How to teach kids about money

10 tips for teaching kids about money

1. Discuss money openly and often

Try to have open conversations about money, budgeting, saving and spending in front of your kids, and with them too. This doesn't need to be complex topics such as how a home loan works or the ins-and-outs of lodging your tax return.

Instead, it could be as simple as mentioning how much the weekly grocery shop is and explaining that you can't get takeaway for dinner twice in the one week as it's not in the budget. The more you openly talk about everyday money matters with your kids, the more comfortable they will be with money.

2. Explain that money needs to be earned

You can teach your kids from a young age that money certainly doesn't grow on trees. Explain that when you go to work, you're paid money which allows you to buy things. Without working, you wouldn't have this money.

Introducing some simple household chores in exchange for some pocket money could be beneficial to teach this concept. Perhaps if there's something they really want to buy, they could even do some extra chores to earn a little bit more.

3. Encourage saving from an early age

On the topic of pocket money, this is also a great opportunity to teach your kids the importance of saving. Instead of immediately spending the little bits of pocket money they earn on things like lollies, encourage them to save for bigger items they really want.

For example if there's a particular toy or clothing item they've been begging your for, use it as an opportunity to motivate them to save up for it. Then, when they want to buy something out of impulse, you can remind them what they're saving for instead.

"I check my bank account at the end of each month using the app on my phone to see how much bonus interest I've earned. Usually it's not much! But it's fun to keep track of it. I bank with ANZ and I like that I have a savings account to save up for things like concert tickets, plus an everyday account that I can add to my Apple Pay."

Lila Megginson

15-year-old Gold Coast student

4. Open their own savings account

Having their own savings account is an excellent motivator to grow their savings. Plus, a kids savings account is a good way to get your child used to seeing their money digitally rather than in notes and coins.

Make a habit of sitting down with them often and looking at their balance in the mobile banking app or the internet portal, and chatting about how much more money they need to save to afford certain things.

5. Show them the power of compound interest

One major benfit of encouraging your kids to save via a savings account is they'll start to see their money benefit from compound interest. That is, they'll be able to earn interest on their interest.

This is not only a great motivator to keep saving, but a valuable lesson in how to use compound interest to your advantage.

Our expert says

"Compounding is like a magic trick that makes your money grow faster, because you earn free money on your money, and then you earn free money on that free money, too! It means that small, consistent efforts can make a big impact. Even as little as paying $20 into your savings each week can grow into tens of thousands over the years, thanks to compounding."

Sarah Megginson

Personal finance expert + media spokesperson

6. Discuss the concept of bills and other regular expenses

As well as being open about day-to-day spending, start to discuss the concept of paying bills and other regular expenses. You can explain the difference between 'needs' and 'wants' when it comes to spending money, and the importance of spending it on the things we need first.

You can introduce this concept when you're playing games, and there are even some board games that include this concept too (such as Monopoly or the Game of Life).

7. Compare the price of things together

Teach your kids that similar items can have very different price points, and encourage them to compare their options and look for a good deal. For example, you can take them grocery shopping with you and get them involved with comparing the price of things you need and spotting any sales.

This is a particularly powerful lesson when it's their own money. For example, if they've got $30 worth of pocket money to spend and want to buy a toy worth this amount, show them that by choosing one that's similar but costs less money, they'll have money leftover for something else. Two toys instead of one!

8. Let them make some spending choices

To give your kids a better understanding of how much things cost and how far your money can go, let them help with some of the spending decisions.

For example, telling them you have $50 to spend on a weekend activity as a family and asking how they'd like to spend it. If they want to go and see a movie, how much are the tickets and does this leave any room for some snacks too? If you instead watched a movie at home, would you be able to do a lot more things with the money instead?

9. Consider a pre-paid card for your child

Whe they're old enough (usually 12+) your kids can have their own debit card or pre-paid card. This can help give them some independence around their money, and teach them how to use it responsibly.

A debit card or pre-paid card is handy because you can only spend what's in the account, unlike a credit card where you can spend more than you have. Some kids debit cards let you set parental controls on their spending, so they can't spend too much at once.

Make a habit of regularly looking at their spending patterns with them and chatting about it.

10. Finally, lead by example.

The best way to teach your kids good money habits is to lead by example.

Show them how you prioritise saving money and spending mindfully every day - from little things like choosing the cheaper option at the grocery store, to comparing big things like the cost of your energy bills. Show them how you prioritise spending money on things you need before things you want, and how you limit impulse purchases.

Written by

Alison Banney

Editorial Manager, Money

Alison is an editor at Finder and a personal finance journalist with over 10 years of experience, having contributed to major financial institutions and publications such as Westpac, Money Magazine, and Yahoo Finance. She is frequently quoted in media outlets like SmartCompany and SBS, offering expert insights on superannuation and money management. Alison holds a Bachelor of Communications in Public Relations and Journalism from the University of Newcastle, and has earned three ASIC RG146 certifications in superannuation, securities and managed investments and general financial advice, ensuring her expertise is fully aligned with ASIC standards. See full bio

Alison's expertise

Alison has written 660 Finder guides across topics including:

• Superannuation
• Savings accounts, bank accounts and term deposits
• Budgeting and money-saving hacks
• Managing the cost of living