According to a recent survey, 68% of parents in the US give their kids an allowance which averages around $5 (children aged 4-14), with 69% of those parents handing it out on a regular monthly or weekly basis. The most typical way children earn that money is usually by doing household chores, performing well at school, and selling stuff like books and old toys. This is the good news. The even better news is that kids save 72% of their allowance to buy things they would like to have, such as a new phone, bike, Lego or toys, or even to download an app or make an in-game purchase. This is a significant change of saving habits compared to a few years ago, when only 1% of kids saved any of their allowance money.

Considering that an adult’s money habits are set at a very early age (by the age of 7), it is critical to prepare your kid to use money wisely as they grow and encourage good fiscal hygiene that will follow them well after they leave the nest. Here are some common-sense steps to take if your kids are around elementary school age or younger.

  1. Discuss Money With Your Kids

Don’t think that money is a taboo subject. On the contrary, do feel free to talk about sensitive financial matters, such as the status of your retirement account or how much you make, with your children being present, as openly as you feel comfortable. This will help the little one(s) develop a healthy relationship with money. However, it is crucial to be part of the everyday conversation and not relegated to a one-time conversation.

A good way to start is by including the kids in basic financial decisions. For instance, have them look around the supermarket with you to see what is on sale and then decide what to buy to make dinner together. You may also ask them to make decisions based on a pre-set budget. For example, budget an amount for footwear and ask them whether they wish to have two pairs of cheaper shoes or one pair of expensive ones.

If you find it necessary, you could also dive into some whys (i.e. why some items are costlier than other similar ones). Ask the child to look through product claims and compare prices with you while also mentioning factors that determine price (i.e. a name brand, better workmanship, etc.).

  1. Have Them Play With Fake Money

It is a superb way to teach little children about the value of money. There are plenty of money and banking play toys on Amazon that you can consider when planning to play “supermarket” with your kid.

Using fake money will help them understand the concept (and value) of money and gradually learn how to use it properly and become wise customers later on. If you wish to take it to an upper level, there are lots of DIY projects and free printables that will allow you to make play money that feels like the real thing, along with amazing money activities to play with your child.

Alternatively, you may print a chore chart if you want to start your kid on paid chores, and pay them with colourful faux money until they are old enough to make sound spending decisions. To help the little one(s) out, consider showing them what they can buy with their money (provided you have defined dollar values for each chore) or playing out transactions with the fake money.

  1. Set Limits

Even if you can afford to spoil your kid every now and again, it is important not to give them indefinite credit. Setting credit boundaries will give children an awareness not only of money itself but also its purchasing power.

You can start by creating a very simple budgeting system that comprises of three basic categories (1) Savings, (2) Spending, and (3) Giving. This will give the little ones a concrete way to think about money in a 3-purpose fashion, rather than spending alone. Plus, it will encourage them to save, spend, and give in equal measure. Don’t be afraid that your young son or daughter may have a hard time grasping the importance of charitable giving. Children have many ways to surprise us pleasantly!

Idea: Set an age-appropriate budget, write it down on a sheet of paper, and add up what the kids will need every week (given what you expect them to pay for). End by adding in a reasonable amount for charitable giving and savings. Kids will then be called to work on categorizing their purchases once a month or week (depending on how you have routinized allowance payments). In the end, they will learn to weigh the pros and cons of their options, evaluate their spending priorities, and decide whether it is best to save their money or spend it at that given time.  And, don’t forget to be very clear about the balance and tell them exactly how much they can spend out of their money (meaning what they can afford) every week or month.


  • Put your foot down on purchases your kids want to make with your financial assistance, as well as requests for extra cash. It is critical for a child to understand that money will not be always available to them upon request. If he or she wants to buy something that costs more than the money they have, they will simply have to save up for it.
  • Build or buy a see-through piggy bank (with multi compartments if possible) so your kid can actually see their money pile up. It will give them more motivation and encouragement to keep saving.
  1. Use Technology (Money Saving & Spending Apps)

There seems to be an app for practically every need, including at-home financial education. Some of the apps that you can safely use to help teach your little one the value of money and educate them on ways to make wise financial decisions are:

  • iPiggiBank – It is a website with a money management feature designed for educators and parents alike and is perfectly suited to children aged between 6 and 12. The money management program is offered through a 90-minute teacher-student workshop, a 10-week, after-school enrichment series, or a specialty camp and teaches kids healthy financial habits.
  • Savings Spree – This app allows your kid to spend, earn, donate, or invest (fake) money in a variety of scenarios. The goal is to show how various everyday lifestyle choices can add up to big expenses or big savings. Plus, it presents the child with instances that require an emergency fund. Ideal for ages 7+.
  • Bee Farming – Great, fun app that lets your child start their own virtual business with $100 and, of course, a swarm of bees. Every week, the bees collect honey from the forest; honey that your kid can sell in the market to buy supplies or more bees. Excellent way to give the little ones the basics on managing expenses, hard work, and business.
  • PiggyBot – A free app that gives children the opportunity to collect a virtual allowance, categorize it into Spend, Save, and Share areas, and select savings goals while also providing them with some key information they need to achieve that goal (i.e. how much money they need to save). Nice app for ages 6 to 8.
  • Bankaroo – Another free allowance-tracking app with great ratings that also offers different currencies. Created by an 11-year-old girl in search of a way to keep track of her allowance, Bankaroo is an excellent option for children between grade 1 and 6.
  • FamZoo Family Finance – Helps children aged 4+ understand money, saving, and budgeting, and can even be used by pre-schoolers to track chores, manage allowances, and handle reimbursement, among others. You get to be the banker in the Family Bank and your kid is the customer.
  • Greenlight – Available both in the iTunes and Google Play Store, Greenlight enables you to choose the exact stores where your kid can spend their money through the use of a smart, reloadable prepaid debit card for kids; a card that you can control and supervise. Real-time notifications, instant loading, and immediate turning off and on of the card are some of the features that you may find interesting.
  1. Practice What You Preach

You are your kid’s most important role model, especially during their tender years. If you make sure you follow through on the financial advice you give to your child, you lead by example, which is the best way to teach your offspring about how to best manage their money, and not only. Even when you are comparing prices at the grocery store, bear in mind that you have a set of eyes locked on you, watching your every move and picking up on cues.

Bottom line, you have a wide array of ways to teach your offspring the value of money and instill sensible saving and spending habits so they can manage and grow their own money later on. No matter which option you choose to help your child learn valuable things that can help them lead a financially healthy lifestyle for years to come, though, keep in mind that it is crucial to follow your own advice yourself.