How-To Build strong MONEY MANAGEMENT skill in your Kids

Money Management

Money Management: You and your kids go to a neighborhood mall. You kids spots a toy. Pulls u along happily shouting “I want this?”. You do not want to disappoint. So,you give in. You buy the toy.

Every trip to a shopping centers the same story repeats. Then comes a time you are low on funds. You go to the mall to pick basic needs like provisions for house. Your kid spots an expensive toy car and asks you to buy? This time you refuse. The kid is shocked?  Done not understand why the refusal has come.

So, the kid asks again. Another refusal from the parent. The kid starts to demand. This leads to a tantrum and a scene is created.

Irritated Kid

Does this sound familiar. Either it has happened to you or you have witnessed a poor parent dealing it out with their kid. We all would have experienced or witnessed it at one point or the other.

Who do you think is responsible for this situation? Is it the kid who is throwing the tantrum or the parent who had always given into the kid’s impulsive needs and suddenly refused?

In my opinion I would say the person to be pointed at for the scene created is the parent. Simple. How would the kid know that times have changed, and the family is facing a temporary financial crunch if the kid was never educated about money and money management skills.


  1. Introduction to Money Management
  2. What is Money Management
  3. Why should we teach money management to Children?
  4. Money management teaching for Toddlers
  5. How to teach money management for preschoolers?
  6. How to teach money management for school going children?
  7. Video time – Expert speak
  8. Note and Word of caution to Parents
  9. Conclusion

Money Management – Introduction

Do you know that money habits are formed by the time the child is 7 years old.

Kids are curious about money from around the age of 3 and understand that money is needed to buy their goodies. However, managing money comfortably comes much, much later around 7+ yrs.

While it is advisable to start getting your kid aware of the concept of money to buy things at an early age so that financially skills foundation can be laid. It is equally important to teach them to save and teach them to tell apart between wants and desires.

As soon as your kid is the right age to urge an allowance, you know it is high time to teach your little one on how money works.

Money management – What is it?

Financial Literacy is a process of making meaning out of a financial situation where an individual basis the knowledge he has acquired makes a competent financial decision and see through the consequence of their decision good or bad. It is call “meaning-making Process”.

In simple terms financial literacy is managing proactively finances to direct to a certain outcome.

Money management is a part of financial literacy where the through money management one can simplify their financial life. They can set long term goals while securing day to day expenses.

Money Management – Why should we teach our kids?

Counting & Sorting Money

Money management is not a talent that is inherited. Yes, kids do see their parents and their attitude about money and imitate it. Like every other skill many managements should also be taught.

Money is an important resource in adult life and teach our children right from a very early age will help them handle and manage money wisely as they grow up.

While money does not buy happiness like any other resource wise usage of money will lead to much more fulfilment in life. It is one of the important skills to acquire that will help our kids to navigate through life.

Other important life skills that you need to teach your children can be found in our blog TEACH YOUR CHILD LIFE SKILLS: A How-To Guide

Teaching money management for Toddlers

Piggy Bank

Feeling Money:

Let then look and feel money. Feeling physical currency is a great way to under about money than ATM card and banks.

Paying Money for Goodies:

Hand over money to your little one and let then give money to the storekeeper. So that they can understand that money is exchanged to buy things.

Teaching money management for Preschoolers and Kindergartners

Teach them to save:

It is very important to teach kids to save for a rainy day. While there are different types of saving like short term savings e.g. for buying a mobile phone or a toy, long term savings e.g. for purchasing a house or for retirement.

At this stage it is advisable to stick to very short-term saving. If we introduce long term saving that can take weeks or months can discourage kids from the saving habit. The best way to encourage saving is to Buy them a piggy bank. Talk to them about saving and show positive encouragement when they save.

Set clear goals:

When goals are clear it becomes easy for all involved to adhere to it and learn. Set clear goals of when they can open the piggy bank and take money out. E.g. It will be open once a month. Or on the kid’s birthday. Or when it gets full etc. This will not only teach them to save but also help in delayed gratification.

Be an example

Let them see you being conscious about money. This will teach them to also be conscious and will follow it as they grow older. You can read about the things that kids learn from observing you from our article observing you.

Show them the cost of items:

Talk to them on the cost of the item and show them how much it cost by taking out physical money and placing in their hand.

Wants and Needs:

Teach them difference between wants and needs. E.g. Ask them if they like to spend from their savings when they ask you for nice to have things. See how they respond.

Delay Gratification:

Teach them gratification by having a rule that any item that is “a want” will be got only during weekend. Or at least a day from the date the kids asked for it. Give them points to think about the need to buy the item and discuss and seek confirmation once again before deciding to buy.

Teaching money management for school going children

Compare between Items:

Teach them to compare between items and decide. Egg they might want a fancy shoe and a roller blade. Teach the kid to compare the cost and what they will be left with post that and how long it took them to earn and save it and let them decide.  Kids will learn to weigh options and make an informed decision.

Give them wages/ commissions:

Set a communion sheet for the chores that can be done in the house. Pay them for doing these chores. This will help them understand the concept of working hard to earn money. (Note: Do not commercialize everything as children will also have to learn to be of help in the family without expecting to be paid for).

