Practical Money Management for Kids

money management for kids

When it comes to money management for kids, don’t bank on the schools to teach your kids financial literacy. Instead, you can begin their financial education right away at home through hands-on experience with money.

An Allowance Offers Real World Exposure to Money

An allowance is a valuable teaching tool that gives kids an opportunity to manage their money. I recommend giving your child a dollar for each year of age. For instance, I give my 7 year old daughter $7 every Friday.

The 3 Money Jars: A Simple System of Money Management for Kids

Children of all ages can easily learn the financial concepts of saving, spending and giving using the three money jar system. The best time to teach them is when they're interested, but kids can learn as early as 3 years old.

Begin with three money jars for each category. As kids get older, the number of jars can grow with your child depending on her money goals. Within the spending category, your child may wish to have an extra jar to put some of the money towards a longer-term spending goal, but still have a little to enjoy spending, like candy or bubble gum.

My daughter loves using her Money Savvy Pig which has four compartments instead of jars: Investing, Giving, Spending and Saving – perfectly suited to her needs. The Saving compartment is meant for a longer-term spending goal, which for her is currently a $25 Build-a-Bear.

How Should Kids Allocate Their Money?

I allocate my daughter’s money to roughly resemble real world proportions:$1 to giving, $1 to investing/saving, and $5 to spending. From spending, she then saves $3-5 each week for her Build-a-Bear. The rest she spends on gum or trinkets. 

To accumulate money faster, she looks for extra jobs around the house, items she can sell and thinks about other ways kids can make extra money.

How Money Management Teaches Kids Financial Literacy

Once kids have their own money to spend, they quickly discover that it runs out! Here are some great lessons in money management for kids to learn while managing their own money.


“A penny saved is a penny earned.” Benjamin Franklin

  • Saving takes time. Kids learn patience and get the satisfaction of buying something they have been saving up for a long time.
  • Goal setting is important. It helps them think about what they want to do with their money. With younger kids, help them set small goals to start - items they can purchase within a couple of weeks. Having to wait too long to buy an expensive product like an iPad can be discouraging, and is more appropriate for teens.
  • Investing. For older kids, they can begin to learn more advanced money concepts about earning interest on money.


“When money is once parted with, it can never return."  Jane Austen

  • Spending wisely. With time your child will learn that there are many things out there she wants to buy, but will have to decide what will bring the greatest satisfaction or value to her.
  • Opportunity cost. Buying one item means forgoing another. Or having to wait until next time to buy it.


“We make a living by what we get. We make a life by what we give.” Winston S. Churchill

  • Giving benefits everyone. Giving is a great practice that gets kids thinking about how they can help others in their community. Whether kids choose a church, charity or individual in need, giving is a wonderful way to cultivate generosity and experience the joy of giving.
  • Money isn’t everything. Ironically, teaching kids about money is also a great way to show them that money can’t buy friendship, love or happiness. Rather, money helps us prioritize what is important to us.

Smart Money Management for Kids Increases Financial IQ

“A wise person should have money in their head but not in their heart.” Johnathan Swift

Learning to manage money is a life habit that kids can develop from young. You can increase their financial IQ by encouraging their curiosity about money. There are opportunities to teach them about money all the time - just think about how often you use money (i.e., grocery trips, banking, budgeting, etc.).

It’s the cumulative impact of everyday financial exchanges that offer practical lessons in money management for kids to easily understand.

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