Teaching children about money is about instilling values, attitudes, and practical habits that will set them on a path toward financial success. With the rise of digital banking, easy access to credit, and the growing complexity of financial markets, children need to be financially educated earlier. According to a 2023 survey by the National Financial Educators Council, nearly 70% of adults reported that they faced some kind of financial difficulty due to a lack of understanding about money management in their youth.
Unfortunately, many schools still don’t emphasize financial literacy, and parents are left to fill in this critical gap. Financial habits begin to form as early as age seven, as a study from the University of Cambridge reveals. Therefore, it’s crucial for parents to foster healthy money habits from a young age, helping their kids develop a strong foundation that can lead to financial independence.
Through this article, you can expect to learn nine key money mindsets that will shape your child’s perspective on earning, saving, spending, and investing money. These mindsets are actionable, meaning that as a parent, you’ll be able to implement them in everyday life. By teaching these concepts, you will encourage your children to take ownership of their financial decisions, helping them avoid common pitfalls and build long-term wealth.
Money is a Tool, Not a Goal
One of the most fundamental mindsets to instill in children is the understanding that money is a tool, not an end goal. Teaching kids that money should be used to achieve things—whether it’s paying for education, traveling, or giving to charity—helps them see beyond just accumulating wealth.
When children understand this, they won’t equate money with happiness or success. Dr. Brad Klontz, a clinical psychologist and financial behavior expert, emphasizes, “Money is not the root of evil or happiness. It’s the mindset we attach to it that shapes our relationship with it.” Teaching your kids that money is meant to be used wisely will help them focus on what truly matters in life—like relationships, experiences, and personal growth.
By framing money as a means to an end, you help your child avoid materialism and focus on value-driven goals. They’ll learn that the ultimate purpose of earning money is to live a meaningful life, not simply to amass riches.
Earning Requires Effort
Children should understand that money doesn’t grow on trees. It’s essential to teach them early on that money is earned through hard work, creativity, and sometimes even taking calculated risks. Research by financial psychologist Dr. Roy Baumeister shows that developing a strong work ethic at a young age correlates with higher financial success in adulthood.
Parents can start small by encouraging children to earn an allowance through chores or small tasks. For older children, babysitting, pet-sitting, or setting up a lemonade stand can help them learn the value of a dollar. Allowing them to experience the effort it takes to earn money will build a sense of responsibility and pride in their accomplishments.
By making this mindset part of your daily interactions with your children, you’ll help them understand the connection between effort and reward, preparing them for the realities of financial independence.
Saving is Essential
The importance of saving money cannot be overstated. Unfortunately, many adults struggle with saving due to poor habits formed in childhood. Teaching children to prioritize saving early on can help them avoid falling into this statistic.
To make saving more tangible, encourage your child to save for something specific, like a toy or game. Open a savings account for them and let them experience the satisfaction of watching their balance grow over time. Personal finance expert Dave Ramsey suggests, “Teaching kids to save for what they want rather than getting it instantly helps them develop patience and financial discipline.”
As they grow, introduce them to more advanced saving strategies, like emergency funds and long-term savings for bigger life goals such as college or a car. By understanding that saving is an essential part of financial well-being, children will be better prepared to manage their money as adults.
Spending Should Be Intentional
Children need to learn that every money spent is a choice. Being intentional with spending is crucial for developing good financial habits. According to financial expert Suze Orman, “When you manage your money with intention, you prioritize what truly matters in your life.”
To teach this, encourage your children to think critically about their purchases. Ask questions like: “Is this something you need, or is it something you want? Will this make you happy tomorrow, or just right now?” These questions foster a thoughtful approach to spending, where children start to evaluate the long-term value of their decisions.
As your child grows older, you can introduce them to budgeting tools or apps to help them track their spending. This will give them a clear picture of where their money is going and reinforce the idea that spending should always align with their values and goals.
Mistakes Are Learning Opportunities
One of the most powerful lessons kids can learn is that financial mistakes are inevitable but can also be valuable learning opportunities. Often, parents rush to protect their kids from any
financial missteps, but allowing them to experience the consequences of poor choices can lead to lasting lessons.
If your child spends all their allowance on candy and has nothing left to buy a toy they wanted, don’t rush to bail them out. Personal finance educator Beth Kobliner says, “Letting kids make small mistakes with money teaches them how to make better decisions down the road.” Small financial errors in childhood can prevent larger financial disasters in adulthood.
When mistakes happen, guide your children through what they could have done differently. This reflection builds resilience and encourages them to take responsibility for their financial decisions.
Delayed Gratification Pays Off
Delayed gratification is a critical skill in financial success. The famous “marshmallow test,” a study conducted by psychologist Walter Mischel, showed that children who were able to wait for a second treat instead of eating the first one immediately were more likely to be successful later in life.
Teach your kids the value of waiting for something better. For instance, if they’re saving for a toy, explain how waiting and saving a bit more might allow them to buy something even better. This practice not only helps with saving but also teaches them to think long-term.
Over time, they’ll see the benefits of delayed gratification in other areas, from investments to career choices. Patience and self-control are key components of financial wisdom.
Generosity and Giving Back Matter
Instilling a mindset of generosity is as important as teaching saving and spending. Children who understand the value of sharing and giving back are more likely to grow into adults who view
money as a way to make a positive impact.
Explain to your children that money can be used to help others in need, not just themselves. According to a study from the University of British Columbia, people who spend money on others tend to be happier. When children donate part of their allowance to charity or help out a friend, they learn that money has the power to do good in the world.
Generosity also helps prevent a scarcity mindset, where children might grow up fearing there’s never “enough” money. By teaching them the joy of giving, you foster a healthy relationship with money that’s grounded in abundance and purpose.
Understanding Debt Early
It’s never too early to teach kids about debt, especially in a society where credit cards and loans are so prevalent. Financial author and speaker Rachel Cruze advises, “It’s critical for kids to understand that debt isn’t free money—it has consequences.”
Introduce the concept of borrowing in a simple way. For example, if they want to borrow money from you to buy something, set clear terms for repayment. This teaches them the concept of debt and the importance of paying it back responsibly.
As they grow older, explain the dangers of high-interest debt, like credit cards, and how to avoid falling into the trap of borrowing more than they can repay. Understanding debt early on will help them make informed decisions about loans and credit later in life.
Investing for the Future
Lastly, teaching kids about investing is a powerful way to set them up for financial success. While it may seem complicated, children can grasp basic concepts like growing money through smart investments. “It’s never too early to teach kids that investing allows their money to work for them,” says financial planner Michael Kitces.
Start by explaining the concept of interest, then move on to more advanced ideas like stocks and bonds as they grow. Let them track investments through child-friendly apps or games to spark their interest. This exposure will give them a head start on understanding how to build wealth over time, rather than relying solely on earned income.
