Money Matters: Teaching Finances

By Dr. Rick Bavaria

Subject Areas

With many families struggling in tough economic times, financial literacy and the ability to make smart spending decisions have never been more important.

Plenty of research suggests that spending and money habits are formed at a very early age — as young as seven. The better job we do of educating our children on financial responsibility, the more likely they will be to make better financial choices later in life.

Schools have begun to play a role in this, with many states integrating financial literacy classes into their curriculum. See how your state stacks up here.


Outside school, there are plenty of things parents can do at home. Here are a few ideas:

1. Keep it simple and age-appropriate. No need to make money scary or boring.


2. Start with counting money. For the littlest ones, the most logical place to start is with actual money. Teach them about pennies, nickels, dimes, quarters and dollars. Let them count the money for you — out loud — at vending machines and the grocery store.


3. Use their allowance. Take some of the discretionary spending you put aside for them and give it directly to them to spend as they want. Help them understand smart budgeting.


4. Teach about “Spend, Save, Share.” I like this phrase — kids get it. They get to spend some of their allowance, save a part of it and share some of it with a place of worship, charity or cause of their choosing.


5. Teach about wants and needs. It can be tough to help kids distinguish, but it’s important to help them learn the difference between wants and needs.


6. Be a role model. Let kids learn from your actions by being a smart spender yourself. Talk about how you budget and how you allow yourself the occasional treat.


7. Allow for extra earning. Outside jobs like babysitting, yard work, pet walking and other helpful tasks jump starts kids’ work ethic by allowing them to earn a little extra cash. They’ll learn the connection between work and pay, and they’ll feel the benefits of being helpful.


8. Show the wisdom of saving. Let them see how interest allows savings to grow. Teach them about compound interest, a potent motivator to save.


9. Show them the goodness of giving. Help them decide on a way to share their money in good and helpful ways. A small amount to an animal shelter, say, or to a children’s hospital can teach as much about compassion as it does economics.


10. Be patient. Kids will make financial mistakes. We adults certainly have done so; why wouldn’t they? And rest assured, running out of money will be a lesson they won’t soon forget.


The more “hands-on” experiences kids have with money and the more they see us handling money wisely, the better their chances of being smart money managers when they’re older.

How do you help your children learn about money?