Tips for Teaching Kids Good Financial Habits

Understanding good financial habits from a young age is critical. As a parent, it is your job to ensure your kids know how to be financially responsible. Installing these ideas in their heads when they’re young will set them up for better futures as adults. Kids that understand good financial habits are less likely to end up in debt or with many other money issues when they’re older. 

Keeping that in mind, how can you teach your kids these positive habits? Here are some tips that will help you out: 

Give your children an allowance

Having a set allowance every month can be extremely useful in teaching good financial habits to kids. You will give them money and tell them that they will only have this money until the same time next month. If they want to buy something, they need to be aware of how it impacts their allowance. 

Consequently, you’re teaching your children about two things: 

  • Spending money
  • Saving money

An allowance means they have to learn to be smart with their spending. They might initially go out and spend it all in one day, but they quickly learn the pitfalls of this. Over time, they gradually learn to spread the allowance over the month, spending less and less. You can also teach them to save their allowance so they have more money to spend over time. If they have a toy they want to buy, sit down with them and explain how long it can take to save up for this. 

When they’re older, they should be better at spending and saving money because they’ve been doing it for a very long time already!

Introduce the idea of earning money

Alongside their monthly allowance, you can also introduce the idea of earning money. Some parents will set their kids a task to do every month, which means they earn their allowance. If they don’t do it, they don’t get any money. 

Similarly, you could also tell your kids they can earn extra money if they are willing to help out and do chores. In either case, you are teaching them the value of money. They grow up learning that hard work will result in money, rather than having everything handed to them on a platter. 

So, when they’re at a stage in their lives when they need to save money to buy a car or get a house, they know they have to work hard to get a good job that pays well. Or, they will pursue a side hustle to earn even more money, just as they did when they were kids!

Explain how credit cards work

This is something that might be reserved for older children. However, it is really important to teach your kids how credit cards work. Unlike debit cards, credit cards give you access to money you don’t technically have. It is a way of borrowing money, but the key is you have to pay it back later. 

Too many adults will misuse credit cards because they never learned how to use them. They think they can use as much money on the card as possible, then make a minimum payment. It feels like free money - you borrow $1000 a month but only pay a fraction of this back; it’s brilliant, right? 

Wrong. Minimum payments lead to massive interest rates and extra fees that can lead to serious credit card debt. Teach your children the importance of always paying a credit card bill in full every month. When they reach the age to get a credit card, set one up for them. Put a small credit limit on there, so they can’t spend too much. Then, get them used to the idea of making a few payments on the card every month, before paying the balance in full. 

Not only does this teach them the right way to use a credit card, but it also helps them build a good credit score. 

Lead by example

Finally, be sure to lead by example as a parent. If your kids see you doing things, they are bound to copy you. So, if you spend time comparing prices when shopping for things, your kids learn to do the same thing, helping them save money. If they see you save money or buy cheaper products in the grocery store, they will grow up doing the same things. 


Teaching your kids good financial habits is extremely important to set them up for a good life. The tips above will help you do just that, ensuring your kids learn how to save money, how to avoid spending too much money, and how to make better financial decisions to avoid debt.

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