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5 Important Lessons to Teach Your Children About Money

It’s never too early to educate your kids about the value of a dollar.Child_Money_Lessons

One of the most important life skills you can teach your children is how to responsibly manage money. By beginning their education while they are young, you can instill a healthy understanding of money that will serve them for a lifetime. Sharing the lessons listed below can help your kids avoid mistakes that contributed to major financial challenges in our country, including the mortgage crisis, the $1.1 trillion student loan debt, and $845 billion owed in credit card debt.

1. Sometimes you have wait for something you want.

Perhaps the most valuable lesson you can teach your child early on is that sometimes, you have to wait for things you want. Small children need to learn that you can’t always have everything you want right now. This is especially true when it comes to money. As early as age three, you can begin teaching your children the value of delayed gratification when saving for something you want.

Try making three clear jars: one for “Spending,” one for “Saving,” and one for “Giving.” Whenever your child earns or receives money as a gift, divide the funds between the three jars. Teach your child that the spending jar is for small purchases, like a coloring book or a pack of cookies, the saving jar is for larger, more expensive things, and the giving jar is for sharing with those in need, such as your church or a charitable cause.

2. You need to choose how to spend your money.

Around age six, begin talking to your children about the quality of their purchase decisions, and that money once spent is gone forever.

Offer insights into your shopping habits, such as how you save money by purchasing generic brand cereal over the brand name, or how buying in bulk saves you money on the price per item. This way, you teach children that they can stretch their money further while still meeting their needs.

3. Start saving sooner and take advantage of compound interest.

The earlier in life you choose to begin saving, the more money you can accumulate, especially with incentives like compound interest. Educate your kids beginning around age 11 that by forgoing unneeded purchases that they won’t care about a year from now, they can accumulate money through saving accounts, money market investments, U.S. savings bonds, and certificates of deposits (CDs) for important investments down the road, such as a car, secondary education, or a down payment on their own home.

Have your children visit sites like and for tips and calculators that show how compound interest and other incentives can grow their savings for important purchases in the future.

4. Cost matters when looking at college.

Secondary education is important, but it is also expensive. As your children enter high school and begin thinking about careers and further education, have an honest conversation with them about the costs of college, how much you can afford to assist them, and the challenges of beginning a career with college loan debt after graduation. Motivate them to apply for scholarships, and consider expenses such as in-state vs. out-of-state tuition, as well as the cost of living, transportation, and other costs related to living away from home.

Have your teen use a financial aid debt calculator, such as the one at, and discuss the likely loan payments coupled with the average starting salary for their desired profession, and essential expenses like housing, utilities, groceries, phone, and etc.

5. Never carry a balance on a credit card.

By your kids’ late teens, share with them the benefits and pitfalls of credit cards. Most importantly, they should never carry a balance on a credit card to avoid paying interest. Credit cards should only be used in an emergency, and only for things they will still possess when the credit card bill comes due.

Educate your young adults on the far reaching impact of bad credit, and how it could result in big penalties through high rates for insurance and loans, and even prevent them from purchasing a home, a car, cell phones, and much more.

By sharing these lessons with your children, you can help to ensure their financial security for the rest of their life. For more helpful articles on managing finances and savings, follow the Better Side of Life Blog provided by First Reliance Bank. To discuss any of the savings programs discussed in this week’s blog, contact an associate and we will be happy to assist you.


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