Teaching your child important lessons about financial responsibility

Child Putting money in piggy bank

Learning to manage money responsibly is an important part of adulthood. Navigating savings and loan programs, home buying and investing can all be challenging without a proper background in financial education.

As a parent, you work to give your child the best life they can have. One way to increase their chances of financial success and stability later in life is to start teaching them about money now. You won't need to get into the particularities of hedge fund management or portfolio diversification, but you can start your child off on the right foot with basic financial education. Here are a few things to teach your child about financial responsibility:

Earning money

Start your child off by teaching them where money comes from - by earning it. Giving a child a weekly allowance for completing tasks around the house is a great way to teach them that they'll only be paid once their work is complete.

Before granting an allowance, which you can start to do as early as elementary school, sit down and talk to your kid about how and why they'll be receiving that cash each week. You can give them an allowance for making their bed each day, helping to carry in the groceries, mowing the lawn, helping with dinner or cleaning around the house. You don't have to assign your 5-year-old tasks out of their reach, of course, as the point is to encourage them to develop a strong work ethic and financial understanding. Instead, help your child set reasonable goals, and when they've reached them, they can celebrate with their allowance.

It's important to talk to your child about the power of earning your own money. They may not love weekly vacuuming or raking leaves in the yard, but that's an important lesson, too. Work isn't always fun, but it's still necessary if you want to collect a paycheck. Delegating them chores has an added benefit of imparting the importance of contributing to their household, even if it's a task as simple as dusting off the coffee table.

You can also encourage your child's entrepreneurial spirit. From an adult perspective, running a classic lemonade stand isn't really about the money. It's about giving a child room to be creative, understand supply and demand, and discover that earning money on your own can actually be fun.

Encourage your child's entrepreneurial spirit.Encourage your child's entrepreneurial spirit.


Once your child has some money of their own, whether from completing household tasks or babysitting for the neighbors, it's time to talk about budgeting. No need for spreadsheets, however.

Simply talk to your child about what they'd like to spend their money on. Whether it's a trip to the movies, a new video game, candy from the grocery store or time at the mall, there's no wrong answer for a child to give. However, you can talk to them about the difference between short-term and long-term spending. Your kid likely wants both candy and the new video game. You can point out that by treating themselves to mounds of candy, they will have to wait much longer to buy the game they have their eye on.

They won't be perfect at budgeting - they're kids, after all - but help them understand the difference between immediate and long-term spending.


The ability to save is an important life skill, which is why it's a great lesson to teach your child early on. It's tough to get kids to think long term. You'd be hard pressed to find a 10-year-old who fully understands the concept of saving for summer fun when it's six months away, let alone saving for college.

But there are ways to help your child understand the concept without watching their eyes glaze over as you talk about compound interest. Encourage your child to save money by teaching them to put a set amount aside each week. Show them by how setting aside $5, they will be able to save over time while still spending a good chunk of their allowance on the more enjoyable activities they're actually interested in. After a few weeks or months, your child will be able to experience the satisfaction of watching their money grow.

Making mistakes

We've all made financial mistakes, as small as eating out too often, to mistakes as large as living outside your means in a home you couldn't really afford in the first place.

As much as you'd like to tell your child outright that it's a waste to spend their money at the concession stand at the pool, it's important to let them make mistakes. For example, if you give your child a set allowance to spend on a family vacation, you can encourage them to spend it wisely.

However, if they'd rather buy a few small souvenirs only to discover later that they can't afford something larger because their money is already spent, that's a valuable lesson. It's also a small mistake in the grand scheme of things, and one that may make a difference in their financial literacy at a young age.

Money isn't everything

Making and saving money is vital in adulthood, but so is the realization that money doesn't equal happiness. Encourage your children to follow and develop their own values. They can donate a small sum of money to local charities, pay for a friend's ice cream cone, or save toward something fun instead of saving only to watch their money grow.

They'll make mistakes and they may not fully understand how money works, but if you take the time to teach your child about finances throughout their lives, they'll be far more prepared to responsibly handle their own money when they reach adulthood.

For more personal finance tips, consult with a professional at Landmark Bank.

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