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Five Easy Tips for Teaching Your Children Personal Finance

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Editor’s Note: I think you’ll thoroughly enjoy Fehmeen’s take on teaching kids PF.  It’s humorous and very informative.  Thanks, Fehmeen, for sharing!

Five Easy Tips for Teaching Your Children Personal Finance

Me: [On a fresh summer day] Good morning, Mum.


Mum: Consider a ship sailing gently in the vast blue ocean. If all the water were to dry up, the ship would stop sailing. If there were a flood or rough storm, the ship might get damaged and sink. In life, you’re the ship and money is the water.


Me: Can you please make me pancakes for breakfast?


Mum: This is the relationship between money and happiness, dear. You need a certain amount of money to be happy, but greed will lead to thoughtless consumerism and lack of appreciation for what you have, and they are your enemies.


Me: How about you drizzle some honey over them? Thanks.

This story is partially true – not because my mum didn’t share this analogy with me, but because I dislike honey – a lot.  She heard this bit of wisdom on the not-so-idiotic box.
My mum and dad not only told me how to spend and save wisely, but also showed me. As role models, parents can do plenty to set their children on the path to financial independence and spiritual well-being. In most cases, children will follow that path, because they are born mimics, and as they grow up, their first frame of references are their parents.
Here are some tried and tested ideas you can add to your family’s culture to improve financial discipline of the entire household.
1. Record and Compare.  Each member of the family should record all incomes and expenses, dividing them up in terms of groceries, entertainment, gardening material, food, stationary, gifts, etc. With the intent of empowering each grown-up and kid to control spending habits, sit together to compare notes and trends over the last few months.
Encourage thrift and gently advise against wasteful spending on entertainment and often-expensive-and-always unhealthy junk food.
Avoid saying: ‘You wasted all your money watching movies, dear. I’ll have to disown you after cutting your allowance.’
Instead, consider saying: ‘It seems we spent a lot at the cinema last month. Let’s give it a break for a while and see some movies at home instead.’
2. Saving And Giving To Charity.  Set targets for saving and donating small portions of household income and pocket money. Even if you can afford to buy expensive gadgets, toys and furniture right away, consider saving up for them because delayed gratification can help improve self-restraint.

Share with your children any information about donations made to NGOs, free health clinics, or shelters for the homeless, and keep pointing out the merits of giving to charity.

Avoid saying: ‘We don’t have enough money to buy you designer sneakers, dear. Do shut up.’

Consider saying: ‘We sure are lucky to be in a position of ‘giving’ charity instead of ‘accepting’ charity.’

Or say”  ‘You’re shoes are a little worn out but there’s nothing wrong with them otherwise. We’ll get a new pair after a few months, and donate yours to the homeless shelter because someone could probably use them for another year or two’.

3. Don’t Shop Till You Drop.  Impulsive buyers often shop without a list and end up over-spending. Make monthly shopping lists for ‘mum & dad’ and ‘kids’ (include groceries, junk food, candy, drinks, fashion accessories, room decorations, etc.) and take your children to the store to give them an idea of how the household is budgeted.

With the sole intent of window shopping, visit toy stores with your children and let them browse the collection to their hearts content. Any requests for purchases should be met with gentle yet firm reminders about the purpose of the visit.

Avoid saying: ‘Will your wish list ever end? I can’t afford to keep you in my house anymore. Good bye!’

Consider saying: ‘We’re just here to have a look around. You have plenty of toys waiting to play with you at home.’

4. Spiritual Guidance.  Use references from your religion to teach your family about thrift and wasteful extravagance. All belief systems praise humility, hard work and gratitude for one’s assets, regardless of their shortage or abundance – correct me if I’m wrong – because these qualities are related to spiritual success. And as artless as it sounds, our life’s aim is to be happy.

5. Penny-Wise and Not Pound-Foolish Either.  We all compare prices for products and services we buy – it’s natural to want to get a good discount. But we often forget to encourage our children to do the same. While at the mall, give your children a budget and allow them to buy anything, as long as it fits within the range.

Avoid saying: ‘Why do you always pick the priciest item? Even you’re not worth that much!’

