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How to Teach Money Matters to Your Kids

Published Mar 14, 2017 | Updated Feb 19, 2020

The article provides four tips which can help parents inculcate better money habits in their offspring.

Many parents perfectly teach their children about good manners, but they forget to educate their offspring about the money matters. When children are financially dependent, they don’t understand the behavior of money. However, once they become independent and face the real-life challenges, they find a great mismatch in their expectations versus reality. They may spend money on things which are not needed and miss out crucial things in life. It finally leads to disappointment and sometimes depression despite having an excellent track record in their profession. Thus it is vital for you to make your child money-wise.

This is how you can you can inculcate right money habits in your kids:

Start Early

You should start educating children about money as soon as they ask to buy new things like candy, toys, video games, etc. It doesn’t mean that you question every request made by the children to buy something.  It simply means that you subtly start teaching them little things about money. Telling simple stories related to earnings, savings, investments and spending will subconsciously improve kids’ grasp of things related to money. 

At an early stage, children should understand the value of money and how it is different from other things. You should also discourage the kinds on using plastic money at early stages. They may not understand the intricacies of plastic and online transactions and may not respect the value of money.  

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Needs Versus Wants

It is crucial that by the time children face the world, they should develop an understanding the difference between their needs and wants. It will help them develop the habit of delayed or deferred gratification. According to a Standford study conducted in 1968, children who have the ability to say 'No' to themselves become adults with better self-control. It will not only help in managing their finances well when they become an adult, but it also leads to a disciplined and healthy life. 

Freedom to Spend and Save

While it is critical to inculcate right money habit in kids, it is also crucial to enable them to make better decisions. Thus, don't put many restrictions on what they buy and how much they want to save. Give them weekly or monthly pocket money and monitor their spending habits. Encourage them to save money from Birthday and Christmas gifts and pocket money to buy their favorite items. They will feel the joy of delayed gratification and develop the habit of saving money to accomplish bigger goals. 

Lead by Example

Children don’t follow what their parents say or ask them to do. Rather, they do what their parent do. Thus, be a role model for them. Spending money on unnecessary items or not buying something important due to lack of money doesn't leave a great impression the kids. Therefore, set your priorities right and lead a life that you want your children to follow.


Many people feel uncomfortable talking about the money matters. They also avoid discussing finance related issues with the kids. Many others fulfill almost all the demand made by their children. Such solution may look good in the short-term. However, in the long run, it only creates a problem for their offspring when they become adults. Remember that, the money is one of the most important things in our life. And we can't afford to not to teach children about the better management of the finances. Thus, start observing your kids' money habits and make proactive efforts to help them develop the right ones.

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