How to set up an easy money management system for kids so you can help prepare them to be financially successful adults!
You want your kids to learn how to manage money well? Great!
My sister gave my 6-year-old daughter some coins the other day and she said “Wow! Thanks for the free money! Mom makes me do chores to get money.” Haha! Still, my daughter is learning the connection between work and money, and she is also starting to understand the value of saving.
This is where it all starts! Many adults don’t understand the value of budgeting, saving, and the importance of managing money.
If you want your kids to manage money well, you need to start as young as you can – if your kids are older, don’t worry, you can still teach them!
Easy Steps to a Simple Money Management System for Kids
Start by focusing on these 4 areas:
- Earning Money
- Storing Money
- Keeping Track of Money
- Spending Money
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First, you need to look at the various ways your kids can earn or get money:
- working at a job
Small children might not have a lot of money, but they often get a few dollars here and there as gifts for birthdays or holidays. Once children start receiving money and understanding how to buy items with money, you should start teaching them what to do with it.
This is a great opportunity for you to chat with your kids about how they can earn money themselves – even if they are young. When my daughter was 5, I started a chore chart with her and paid her money for chores each week ($0.25 per chore per day). After a few weeks of earning (and going to the store to spend), she quickly caught on and now eagerly wants to save money for special purchases (mostly Barbies – haha!).
As they get older, you can show them ways to get more money (by finding a job, for example), but it’s far better if you teach them how to find ways to earn money themselves. Talk about ways to make money and read about entrepreneurs – especially kids. Show them stories of other kids who have started businesses and made money!
Related: 70+ ways for kids to make money
If you have very small kids, the popular save, spend, and give jars are a really great way for your kids to collect and store their money. It’s super easy to set up and it’s a great visual so little kids can actually see their money accumulating.
My 6-year-old keeps her save, spend, and give jars on the bookshelf in plain sight and within easy reach.
Once they get a bit older (upper elementary) and show more knowledge and responsibility, you can open a bank account for them and explain how it works. I actually opened accounts for both my girls when they were babies and plan on adding money to them every year and explaining how they work when they’re a bit older.
Teens should definitely have bank accounts and even start with a basic checking account and debit card that you can help monitor each month and explain the paperwork (teach them how to balance the checkbook, review purchases, and understand the statement).
Budgets (or how to keep track of money)
Yep, you also need to get your kids started on budgeting. This can be very, very simple for little kids – help them set a simple savings goal for a special toy or other “bigger” item and save up money to reach it. Don’t make it too hard to attain, and use a cute savings chart tracker like this to keep it real!
A savings goal is the very basics beginning of a budget. As they get better and a bit older, the save, spend, and give jars work well for being a “budget.” Start here as the basics of a budget and emphasize the importance of these 3 for a while.
Later on, you can teach them how to use a simple budget worksheet – like these.
Finally, you need to let your kids spend their own money. Cash is best because kids can see it and feel the pain when it leaves! Seriously, it’s harder to part with actual cash than to hand over a credit card.
My 6-year-old understands when she spends from her spending jar that she’ll need to work and save money (from chores and gifts) in order to buy anything else.
Next, when they are older (and have developed more math skills), have them start using their allowance or earned money for paying for specific things.
There are a lot of different ways you can do this. You can tell them you’ll spend X amount on basic school clothes, but if they want extra (or brand names), they need to pay for that.
In other words, you’ll pay for x, y, z, but if they want something else they need to pay the difference.
You can buy regular food, but if they want special candy or particular snacks, they can use their own money.
Older kids and teens who understand bank accounts and budgeting, can use a debit card (be sure to show them how to check and keep track of their balance).
The best way to help your kids learn how to manage money is to keep it simple! Don’t make a money management system for kids complicated, tedious, or hard to keep track of. Help your kids learn to manage money by teaching them how to save for a larger purchase and requiring them to buy some things of their own. Money management does not have to be difficult to teach or grasp. You can set your kids up for success!