How to Teach Children Financial Responsibility

If there is one thing we can all agree on with people in the United States, it is that people really need to learn better financial responsibility. The majority of financial problems people here experience are not due to not being able to do any better, but rather because they just do not have the skill set needed in order to make the right decisions with money. And, while some may try to disagree with this, the best time to start teaching them is at the early ages. The earlier you learn the tricks and what to and not to do, the better off you are likely going to be in the long run. This article is designed to help understand how to teach financial responsibility, in a way that has worked for many people I know. Keep in mind that like with most things, if you are not persistent you will not be getting very far. With that said, let us move on!

The Importance of Financial Responsibility

Not being financially responsible can bring on its own slew of problems. It causes people to lose their homes, their cars, etc. in the worst cases. In other less severe cases it can lead people to having to live month to month or continue to borrow money for their living expenses. Neither of these are preferable, I'm sure, and both are avoidable for the vast majority of people. Please note that I am not saying that everyone that is having monetary problems can have avoided it, but most could. That is one thing I am hoping to fix with this article.

Starting Early

The earlier you start instilling these ideas in to your children, the better off they will be. Being able to make informed decisions is important when it comes to not spending more than you should, and also leads to being able to handle any events that come up, without having to get rid of everything you own in order to make it happen. In essence, it leads to a higher quality of life.

The reason for starting earlier is that when we get older, we start to get our own opinions on things and are much less apt to listen. We think we know absolutely everything (even when we do not), and it causes more problems than you may realize. While some people will still hit this point in their life and not follow these guidelines, the chances are much greater that they will when it comes to long term lessons. What may not seem to be important at one point may show to be even more important later, and vice versa. The goal here is not to force people to change, but to help bring about more informed decisions.

Lesson One: Pay Your Own

This is something I actually learned from someone else. When his son was pretty young (5-6 or so) he was already working on training him on financial responsibility. His method for doing this was to give him weekly allowance that was used to help pay for his own food and things. For example, when it was time for their dinner, he would help by paying his part of the food. In most families, this would be skipped altogether (in that the child would also not get an allowance that they have access to), but this method allowed him to start learning that money has value; it is needed in order to eat.

He was also to use his money for things like clothing and everything else he needed. It was an awesome concept, because I think one of our big problems is that when we are young, we do not realize that money is limited and that money is required for everything we want. So really, what we can get is limited, and you have to start balancing between what you need, what you want and how much money you have available. You can not spend more money than you have, and you can not live without the items you need, so learning this balance is important. This is something that was taught to the child in this scenario.

Lesson Two: Learn to Go Without

This was a lesson that I learned while I was growing up. What would happen is I would do like most kids; when I got money, I would take it to the store to spend it. If I could not afford what I was hoping to buy, I would just get something I did not want as much. Pretty much I would rather have the items than the money, since the money had no value to me if it could not be used, right?

Well, while this was my train of thought at the time, my grandfather had a different opinion. He decided to turn every purchase I made in to a choice to determine how important each thing was to me. What he would do is wait until I was ready to buy something, and then if I was actually ready to make the purchase he would give one of two choices: I could buy it and take it home or I could not buy it and he would match the cost so I would have no item but double the money I started with. This would cost a bit over time were I to try and exploit it, but this never happened. As such, I learned a pretty valuable lesson: I need to have a realization of the difference between wants and needs. And even when it comes to the needs, how much need is there?

This was a strong lesson that has followed me ever since. It has taught me to not just make purchases, even when I really want something, and to instead evaluate how important it was to me, based on whether or not I needed it and if there was any alternative to making the purchase. Some would find this as being “cheap,” but at the same time it has helped keep me out of debt while all my friends and others I know are going deeper and deeper in to debt, despite us all living similar life styles.

Lesson Three: Learn How Money is Earned

I would strongly argue against giving kids an allowance without making them earn it. When you do, you work towards instilling the lack of value in work, and cause them to feel as if the money is given for free and that there is no reason to work for it. Instead, have them do something. It could be as simple as helping with some chore that they do not normally have, as that still shows that work brings income and income allows them to purchase the items they want. The worst thing you can do here, though, is to reward them for doing nothing or for doing the chores they already have to do (like cleaning their room).

You can even take things a step further and make the allowance that is earned based on the amount of work they have to do. For example, if they do not normally do the dishes or help with laundry, offer a certain amount for each of these tasks. This gives yet another benefit in that they learn that the more work they do (in this case the more jobs they do) the more they will earn. Really, the goal here is to mimic what the real world is like, and this is a perfect representation. The more you work, the more you earn; it is a pretty simple concept to show, and showing is much better than telling.

Lesson Four: Job Creation

When your child is old enough to start doing things on their own, I think it is a good idea to start instilling values of work ethics in them. One of the best ways to do this is to allow them to start their own business, albeit small. For example, I have found that allowing children to run a lemonade stand is a great way to give them a head start here, as it teaches a few different lessons:

  • It shows how to create new jobs from scratch, on their own, in order to earn money
  • It shows how to deal with the public and helps learn how to market goods
  • It pushes them towards working (for themselves) to earn money to buy something that they want
  • When done properly it helps figure out how businesses work in terms of the profit and losses, figuring out how to make the business work well enough to earn more than it costs (in both time and money) to run

A lot of people usually look at the lemonade stands as being a fun little game for children to play, when really it helps learn a lot about life. It is things learned at this stage that help set them up for their future, and despite being a generally unprofitable venture, it is the information obtained and the lessons that are learned that make it well worth doing.

As children grow up, getting them involved with other businesses can help out as well. It could be as simple as creating a new type of art, or something more detailed like creative businesses (things like recording videos and voice overs). All of these help learn how to run better businesses and how to get themselves off the ground, without having to constantly work for someone else. In a way, I believe it is a great part of what creates some awesome entrepreneurs.


You really want to start pushing these ideas on kids at a young age. The longer you delay, the harder it will become and the more problems you can end up with as a result. By making the move early, you cut down on these chances and help ensure that your children gain the knowledge they need in order to make smart decisions with their finances. Just keep in mind that teaching someone does not necessarily mean that they will follow those guidelines; they could just decide not to. But you are doing your job by making sure they know what they need to know, and that is the most you can do!


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