Wealth Insights

Teaching kids about money: Making sense of money management

Key takeaways

• Start financial education early and keep it fun.
  Young children can understand basic money concepts through play, games, and cause and effect thinking long before formal financial lessons are appropriate.
• Focus on habits, not complexity.
  The primary goal is to build responsible money habits: saving, spending thoughtfully, and setting goals rather than teaching advanced financial concepts too soon.
• Use everyday moments as teaching opportunities.
  Grocery shopping, coupon clipping, meal planning, and price comparison all provide simple, real world lessons about value, tradeoffs, and smart spending.
• Introduce budgeting with simple frameworks.
  The 50/30/20 budgeting rule offers an easy to understand guideline for allocating income between needs, wants, and savings.
• Parents’ behavior matters most.
  Role modeling through thoughtful spending, budgeting, and planning has a stronger impact than instruction alone.
• Teach values alongside value.
  Gratitude, generosity, and community involvement help children understand that money is a tool for impact rather than status will help reinforce healthy financial perspectives.

Start early and try to make saving and spending fun.

Money is a huge part of our adult lives, and as a parent, you have the responsibility to kick-start your children’s financial education. But just because money is a serious topic doesn’t mean that teaching kids the basics has to be daunting - or tedious. You won’t need to start with stocks and bonds and interest rates. Instead, you can start by playing around.

“Kids understand cause and effect at an early age,” says Erin Reece, Wealth Advisor, Regions Bank. “They understand ‘if I have this amount or earn this amount, I can purchase X, Y or Z.’” Beginning early provides an ideal opportunity to begin teaching children through functional play.

“Your main goal should be to instill good, responsible money habits that will serve as a sturdy foundation for their financial future,” notes Reece. “When you can do that, they’ll reap the rewards throughout their lives.” Here are some ideas to consider as you get started:

The savings game: Start when your kids are young

Even toddlers can grasp some basics, so engage your preschoolers in functional play. For example, playing storefront types of games that involve the purchase and sale of goods can be a teaching opportunity. Digital natives may enjoy the U.S. Mint Coin Classroom, which hosts games, videos, and other educational resources to give kids a fun way to learn about money.

You can also:

• Encourage them to earn and save. Once children reach elementary school, perhaps receive an allowance and can earn money through things like pet sitting and setting up a lemonade stand, they can begin to save money. Encourage it and show them how to save by setting money aside each time they earn some. When they are young, it doesn’t need to be an exact percentage - just enough to create a mindset and habit.
• Help them visualize progress. Even young children, who may lack advanced math skills, can easily visualize their progress toward a savings goal. Reece says that when her son wanted a water gun, she represented it with an illustration and drew marks for each dollar saved toward the total. That served as a powerful visual reminder of the progress he was making. “We’ve got to be able to show them how we visualize goals,” she says. “With smaller kids, you can simply do things like draw the picture and check off the boxes.”
• Ask questions. To help kids see how money grows over time with consistent saving, ask questions like:
  • What if you saved $10 more each week?
  • What if you waited 3 months before buying?
  Let them adjust inputs and see real-time results. This can be a great way to introduce the concept of compound growth in a visual way.
• Show them coupons and plan menus. You know those weekly grocery store flyers in your mailbox and at the checkout counter? A practical family interactive money lesson is to clip coupons from them and build a meal around smart spending. “‘Buy one, get one free’ is a simple and easy-to-grasp concept,” Reece says. This is also a good example of role modeling by parents.
• Price comparison. A simple but powerful tool, price comparison is a great way to help children develop financial savvy. When they see that toy, snack or clothing item they have to have, seeing the same item can be purchased from different retailers at varying prices may help kids understand the value of money. Learning how spending choices may impact that purchase, it may also influence how they save.

When children see they can have that item today for $15 or purchase from another retailer for $11 and receive it in two days, they will probably initially prefer the instant gratification. However, the latter provides more than just savings in the moment, it encourages critical thinking, patience and decision-making that will stay with them for a lifetime. “Whether it is earning and saving for a desired item or helping meal plan with coupons on-line or in-store, there are little everyday ways to create teachable moments around money at any age,” says Reece.”

