How to Teach Kids About Money

Every third Sunday of June is when Father’s Day is celebrated in many countries including here in Singapore. And with this event coming up, I’ve been reminded of one of the roles we take on as a parent, which is teaching our kids the important things that will help them in life.

One of these lessons is how to handle their finances. Being in the personal finance industry, I’ve seen the importance of knowing how to manage your money at an early age or before you start earning. It’s a skill that our children will use their whole lives.

That’s why here are some simple tips I’d like to share with fellow parents when introducing personal finance to your kids. As a father of 3, I use these to prepare them early on. And I hope that these will make it easier for you as well.

1. Experience is the best teacher.

Let them experience things firsthand. When kids get to handle money in real-life situations, they learn its value and how to manage it wisely. Instead of just talking about money, we can guide them and relate money lessons to everyday activities.

To understand this better, let me give some examples of the things we do with our kids.

• Savings - When doing grocery shopping, I ask them things like, “Which one should you buy? Why do you want to buy this instead?” And I give them examples like when choosing between two brands of toothpaste that have the same amount. They should only get the cheaper one if it’s just the same quality. Or they have to do some math to identify which is better.
  
  The same goes for toys or arcades, like where they would want to play? For the same amount of money, would they play one time in arcade #1 now? Or would they wait to visit arcade #2 so they can play three times?
  
  Another one would be going to McDonald’s. We’ll give them a specific amount of money for them to spend and whatever amount that’s left would be theirs to keep. My kids will see how their siblings will have more or less amount of money than they have and it depends on the food they chose at that time.
• Investments - Speaking of McDonald’s, we tell our children that they can also earn from this fast food restaurant not just by working, but by investing in them wherein they’ll become part owner.
  
  We didn’t go deep on the example above since it may get complicated and it’ll be easier to show them how investments work. And so what my wife and I did is we opened accounts for our kids and started investing their money. This way, they’ll have an initial start and see how it’s possible to have their money work for them.

• Sales / Business - My son wanted to sell his book that he’s not reading anymore. What he did was he asked his sister to sell it for him. So we explained that he should give his sister a share from what he’ll earn because his sister will be doing all the work. He’ll also have to give us a portion since we’re the ones who bought it for him.
  
  This way, our children will have an idea on how sales work. And they can definitely use it again when they want to declutter some of their things or maybe create something and sell them.

Keep in mind that we’re just here to give them guidance on what they can or cannot do. But unless they asked for our help, we should let them decide on things themselves. This way, we’re not just teaching about money, but we’re also developing their other skills like decision-making, computations, etc.

By doing this, we’re also doing the next tip which is for them to:

2. Build good financial habits.

Building these habits early on gives kids a solid foundation for their financial future. They'll grow up understanding the importance of money management and feeling confident in their ability to handle finances.

Avoid confusing or overwhelming kids with theories or technical things. Focus on developing the habit of saving regularly and investing passively.

As an example, what we do is we give our kids a certain amount for every chore they do. Let’s say when they put their toys away, they’ll earn like 50 cents or a dollar for them to save or spend.

When they also receive red packets or cash gifts, we ask them to allocate some of it in their savings or their investments. This way, they’ll get disciplined about it and they’ll be encouraged to put more when they see how it grows over time.

Take note that there should be a balance between saving and spending. If they already saved a specific amount, let your kids spend on things that they truly want. It cannot be all spending and cannot be all saving. It’s essential to develop the mindset in enjoying the present while preparing for the future.

Also, don’t forget about financial responsibility. We’re Christians so what we do is we give them some money to serve as tithes and offerings. Or they set aside money themselves. What we’ll want is for our children to use their financial literacy for good.

With that said, last but not least. Always remember that…

3. It’s okay to make mistakes.

This is a reminder for both you and your kids. Have them make all their mistakes now. Because whatever mistakes they make, it’s not gonna be as big compared to any mistakes they're gonna make when they're older.

Let them fail fast and fail forward. Have them recover from the mistakes as soon as possible, learn the lessons that come with it, and don't repeat the same mistakes.

Now that we’ve covered these, keep in mind to set an example to your kids. Be their role model. As someone who grew up learning about money from family and relatives, this is a life-changer.

Teaching kids about money is one of the most valuable gifts we can give them. By integrating financial lessons into their everyday lives and encouraging hands-on experiences, we help them build strong financial habits that will benefit them for a lifetime.

As parents, it's our role to guide them through these learning moments, whether it’s saving for a goal, managing their spending plan, or understanding the basics of investing. These practical skills will empower our children to make informed decisions and will help them navigate their adult life.

By focusing on these basic foundations, we're not just teaching them about money—we're setting them up for a future of stability and success. So let’s continue to support and encourage our kids on this important journey, giving them the knowledge and confidence they need to thrive financially.