Consider saying: ‘I think this teddy bear cost a few dollars less at that other store. You could use that money for something else or give it to the homeless man we saw earlier; he’ll be really happy.’

Or say: ‘I’m sorry dear, you’ll have to put back one item because you’re spending more than what you have. Maybe buy it next time.’

And make sure you follow the same principle when shopping for personal items. Communicate with your children about your buying decisions and sacrifices.

If you didn’t buy something you liked, tell them, ‘That green bracelet sure was pretty but I’ll wait a few months for the price to come down. It’s just not sensible to spend that much on a bracelet.’

It’s easy to see that empathetic communication must accompany leading by example. Eventually, you will direct your children away from ungracious indulgence and towards prudent buying behavior, and while that won’t guarantee your kids a great life, it will go a long way to achieve that end.

Fehmeen blogs at Management Mafia, where she writes articles about different management topics with a touch of humor. You could follow her on Twitter, but you don’t really have to because all her work on business and home management is on her site!

49 comments

  1. Good tips, especially #2. I think we all too often do not realize what we’re communicating to our kids by what we say. Those things you’re saying could lead them to think things that may not be right. We’re going to be starting with our oldest this year with an allowance and have her divide it up by saving, giving and spending…looking forward to teaching her. 🙂

    • Laurie says:

      Great idea, John. We do that with our kids, and it’s really made them excited about both giving and saving. Our 13-year-old is already saving for her first pickup truck. 🙂

    • Fehmeen - Management Mafia says:

      Thanks for commenting, John S! You’re absolutely right when you point out what we say to our children can lead them the wrong way, and it’s something that starts as soon as your child understands the English language. It’s great that your daughter is already saving up for her truck. It’s a very mature thing to do at 13! Do keep us posted on how she stays motivated 🙂

  2. Get your kids to help out with the finances. You’ve got them looking at their expenses, but not the overall household expenses. While you’re at it, get them to write checks and pay bills either online or via paper. Actually do both, everyone should know how to write a check.

    You could even give them a weekly budget and have them make the meal plan and then have them cook it. Cooking and personal finance all in one.

    I would also plan on introducing them to your debt at some point as well. Let them see how much you owe, and how much the interest compounds.

    I think it’s also important to teach your kids about investing. Kids are pretty smart when they’re motivated, even if you don’t feel comfortable helping them pick stocks or mutual funds, once they have the concept and an internet connection they can start learning more on their own. Saving is great, but when you really grasp the idea that money is best used making more money, you’re whole mindset will change.

    • Fehmeen - Management Mafia says:

      Thanks for adding to the article, MIJ 🙂 I think it’s a great idea to have kids in the loop about household investments and debts. They ought to know how hard parents work to make sure the family’s well-fed, and also how careful you have to be when creating budgets that match your income level and debt obligations.

      Laurie, I like the investment account idea for your kids. It’s important to start early because making money through careful buying and selling of stocks is a wonderful way to supplement basic income. One must explore all avenues that lead to financial independence.

  3. Laurie says:

    Hi Myfij, Fehmeen didn’t mention this particular point, but in our own house, we do have them looking at overall expenses, and they know our debt numbers as well. We felt it important to share with them, as we wanted them to understand the urgency of paying it off as quckly as possible. You’re so right about the investment portion too: when our consumer debt is gone, we plan on opening a small investment acct for each of them and allowing them to dictate the buying and selling as we educate them. Thanks for sharing the great tips!

  4. These are all great tips, especially #2 and #5. I was lucky that my parents taught me all about personal finance as well and that has helped me tremendously when growing from a child into an adult. I just hope that I can teach my kids the way my parents (and yours) taught me because I realize now how important it is to start at a young age.

    • Laurie says:

      You’re so right, Jake! Rick and I didn’t have financially saavy parents, so it’s fun to read about parents like Fehmeen’s and others who taught their children well about personal finance. It gives us some much needed training!

    • Fehmeen - Management Mafia says:

      Thanks for the appreciation, Jake and Laurie 🙂 It’s a difficult job being a parent because you’re constantly under observation by your kids. One slip here or there and you may have misled the child. I hear there are games and phone apps that help teach children about financial sense too, so that’s a load off the parents for a while 🙂 But nothing beats good old fashioned parental advice.