Build money management skills in tweens and teens

When kids start to get older, their needs and wants can grow more complicated. They will understand money better, but they still will need guidance on saving and spending.

“As examples of wants, tweens and teens will happily spend money on makeup, trendy clothes, or a pair of expensive sneakers or the latest video game,” Reece says. They should know the difference between their necessities and these desires and behave accordingly. Here’s where to start:

• Deter impulsive spending. Once children reach middle school, they could earn money through part-time jobs as they become more independent. This is a great time to teach them to deter impulsive spending, which isn’t easy in the face of the constant pressures to purchase based on advertising and their peers.
• Follow the 50/30/20 budget rule. This basic budgeting rule says you should spend 50% of your income on must-have items, such as groceries, car loan payments and gas and maintenance for that vehicle. Then, 30% can go toward things you want but don’t truly need. And finally, 20% should be saved. This formula can serve as a guideline for children to follow as they become more independent.
• Introduce more complex topics. Every child is different, but as they become older, you should teach them about credit, interest, investing, giving and even retirement planning. You don’t need to sit down with them and explain the nuances of portfolio management, but general conversations about how money can be used to reach short- and long-term goals will help them gain perspective on the value of a dollar. Buying a car or saving for their first apartment can be great longer-term goals for teens and young adults.
• Create a budget. A budget calculator creates the perfect practice environment when preparing for those first milestones of adulthood.
  “Let kids build a basic monthly budget using allowance or chore money,” suggests Reece. “You can turn it into a game: “How much can you save if you reduce spending in one budget category – groceries, travel, entertainment, etc.?”
  Older children can use the budget calculator to simulate adult expenses such as rent, groceries, gas, clothing, and entertainment.
• Getting started. Setting up a savings account for your children is a great way to get them started. Holiday or birthday money (or an allowance if that is the approach in your family) is a great way to begin sharing the 50/30/30 budget rule. You can even find piggy banks with designated compartments for each to provide a nice visual of where the money goes. At 13, kids can have their own checking accounts (and debit cards), which grants them more access to their money once parents deem them more responsible.

Role modeling can be powerful

The greatest impact parents can have is to lead by their example. That means parents should limit their own impulsive spending. They also should involve children in discussions around family spending choices, such as how, when and where to vacation, bringing in cost considerations.

• Stay positive and empower your children. Avoid creating a scarcity mindset by saying things are too expensive. Instead, explore how you can work toward an achievable financial goal. That can help to instill responsibility while empowering your children.
• Have your children participate financially. They can benefit from having some skin in the game. If you make it clear that your children will contribute to saving for that car or college tuition, they will take ownership of those quests and will learn the value of a dollar and hard work. They will also feel a sense of pride and accomplishment. “Say your child saved $5,000 toward a car, and you promised to match that $5,000 for a down payment,” says Reece. “Go a step further and sit down with them and allow them to search for cars and compare their monthly payment to determine what they can afford perhaps versus what they want. Doing the math together will help them navigate these decisions wisely on their own in the future.”

Value values and practice gratitude

Focus on values as well as considering value. Encourage your children to appreciate the simple things in life, not just material wealth. Teach them to place value in themselves rather than feel the need to buy into the idea that possessing something gives them greater status. Encourage giving by helping them find a cause or organization they have a passion for. “That lemonade stand is a great way to start building an attitude of giving,” says Reece. “Pledging to match any earnings they give to say a local animal shelter or community food bank allows them to see how even they can make an impact in their community.”

Involving your children in your own philanthropic endeavors can be a great way to instill a sense of community and giving from an early age. Private family foundations can serve as a powerful platform for uniting founders and future generations around shared values, purposeful giving, and long-term community impact.

Talk to your Regions Wealth Advisor about:

1. How and when you should introduce financial topics to your children based on their ages.
2. When to establish banking accounts: savings, checking accounts with a debit card.
3. What resources from Regions Bank’s Next Step program may be helpful.

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