10 Steps To Build Smart Money Habits With Your Kids

5 Mins read

Why should you teach your child to have smart Money habits?

Every parent wants their child to become happy and successful, and financial literacy is a very important point in this case.

How to teach a child to handle money properly?


Children at the age of three years do not understand the concept of the value of money, so it is too early to teach them. Instead, teach your child to recognize different coins and banknotes. They can distinguish the value of a coin that way. To do this, there are two simple games: the account of money and the store.

● Game to count

Teach your kid to recognize different coins by asking him to sort the coins into different cups.

● Another option is to play a game of finding coins.

Take various coins, put them on paper and circle them with a pencil – you will get circles. Then mix the coins and ask your child to place the coins in the appropriately sized circle.

● Game «Store»

How to play this game probably doesn’t need much explanation because most of us played shop in our childhood. If you want, you can also buy a small toy cash register and toy money. Such a toy cash desk is definitely sold in toy stores!


You also must explain the meaning of loans and in what life situations they should use this option. They need to know the difference between the credits. For example, there are mortgages for a long time to pay off, loans like lendup or payday loans and you have a short period of time to pay them off.


A child aged 4 to 6 years old should already start issuing pocket money. A kid begins to learn how to handle it. You can unobtrusively ask the child what he is saving for, how much he spends and on what, and how he feels about the purchase: is he satisfied with the result, or maybe it was worth saving up to buy a better quality product.

However, scolding a child for an impulsive purchase or buying a product of poor quality is not worth it, but you definitely need to talk about it and teach your child to save money.

The main lesson you should teach your child is that money should not be spent right away, because it can be used for future purchases.

Save up to buy (six years old and older)

● Tell the child about the goal.

Let the child choose a few things that he or she would like to buy. This could be, for example, a new toy car, a doll, or anything else the child would like to have. Let him choose, for example, one short-term goal (something small) and one long-term goal for which you need to save more.

● Divide the savings.

Take several envelopes depending on the number of goals. Let the child draw on the envelopes what he or she wants to buy.

● Help with the Count

Help your child estimate how long it takes to save up the required amount and how much money needs to be in the weekly/monthly envelope to cover the purchase. You can even write down the date when enough money is accumulated. Then ask your child to put the money in a suitable envelope every week/month. It is very important for the formation of this useful habit that the purchase exactly what the child wanted – in this way, he receives a reward for the work done and patience.

Earning money

Based on the statistics, 78% of adults live paycheck to paycheck and it’s very sad because people can make their lives brighter and happier with financial knowledge that is necessary for life.
When a child looks at you in a store or observes your daily life, your kid may mistakenly believe that you make coins yourself and colorful banknotes, which for some reason you spend in stores.

To avoid this misconception, the child needs to be taught early that money is the result of certain activities, such as work or services, and that this money must be earned.

The best way to teach your child how to make money is to let him do some one-time work, such as helping to dismantle the mezzanine and give him a certain amount for this task.


  • Don’t make this practice permanent, because your child must understand that in the family mom and dad do some work for free
  • Don’t pay for good grades, as studying is the responsibility of the child.

Spending money

If a child understands how to make money, the next step is to teach him how to spend money wisely and responsibly. There are several ways to teach it: Take your child to the store and give them a certain amount to spend on items on your shopping list. This will help your child to see the difference between expensive and cheap products and teach children to choose products that will stay within their budget. In addition to spending wisely, you will teach your child to budget a little and manage their money in general.

Paying the bills

At the age of seven to ten, you can already involve your child to some extent in what bills are for apartments, and what it means to pay bills. It doesn’t mean you have to teach your child the details of paying bills, but you can involve him or her in the process. Thus, the child sees that you have to pay for everything – electricity, and water do not work for free, and the Internet also does not work just like that.

Paying taxes

For an even better understanding of what taxes are for your child, you can “tax” his or her weekly pocket money. Let’s say your child receives 20$ a week from you. You can explain that when you receive a salary, a part is deducted and goes to the state budget. Thus, you can act like a government, by taking 5$ to pay for the Internet, for example (if your child likes to play computer games).


The easiest way to understand what a budget is is to give your child a short part-time job. Once your child earns money, help them come up with a simple budget that determines how the child can spend the money he or she earns.

There is another way:

  • Give your child a certain amount to buy Christmas gifts for all family members.
  • Help your child decide how much money to spend on shoes for each family member.
  • Discuss how to decide what to spend money on, and what expenses it is better not to rush.


Primary school age is a good time to teach your child that investing money that he or she has earned somewhere helps multiply the amount received over time. One way to make these lessons clear to your child is to look at the contributions together and, for example, purchase a policy for the children for future education or housing costs.

If you are actively investing your funds, for example, in stocks, you can also explain the principles of this activity to your child.

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