  5. Oh, I love this! Probably not a shocker! My girls LOVE to share, although they were a bit hesitant at first. Money was hard-earned, so giving it away meant it took longer to buy the things they wanted. But once they started sharing – they were hooked. They often exceed their annual share goals and actually share more than 10% of the money they earn/receive within a year. We also adopt a family at Christmas and I try to pick a family that has girls about the same age so the girls can donate clothes and toys. Lauren went with this year to deliver to the toys and she was so excited to share with the kids all the extra things she and Taylor picked out for them. They make me very proud.

    • Laurie says:

      Shannon, I just love what you are teaching your girls! I bet delivering to the adopt-a-family was a real eye-opener for Lauren, and that it was so fun for the girls to shop and pick out things for girls of the same age. It’s so important to make sure kids know that not everyone gets the blessings of regular food and clothing, isn’t it? Thanks for sharing this wonderful story, Shannon. 🙂

    • Fehmeen - Management Mafia says:

      Shannon and Laurie, I couldn’t have said it better. Reading the comment about adopting a family on Christmas brought a pleasant smile to my face because it reminded me of a moving scene from Little Women, by Louisa M. Alcott. The fictional family realized that by giving away their freshly baked Christmas breakfast, which was a rare, to a less fortunate family, was the best way to spend the holiday, and it made them happier than ever.

      There is plenty of poverty around us, unfortunately, and by foregoing a few dollars a day, or a slice of bread, we can keep someone else alive and healthy.

  6. Great advice. I just wrote a similar piece so I’m totally on-board. Living by example is probably the best thing one can do, but there is so much more than that!

    • Laurie says:

      I agree, Nick. We owe it to our children to teach them everything we can about handling money responsibly. Thanks for the comment!

    • Fehmeen - Management Mafia says:

      Thanks for stopping by, Nick. I read the article you mentioned and there are some great points in there, about teaching children self-sufficiency, respecting nature, learning a second language and music when young, and most importantly, simply being there for support.

      I also love the saying you quoted from The Descendants, “You give your children enough money to do something but not enough to do nothing.”

      It’s been running around in my head ever since I watched the movie.

    • Laurie says:

      Me personally, I think hypotheticals are great teaching tools for kids. It helps them to use potential real-life situations to discuss good decision-making processes. We do this often at home with our kids.

  7. The main point here is that you were not only taught about money, but you were SHOWN how to do it properly. This is something that is missing from many families and from many parents toolbox. They can teach all day, but when it comes time to show, that is where the wheels fall off the wagon.

  8. Justin says:

    Wow. I live analogy posts like this. I’d say that number one and two are my favorites. Especially getting fat over sweets being compared to consumerism.

    • Fehmeen - Business Management Blog says:

      Thanks for the appreciation, Justin 🙂 I love eating candy and fried food too, but ever since I realized how they damage my arteries and raise my cholesterol level, I’ve been careful about the portion size. Junk food is a blessing for the taste buds but a curse for our health, and it’s the parent’s job to teach the younger lot about the dangers, and wastefulness of such items.

  9. Teaching kids about charity is so important. When I was young this was one of the first “lessons” I learned about money. No matter how little you have there are other people who have less and need more.

    • Fehmeen - Management Mafia says:

      Thanks for commenting, KK 🙂 I think giving to charity is important for spiritual development and financial discipline. I once read that in order for you to ‘deserve’ more (more money, a bigger house, better clothes, bigger car, etc.) you must first prove that you’re happy with what you have, and that involves being thankful and making donations, simply for the goodness of it. I know people who are a little miserly even when they’ve been given plenty, and they just don’t seem happy with life.

  10. Jim says:

    Great post, so important…I had to print it out. Wanna make sure to teach my 3 year old the importance of giving to charity and being grateful for the gifts we have! Thank you!

    • Laurie says:

      You’re so right, Jim! We’ve taught our kids giving from a young age, both through donating money and time, and they now thoroughly enjoy serving others.

  11. Laurie says:

    Thanks, Cami. I agree – it’s so important to instill those values when they’re younger, isn’t it? You’re lucky to have parents that have taught you the basics about finances – not all kids get that education.

