expenses you cover for your child today. Let him or her manage that money and learn what it feels like to have only so much cash available. When the money is gone, it's really gone. A monthly allowance that must be parceled out to cover certain expenses is the first step toward learning how to take personal responsibility for money decisions. In the long run, your child will grow into an adult able to make and stick with a budget. More about allowance.

  5. They need good role models. Children are keen observers of our behavior. They may not listen to what we say, but they sure do watch us and mimic our behavior. Instinctively, children understand that our behavior is more genuine than our words. Knowing this, we must model what we want our children to absorb. Pay bills on time, use cash rather than credit whenever possible, and take your kids with you to make savings deposits.

Susan Beacham is the founder and CEO of MoneySavvyGeneration which provides innovative products and services to help parents and educators teach children money management skills. Email her at