3 Strategies for Teaching Your Kids About Money

Updated: Dec 7, 2020

Over the weekend, a friend tagged me on Facebook in a discussion one of her friends was having on how to teach kids about money. The friend-of-a-friend wanted to know what parents were using for bank accounts for their kids and how they were teaching their little ones how to manage their money.

My friend, Jennifer, tagged me and asked if I had any thoughts.

Why, yes. Yes, I did have some thoughts.

While I don’t believe there’s any one way to teach kids about money, because damn if the little sponges aren’t going to learn about the world of finance whether or not you specifically intend to give them lessons, there are some strategies that I believe will set them (and you!) up for success. We use these in our own house as part of the intentional financial education I’m giving my kids.

The important thing to remember about these strategies is they don’t have to be perfect to help your kids learn how to manage their money. You also can ignore or adapt any of these strategies to fit into your life, since they are what works for me rather than commandments from on high. The important aspect of teaching your kids about money is giving them some building blocks they can rely on in the future. Your building blocks might look different from mine, and that’s totally okay.

Here are the 3 strategies I personally use to teach my kids about money:

1. Teach Them How Money Feels With Cash

The world may be going increasingly cashless, and your kids will definitely need to understand how to handle digital payments eventually—but I truly believe that kids need to start their financial education with cash (and possibly an old-school piggy bank).

Here’s why: for kids to first understand money, they need to feel the loss of spending it and the rush of earning it, which is much more muted when you are using cards/apps/digital spending. (Think about how much easier it is for you to spend $100 on your credit or debit card without realizing it than it is for you to spend five $20 bills without realizing it. One can happen without much conscious thought, while the other feels almost viscerally painful).

Money is already an abstract concept. It’s difficult enough to help children wrap their heads around the huge amorphous idea that is money when there are pieces of paper and metal disks attached to it. Add an additional layer of digital abstraction to the imaginary nature of money’s value, and it will be very difficult for young children (and even older children) to understand the finite nature of money.

This is why I give my kids their allowance in cash, even though it can be kind of a pain to make sure we have cash available every week (and more on that later). I want them to have a baseline understanding of what it feels like to earn and spend tangible money before we transition them to using digital currency.

Make It Work For You

Using cash isn’t going to work for everyone. There is nothing wrong with opting for a simpler method that requires fewer trips to the ATM. Just recognize that using a digital payment system like Greenlight or FamZoo or the like might require a little more effort on your part to help your kids recognize the tangibility of money entering and leaving their accounts. Using cash is an easy way for my kids to “naturally” feel the pain and joy of spending and saving without me having to make the lesson explicit. Choosing a digital method m