How to Raise a Money Smart Child

Every parent wants a child who is equipped to survive in a world full of financial hazards. You can make that happen by actively teaching the meaning and mechanics of money.

Be a Good Role Model
From the way you use credit cards to how you pay your bills, know that your kids are watching – and adopting – your behavior and attitude. If your money management system isn’t up to speed, make a pledge to improve it. Doing so will not only benefit you, but will make a positive and lasting imprint on your children.

Teach Early
Even toddlers can and should be introduced to certain basic financial concepts. Forget formal lessons: make outings together fun learning opportunities. Have your child put coins in a parking meter, hand money to a cashier, or complete a task for a dollar. By the time your child knows numbers, the world is your financial classroom.

Shop Smart
In age-appropriate language, discuss how marketing and advertising affects shopping decisions. At the store, explain what is and isn’t a good buy, and let your child make a few selections. If you use a credit card, explain that there will be a bill at the end of the month that must be paid by a specific date.

Stress the Work-Income Connection
Before heading off to work, take a moment to explain that you go not just because you like your job (associating work with enjoyment and fulfillment is important), but to earn an income to keep the household afloat. Keep it simple, light, and positive.

Allow for Successes and Mistakes
Whether you give an allowance that is based on chores, freely give it, or you provide a “base salary” with a bonus option, make sure you give your child the chance for success and error. Mistakes made on a small scale, such as blowing a months’ allowance on a toy that immediately breaks, can be the most effective learning device around.

Emphasize Saving
Many children are natural savers, stockpiling coins like squirrels hoard nuts, while others have to be taught the skill. In either case, saving money should always be encouraged and praised. Again, the best way to educate is by example. Talk about how you save and what you are saving for. Start a piggy bank. Your child will catch your excitement.

Don't Stop!
As your child matures, increase the complexity of the lessons. Read the business section of the newspaper together and discuss the basics of economics. If you are fuzzy on the details of how the stock market works or the impact of taxes in our lives, make a commitment to learn more – and to share that knowledge with your child.

Teaching about personal finance can be a very enjoyable experience. However, to be the most effective instructor, you may have to change some of your own notions and habits, or learn a little more than you know now. The end result? An informed child who will develop into money-smart adult.

BALANCE is a financial education and counseling service committed to helping individuals and families nationwide take control of their finances and reach their goals. To speak with a financial counselor about your personal situation, give us a call at 888-456-2227, or log onto