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This article is from a series of articles about giving your children the life-skills necessary to effectively manage their money. To go to the table of contents, click here

Teaching your children your values about money

Money plays an important role in our lives and has come to symbolize a measure of success. How your family spends money is a direct reflection of your family's values and standards. Invest time in defining what success looks like for your family-use both your mind and your heart. This definition will provide an important backdrop for setting goals, making decisions, and establishing priorities. Also, you will ensure that your family budget reflects your family vision.

Helping Kids Understand Needs and Wants

Long before they understand the concepts of saving, investing, or borrowing, kids sense the power of spending money. They see grown-ups show off their latest purchases, hear them talk about a relative's new car, or watch while they give thanks for presents.

One lesson about money and finance involves differentiating between wants and needs. This distinction is essential for developing good money management skills. Without this foundation, kids may have trouble controlling their spending as adults, never appreciating the difference between a luxury and a necessity. You can develop a WANT IT-NEED IT list for your family that shows the difference between desires and necessities. The list can help them understand the difference between wanting comic books and candy bars and needing clothes. You can make this into a game by having your kids list several things they own and decide which of them are necessities. They can then do the same thing with things they would like to own.


Today's families make more use of money than people did in the past. Two hundred years ago, many families grew much of their own food and made many of the things they needed. As time went on, people produced less and less of the things they used, and this made money a more important factor in running a family.

You can help your kids understand this concept at the same time you develop in them an understanding of how the role of money gradually changed. Tell them what you know about how earlier generations of your family earned a living. Then help them fill in the family tree below, using photos or drawings to identify family members.

Allowances and Handling Money

Kids start to understand more about the value of money around the age of six, once they have mastered a few basic math skills. They can then start handling money on a limited basis. Most families start to give kids allowances at this age.

Allowances should be age-appropriate and should increase over time. If they are earned by performing household chores, allowances can be powerful tools for teaching children about the connection between work and money. But even when they are not related to chores, allowances give kids a sense of pride and responsibility in handling their own money.

As kids get older, you can give them larger allowances and more responsibility over how they spend their money. For example, by age eight, youngsters often want to do extra chores for additional spending money. Help them by requiring that they spend part of their allowances on certain items, such as toys or clothes. This practice can reinforce their independence and sense of responsibility, at the same time that it allows them to learn the basics of spending and saving for themselves.

Let your kids "interview" you about you and your childhood allowance so they can learn what was important to you as a kid in terms of wants and needs.

How old were you when you got your first allowance?

How much was it?

What was the first thing you can remember buying with your own money?

Did you have a special place to save your money?

Did you ever put your allowance in a bank account?

Did you ever buy clothes with your own money?

Instilling values and a strong sense of self-worth in your kids involves more than just encouraging and promoting money awareness and financial responsibility. It also requires development of sound values that can reinforce feelings of individual self-esteem. Such feelings can facilitate spending and savings habits that will allow the people in your family to lead meaningful lives.

Values Quiz: Your kids will hear a lot about money at an early age. To make sure there isn't any confusion, you can make a game of discussing the following statements with them. Ask whether they've heard these statements before and what they think the statements mean:

  • He's/she's only out for money

  • Money isn't everything

  • She's lucky; she doesn't have to work

  • Money doesn't grow on trees

  • Money makes money

  • The rich get richer and the poor get poorer

  • The smarter you are the more money you make

  • He/she lives payday to payday

  • They are so lucky to be rich