Help them prioritize:

Have a set time to discuss on the things they need and prioritize them with timeline on when it can be brought and who will fund it. This also helps in avoiding impulse buying.

By making clear plans with them on what they need and how it will be funded you can differentiate what is needed and what is asked on an impulse.

Related article you might like to read is How- to Improve time management in kids (11 Tips)

Set rules for impulsive buying:  

Anything out of the priority list stated above will be considered impulsive in nature. Set clear ground rules that it will come out of the pocket money they have earnt. Let them make the decision between their needs and wants.

Basics of Budgeting: 

We need to teach them basics of budgeting. Help them with allocating money under broad buckets and spend within it.

The most common buckets are Saving, Spending, Sharing. Give kids money when they earn in form of change so they can easily divide and allocate between these three piggy banks or jars and they can use from there for the required expense.

By following this method, they will learn how to apportion money and manage to use withing the allocated money they have.

You can learn more about financial wisdom from the article How to teach financial wisdom to your teen?

Comparison shopping:

mparison Shopping

Kids ages 6 to 10 can study comparison shopping when you are at the mall or online shopping together.

Encourage them by asking them to buy a product and let them compare between brands and pick the economical one. This will also help you teach them comparison on not only basis price but also quantity and quality.

Basics of Banking:  

With the tech savyness that kids have these days kids can also with little supervision use an ATM, log onto a bank account you open with them to trace their money. This will help them to understand basics of banking system.


This is the one of the corner stones of money management. Some religions state 10% of your earning. However, discuss with your child on the amount or percentage and give them the freedom to choose how and to whom they wish to spend it on.  

Note to parents on Money Management

Piggy Bank

As mentioned earlier Money habits of our kids are formed by the time the child is 7 years old.

Unlike young students and adult there is no way our kids can learn money management by reading self-help books or taking advice from industry experts. They cannot enroll for online courses or learn through trial and error method. They are too small for that.

Video Time : Expert opinion about how to teach kids about money management

Caution to Parents

Let Kids Make Mistakes

When our children ask us to take them for shopping. Where they wish to spend their hard-earned money or the allowance that they have saved. I understand we are parents have our own understanding or opinion on how and what to purchase and where to spend money.

Trust me it gets increasingly tempting when we find our little ones making choices to buy something which we would not have thought as the best option to buy.

Let them go ahead and make the purchase. Do not interfere. Even if you feel it is a mistake let them commit their mistakes.

As you know money management even for adults is a trial and error method. None of us have got it right all the time and every time. So, to expect a little one to make only the right decision all the time is not fair.

Interfering and correcting them before they have an opportunity to make a mistake might stop them from learning from their mistakes.

I urge you parents to refrain from the temptation of interfering too much into our children’s decision. When you let them face the challenge you are equipping them with an important life skill of facing challenge. Read our articles 11 Practical ways to help your child face challenges and How to develop self-confidence in your teenager

We need to understand that just like us children hey have their priorities. Their priorities of what they want and how they want to spend their money. Especially when they have earnt it by doing chores around the house.

Better Safe Than Sorry

Boy Irritated when not given a free hand to spend his saved money.

It is better for us to observe them and let them make their decisions and learn the fundamentals of money management. By interfering and telling children what to buy, went to buy, how to buy, how much to buy, can become counterproductive.

While we might think it is guidance it can completely discourage the child from learning.  

You might even let the opportunity of teaching your child money management during their childhood days slip away. Because, they are discouraged and no longer participative.

Hence, I suggest it is better our little ones imitate adult life. Make their own financial decisions.

We will be able to understand them better and their choices and be able to discuss with them and nurture and correct them.

You will agree with me, that this is a far better bargain for us. Than letting our children grow without developing money management skills. And as adults they are left to their own devices with no supervision or loving hand to correct. And get into all types of financial mismanagement and mess.


Sound money management is one of life’s basic skills our children should have. But the sad truth is that this very important skill is not taught in our school education system’s curriculum.

So, we as Parents and guardians become our kids primary, if not the only source of education to develop money management skill development.

The responsibility squarely rests on us to help our kids build their strong foundation of financial competence. A foundation that can last a lifetimes so that our children enjoy a much fulfilling life.

God Bless.

Did you find the blog useful? Do like us and share the blog with your friends.

Do you think Money management should be taught is school as part of their curriculum? Comment Below…

Thabitha David

Mother, Wife, Daughter, Sister, Aunt, Friend. She is a MBA Graduate specialized in Human Resources. She is a very proud mother of 3 Kids. (2 Teens & 1 Tween). She is a keen Observer of Life and is a blogger. She writes these articles based on her experience (Success and Failures). She does this with hope to help and ease the pain of at-least one parent as they face the challenges of parenting. Read more from the About Us Page

You may also like...

2 Responses

  1. Like!! Thank you for publishing this awesome article.

  1. July 22, 2020

    […] any formal education, teaching us to handle it. Hence, I have passionately written the topic on MONEY MANAGEMENT FOR KIDS – How and When to Start? Do read this. I am sure it will be of […]

Leave a Reply

Your email address will not be published. Required fields are marked *

← How-to get your kid to play outdoors ← TEACH YOUR CHILD LIFE SKILLS: A How-To Guide
Exit mobile version