Skip to main content
Headshot of woman

Laura Royer

By Laura Royer.

Understanding how to manage money wisely is one of the most important skills a parent can teach a child. It’s even more important today with teens spending on average about $2,300 annually (2020 Taking Stock With Teens). The truth is many parents may struggle with how to even approach the conversation about money because of how they individually feel about it. The following are some tips to help military families start the conversation about teaching their kids about the value of money.

Start by Teaching the Basic Principles of Money

As soon as children are old enough to understand how to count, they can begin understanding amounts of money. Sit down and share the costs of items and how much money is needed to buy the things they enjoy. When kids understand even simple concepts of money, it puts less stress on the household budget.

Allow Your Children to Earn Money

Chores are often shared by all family members. However, using chores as a reward system and allowing kids to earn money for doing extra chores they don’t normally do is a great way for them to understand the value of money. It’s important for kids to experience ownership of having money to make financial decisions so they can learn comparison shopping and the consequences of spending now versus the reward of saving their money.

Talk About Financial Trade-Offs

It’s important for families to help their kids understand that when kids spend their money on one thing, they lose the opportunity to spend it on something else. Parents should discuss with their children the difference between “needed” purchases, such as school supplies, and “wanted” purchases such as the latest video game or gadget. Parents can have their children create a list of “wants” and prioritize those wants in order of importance. Having the child write out the costs of those items so they can plan for the purchase will encourage them to save money.

Don’t Tell Kids No

Too often parents tell their children “no,” which only frustrates the child and the financial situation more. Instead, parents should give kids options. For example, if a child wants a toy, give them the option of putting that toy on their holiday wish list or going back in two weeks to get the toy. The parent is not telling the child “no” to buying the toy right now directly but instead is giving the child two options. Most of the time, the child will forget about it because they just want the toy at that moment. If the toy is important enough that the child remembers it two weeks later, then it was not just an “at the moment” want. This toy holds value for the child, and by giving the child a choice, he or she can be a part of the decision-making process.

Encourage Kids to Save Money

Every time your child receives money, whether it is through an allowance or a gift, encourage him or her to save a portion of it.  Research shows that establishing a habit of saving money early will stick with them through their adult life. One way to encourage children to save is to have them cut out the coupons for the family’s grocery needs. Set up a “family” piggy bank and put the money saved from using coupons in it.  This money should be used for something fun for the entire family such as spending money for a family vacation.

Talk to Kids about Normal Household Expenses

While a parent does not need to give the child actual household costs, they can explain how money comes into the household and that there are some expenses, such as food, utilities, and clothing, that must be paid from that money. Helping kids understand the cost of living is critical so they have a realistic view of what it takes to live on their own. Talking to them about expenses will also help them understand why certain purchases are not possible because there may not be money available to make those purchases.

Teach Kids to Compare Prices

When a child is getting the opportunity to make a purchase, have him or her shop around for the best price and features of that specific item. Use the internet or sales ads to show them how to compare prices. This activity helps them get better deals and avoid impulse spending as well.

Have Kids Track Their Spending

Kids need to see how quickly money can add up.  Spending a dollar on a soda or snack every day can add up quickly. That money could be saved and used for a larger purchase in the future. Helping a child see where their money is going will help your child make better future choices for how to best spend money. It will also have them appreciate money and its value.

Teach Kids How to Manage a Financial Account

For older children, show them how to write and endorse a check, balance a checkbook, and sign over a check to someone else. This could help them avoid costly financial mistakes such as bouncing a check when they get a checking account later.

No matter which tips a military family chooses to implement, the bottom line is that it is important to teach children how to manage money. One day, they will need that skill for everyday living.

For more information on this topic, see:

Remote Instruction Resources for Teaching Children About Finances

Family Finances Series: Raising Financially Responsible Children