  12. Scott @ Youthful Investor says:

    My first piece of advice would be to avoid buying them a smartphone, a laptop or a tablet. It seems like children at the age of 8 or 10 are getting these devices now, instilling in them a necessity to have them. Without them understanding the ridiculous prices for the hardware, the monthly bills for usage and the need for power and internet to provide for them to work, they are instilled a powerful lesson that has the opposite effect. These children will grow up assuming these items are necessary and perhaps worse, will not learn the cost of them. I don’t know about you but, $60-75 a month for a smart phone data plan is ridiculous!

    • Laurie says:

      Good advice, Scott. I too am not a big fan of getting so many gadgets for the kids. We’re not teaching them the difference between a need and a want lots of the time. Over here, we’ve got nothing but the pay as you go phones and our PC. Hoping it will stay that way. 🙂

    • Fehmeen - Business Management Blog says:

      Hello Scott. I absolutely agree about the smart phones. I got my first phone when I was in university, and I still don’t have a smart phone although almost everyone around me does. It’s a pretty wasteful thing to buy when all I do is make calls and text family and friends. Everything else can be done on the laptop, so why create duplication of technology?

      Thanks for commenting!

  13. Fehmeen - Business Management Blog says:

    Thanks for the appreciation, Cami. You’re lucky if your parents taught you healthy spending habits at such a young age. It will only help make life easier for you once you face the world on your own.

  14. Gordon says:

    Very simple but effective tips. I really like the idea of teaching kids to think about others and putting some pocket money aside for charitable donations. There is so much greed in the world and it’s root is in how children are taught when they are young.

    • Laurie says:

      SO true, Gordon! I was just watching a great teaching series on self-centeredness and how it is so detrimental to our well-being. Thanks for the comment. 🙂

    • Fehmeen - Business Management Blog says:

      Thanks for commenting, Gordon. You’re absolutely right about teaching kids the virtues of charity, even when we ourselves are not that well-off. There are a bucket load of benefits of this!

  15. Caleb says:

    Thanks for the post. It was fortunate to learn about spending and saving responsibly from my parents at an early age. All parents should invest some time to teach their kids financial responsibility.

    • Laurie says:

      You are very lucky, Caleb! Not many that I’ve met were taught financial responsibility by their parents. I think it’s getting better, though. Thanks for the comment!

    • Fehmeen - Loans and Lifestyle Blog says:

      Thanks for the comment Caleb. You’re among the few fortunate ones if your parents invested such thought and planning in your financial upbringing. It’s never too early to teach children about money.

  16. Mandy says:

    I think this is a great reminder of how important it is to start early teaching children to be financially savvy. I think #3 is so important. I try to teach my 5 year old this concept and to be happy and grateful for what we already have. I’ll admit shopping can be fun and even thrilling when it comes to getting a great deal, but it does require restraint and if we can teach our youngsters how to derive happiness from within ourselves and that things will not accomplish that for us, we will be much better off without all the excess that only serves to create more stress.

    Great post!

    • Laurie says:

      Thanks, Mandy! Yes, these concepts have taught our kids a lot too. It’s so important that we train the next generation, isn’t it?

    • Fehmeen - Loans and Lifestyle Blog says:

      HI Mandy,

      Thanks for the comment. Reading your thoughts on getting rid of excess possessions reminds me of a wise idea I read once…if you want to prove that you deserve more (wealth, bigger house, better car) then you must first show that you are fully content with your current possessions, because otherwise you’ll continue wanting more forever.

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  18. Amit Eshet says:

    Great tips. Just love above mentioned tips. By using these tips it’s becoming more easy to teach kids about value of personal finance. Books also play an important role in this. There are many books are available on finance.

    • Laurie says:

      Great point, Amit! Yes, we’re huge readers here. Hopefully what we’re teaching the kids will stick with them through adulthood.

    • Fehmeen - Loans and Lifestyle Blog says:

      Hi Amit. Thanks for your kind comments. Indeed, books play a major role in teaching kids about better spending, but it is generally something children learn better through experience and example. Nevertheless, books as a resource can never be undermined.

  19. Amit Eshet says:

    Great tips. Just love above mentioned tips. By using these tips it’s becoming more easy to teach kids about value of personal finance. Books also play an important role in this.

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