Teaching Kids How To Save Money

As you learn to manage your own money, you’ll want to pass on your knowledge to your children so they have a better start to their own financial freedom than you did.

However, money can be a difficult concept for kids because they honestly believe it is always there and available. From their point of view, they see their parents buying everything they want.

So, here is how we have worked with our 7 year old daughter to help her better understand the concept of saving for the future.

Start with a piggy bank

My daughter has had a piggy bank since she was old enough to crawl and has always loved to collect everyone’s spare change when they visited. Even though she was far too young to understand the fact that she was saving money, the actual task of saving money was fun to her. The spare change added up over the years and gave her a nice head start on her bank account as well.

Learn to budget gifts

During the holidays and her birthday, family members give her money. Instead of letting her buy whatever she wants with the money, we sit her down and talk about saving for later. We save at least 50% of her cash gifts and deposit that into her savings account. She is then allowed to spend a little now on whatever she wants and then save a little for something big. So, if she receives a $20 gift, we deposit $10 into savings, spend $5 on a toy and save $5 for a bigger toy that she really wants to buy.

She still might not understand the benefit of her savings account but she will appreciate having that money when older. Saving 25% for a bigger toy helps her understand there is a great benefit further down the road if she saves a portion of her money instead of spending it all at once. It also teaches patience and gives her a sense of reward to see that she was able to still buy what she wanted even though she had to wait a little longer.

There are times that we match what she saves in order to help her along to her savings goal and keep her interested in the process. If the process seems too hard or impossible, kids can lose interest pretty quickly. Saving money is something you want to keep fun and interesting.


As we move into our new home, we will begin a chore schedule for her to make additional money. This money will follow the same rule as her gift money. Working for her own money will create more value around the earning process and also help her evaluate if certain things are worth spending her “hard-earned” money. Will she realize the doll she wants isn’t worth spending 4 weeks of chore money? We shall see.

Lead by Example

The most important step when teaching your child about money is to lead by example. Make sure you are saving your money as well and not spending it on unnecessary items. Our kids primarily learn by watching everything we do. If you’re constantly whipping out the credit card then you’re teaching them everything is affordable with a credit card.

Also, if you’re always stressed about money and arguing with your spouse about expenses then your child will grow to have a negative viewpoint about money. When it comes to the family’s finances, keep it private between you and your spouse. And always maintain a positive outlook around your children.

Take the necessary steps to get your children started in the right direction. Teaching them about money is no one else’s job but your own so get started!

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