Kids Good Money Habits

How to Teach Your Kids Good Money Habits

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Kids have a way of learning about the world through their experiences. Among the most important things that a child can learn are better money habits. So building these financial habits early will allow them to learn (and make mistakes) good behaviors before reaching adulthood where the test really begins. 

Not sure how to get your child started? Read on to learn more. 

What are Good Money Habits?

Your money habits are the “values, standards, routine practices, and rules that people rely on to navigate their day-to-day financial lives”, according to the Consumer Financial Protection Bureau. Good money habits will support their ability to effectively manage money and respond to financial challenges or financial decisions quickly. 

An example of good money habits are things like putting away a percent of your money in savings with each paycheck, only buying things that you can realistically afford, and limiting how many café lattes you buy each month. 

Living Within Your Means

One of the key strategies to developing good money habits is living within your means. Loans and credit cards allow us to purchase many things that we can’t necessarily afford.

For example, you could buy a luxury car by getting an auto loan. However, if the monthly payments make it challenging to work within your budget, you’re living outside your means. A car that cost less would have better suited your financial ability and met your needs. 

Tips for Living Within Your Means

Being successful at living within your means doesn’t happen to everyone automatically. Here are a few tips that will help you learn how to live within your means in your life:

Know How Much You Make

This could be easy if you have one source of income coming in from a full-time job. These days, many people have side hustles or run their own businesses, however, it gets a little trickier in these cases.

You should know how much you make on a monthly basis. You can figure out your regular income using your pay stubs as a reference. 

If you are self-employed, look through your bank account to see how much you’re making each month over the course of 6-12 months. Find the average of that amount, then it’s advisable to lower that by 5-10%. There could be some months that you bring in less than your average, so in these situations, it’s better to act like you’re making less. 

Use this technique when you’re figuring out how much your side hustles bring in each month as well. 

Spend Less Money Than You Bring in

In order to spend less than you make each month, you have to keep track of your expenses. Layout all your expenses for the month and put them in categories like food, rent/mortgage, entertainment, clothes, etc. 

Save Up for Purchases

With a credit card, you can buy something you can’t afford right now. But if you don’t pay your balance in full, you’ll be paying double-digit interest rates on that purchase. 

Instead, make a plan to save up a few months to make that purchase. For example, if you wish to buy a new TV, divide up the cost into how much you can save from each paycheck or month that can go towards its purchase. 

Encourage Good Savings Habits in Children

It’s easier to teach your child good money habits when you’re practicing the tips we shared above. Savings is a critical habit to teach your child. Here are some ways to help them learn about building good savings habits below:

Discuss Needs vs. Wants

Learning the difference between needs and wants is probably the most important financial discussion you can have with your child. Talk to them about how needs are things that you absolutely need, like food and shoes for school. Then discuss how wants are things that you buy for fun or leisure but don’t necessarily need to live. 

Set Savings Goals 

Automating your savings is a powerful tool to kickstart your savings goals. It is also a way to get your child in the habit of saving.

 For example, if you pay your kids an allowance each week for completing chores, agree on a percentage that will go directly into a savings account. 

Having Them Track Spending

They need a simple system like writing down when, how much, and what they purchased in a notebook to start tracking their spending. Have them do these each week or month and then sit down with them and go over it together. Just like this exercise helps adults identify problems or open their eyes to unnecessary spending, it can have that same effect on a child.

Leave Room for Mistakes

Everyone is going to make mistakes – particularly when it comes to money. If you are too strict about how they spend their money or punish them for overspending, they are going to link money to negative outcomes. Instead, when they have used up their allowance in less than a week, talk about what happened and how they could prevent it from happening again. 

Ways for Kids to Make Money Fast 

Just because they aren’t old enough to work at the local coffee shop, doesn’t mean that a kid can’t make money. There are tons of ways for kids to make money fast, like lawn mowing, setting up a garage sale, and babysitting. Encouraging them to pick up a side hustle or two will not only provide them a source of income, but they will have the opportunity to grow their money habits. 

Teach Your Kids About Smart Spending

It’s normal for a child to want a new toy, game, etc. Having good money habits doesn’t mean that they can’t spend any money. It just means that you have to show them how to be smart when they’re spending. 

Save Before You Buy

One habit that your child can learn is smart spending habits as it teaches them to save for things that they want to buy. Sit down with them and help them come up with a plan to save money for their purchase. Help them run the numbers, so they understand how long it will take them to have enough money for the item. 

Learning How to Shop

The price of a certain item might be different depending on where you’re looking. Teach your child how to get the best price when they’re out shopping. For example, ask them to look around several websites, look for coupons, or wait for sales of a product that they want to buy. 

Teach the Value of Giving

A great time to teach your child about giving is once they start making a bit of money. This will instill the value of giving early on, and they’ll eventually see how this practice means just as much to the receiver as it does to the sender. 

Ask them to choose a charity, cause, or church to donate a portion of their money to. For smaller kids, you could have them create, spending, savings, and giving jars.

As your child grows, they will have accumulated toys, clothes, and other items that they no longer need too. Or they may wish to buy new goods to donate to a cause. Whichever is the case, ask them to organize and prepare these items to take to a local organization that would benefit. 


Another good way to teach your child about the importance of giving is through volunteering. Find local organizations that allow children to volunteer, then talk to your children about what activities they wish to be a part of. 

Teach Kids How Their Money Can Grow

Showing your kid how to start saving and investing can never happen too early. Instill upon them the importance of saving a portion of their money once they are earning an allowance. Set them up with their own savings account to put in that percentage of earnings each week. 

Once they’ve accumulated a more significant amount, you can start having discussions about investing. Financial institutions have low interest rates on savings accounts, so they can get a better return and really see the power of investing. 

Teach the Right and Wrong Ways to Use Credit and Debit Cards

Plastic cards are a convenient way to make purchases. However, many people end up overspending and carrying debt month-to-month. Be sure to teach your child what the difference is between a credit and a debit card and how they can avoid their pitfalls. 

How to Model Good Financial Behavior

Kids tend to do what their parents do. They will catch on and adopt many of their parent’s habits by watching them. That’s why it’s important to model good financial behaviors for them to learn from. Adopting habits like shopping on a budget and using coupons and discounts to buy items for less are good ways to save money and demonstrate those behaviors to a child. 

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