How to Teach Your Child Financial Responsibility

One of the most important lessons you can teach your children is financial responsibility. This will help them make informed decisions about spending and saving and will pave the way for success later on in life. So how can we teach children some of these basic skills and concepts? Here are a few tips. Let us show you how to teach your child financial responsibility.

how to teach your child financial responsibility


Reward them for a job well done at school or at home

Yes, doing well in school or finishing chores maybe doesn’t warrant cash prizes. Depending on the family, sometimes these things are expected. But let’s say the child goes above and beyond in either category.  First of all, these monetary rewards teach children early that doing things exceedingly well pays off. Doing more than what’s expected of you produces better results. Second, the kids should probably have some money (with real value) in their possession so they can learn about money management in a more real-world setting. If, on the other hand, you don’t want to give children actual money, you can still teach them a lot about financial responsibility through the use of play money. Reward them with fake bills when you think it’s warranted and turn it into a game. This is probably a more appropriate option for younger children who have no use for real money. When using play money, you can introduce the more complex concepts of paying bills and taxes. This may be a harsh reality to bestow on a child, but this is fake money, so it’s not like they’ve got real problems yet.


Set up a saving system

A popular option used by parents teaching their kids financial responsibility is instructing the children to section their money into three categories. For example, these could be “spending” “saving” and “giving” or “spending” “short-term goals” and “long-term goals.” Regardless of how you categorize these for your kids, getting them to learn how to save is the key lesson. Take this one step further by having them write out a monthly budget for their “spending” pile. Teaching them to set aside saving money when they’re very young will ensure it becomes a habit for them as they get older.


Start them early

Ideally, as early as possible. Getting kids comfortable around the topics of money and personal finances earlier can do a world of good. For example, talking some simple numbers with them and exposing them to basic financial topics may make them feel more comfortable with math once they start school. If you’re thinking these topics feel too grown up for a child, relax. Your child won’t wake up tomorrow looking like Warren Buffet. Instead they’ll find the transition into adulthood easier to stomach. Unfortunately, in school, topics of personal finance and financial literacy get put on the backburner (or ignored completely). Combat this by providing the lessons at home. When I was a little girl, a classmate asked to borrow a dollar for a cookie. I gave her the dollar (naively) thinking I would see that money again. When days went by and I still had not been repaid, I told her every day I went without getting my dollar back I’d charge her another $1. I suppose the unfair interest I charged scared her and I got $5 back by the time the cookie-debacle was all over. My dad couldn’t have been prouder. This is kind of an extreme example, but the point is: I had some understanding of borrowing and interest even from a short conversation I’d had with my father. This is why early exposure to financial responsibility matters; it sticks with you. And children really will listen, so just make sure you’re setting a great example for them yourself. Your children’s ideas about money will all stem from what they see and experience at home.


New to FC360? Welcome! We are a team of financial advisors committed to helping you reach your financial goals faster. At IPA, we want to encourage younger investors to start saving. That’s why we have three account types for minors:

  1. a Custodial Account: a standard investing account
  2. a Minor IRA: allows teens under 18 to open a retirement account if they have earned income
  3. a 529 account: an educational savings account


To learn more about these types of accounts for minors, Check out the different types of accounts we manage. There are no account minimums to start. We are excited to help you and your children invest in the future!