How To Teach Your Child About Money: 3 Core Principles

By Alec Lindenauer, Chief Allowance Officer

How do you teach your child about money? 

Well, you’re in the right spot, and you’re asking the right question. It’s the very first one you should be asking if you want your child to understand the value of a dollar, become financially literate, and grow into a money-savvy adult. 

Realistically, there are a ton of ways to answer that basic question, so it’s sort of loaded. But from a high level, we can boil the answer down to just a few principles.   

Principle 1: Ownership & Freedom

The first thing a child of any age needs to learn about money is some money of their own. Ownership of money gives someone an entirely different perspective on it. 

Try as you may to teach your child through lecture or example, their attitude towards your money is going to be completely different from their attitude towards their own. Ownership over money comes with a sense of freedom, and a totally different level of responsibility. Without it, your child’s relationship with money can only go so far. 

There are two ways for them to get their own money, of course. It can be given, or it can be earned. Whether they earn it through work, receive it from the tooth fairy, or as part of an allowance, it can all be treated equally with respect to teaching your child. Lessons from one might be different, but not better or worse.

Both income sources should land your child in the same place … with money of their own, and some measure of freedom to use it, make mistakes with it, and learn from their experiences. 

Principle 2: Strategy

As humans, we solve all problems the same way. We take time to understand an issue, devise a strategy to overcome it, implement that strategy, and then review the whole process for improvements. 

We do this naturally thousands of times per day, most often subconsciously. Strategy is a natural process … it’s just with money, few parents are prepared with one (through no fault of their own). But strategy is critical, because we can’t function without it. 

Now, what exactly should you be strategizing for? 

Specifically, to effectively teach your child about money, you need a strategy to create opportunities for your child to practice good financial habits with the money they own. I’ll break that down … 

We all spend and borrow. And to a varying degree, we all want to save, invest and donate too. 

In my line of work, I get to see the way a lot of people treat their money. And hands-down, those with the best habits are those who have been practicing good financial hygiene for the longest amount of time. Those that started off mindfully spending, saving, investing, donating, and borrowing when they were young are better at it as adults. 

It’s really not that different from riding a bike. It’s a lot easier to be a good rider today, if you learned and practiced as a kid. 

You can create valuable practice opportunities for your child with all sorts of strategies … you just need to find one that you can make definable and repeatable in your own home. 

Principle 3: Consistency 

I often quote Tony Robbins, the famed motivational speaker, who said, “It’s not what we do once in a while that shapes our lives. It’s what we do consistently.”

He couldn’t have been more spot-on. I teach people about money for a living, and even I failed at educating my kids at first. I tried to give them an allowance each week, and it just didn’t work. Our house was just too busy, and I wasn’t able to stay consistent. Bottom line: I chose a strategy that I couldn’t execute. 

So I switched to monthly allowance. That was years ago, and their money education absolutely took off as soon as we made that change. It certainly didn’t change because the content of our discussions was different. They began to thrive because we were consistent. 

Dedicated monthly conversations that last about 45 minutes have completely transformed the relationship my children have with money. And the same for a host of parents we’ve mentored. 

As you might already know if you’ve been consuming our content for a while, the first Sunday of the month is not just allowance day in our house, it’s allowance day for our whole Cents of Responsibility community … a day we can all rally behind to help each other stay consistent. 

I hope you’ll join us for a community COR Day soon.

In the meantime, teach cents-ibly.

Think you'd like to try setting up a monthly allowance day with your child? Join us for the next 5-Day Allowance Challenge.