Pay off high-rate debt with a personal loan and save thousands. Learn more.

How to Teach Your Kids About Money Management

By Emily Greenhill Pierce · May 18, 2022 · 9 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

How to Teach Your Kids About Money Management

It’s never too early to start teaching kids about money and setting them on a path towards solid financial skills and health. It can start with a piggy bank, to introduce the concept of saving for a rainy day. An allowance can help them learn to budget and earn that giant stuffed unicorn.

Teaching your child the value of money — how to save, budget, and invest — is a vital life skill that isn’t part of most school’s curriculum. So it’s on you to prepare them for this aspect of adulthood. You may wonder how you can start teaching your kids about money. We’re here to help with advice on five simple and effective ways to kick off your child’s financial education. Let’s get going!

Money Management Explained

First, let’s look at the big picture. The goal is to impart knowledge about money management for kids…but what is money management anyway? Some adults can’t answer that question, let alone explain it to their children.

Simply put, money management is the practice of saving, budgeting, spending, and investing. Its principles help you stay on track in terms of money coming in, going out, paying off debt, and being stashed aside for short-term and long-term goals.

While many grown-ups may know that saving money is important, it takes an engaging approach to get kids psyched about hoarding their pennies rather than spending them on a video game. Figuring out how to help children learn good money management is a smart move on its own, but it can also wind up being a satisfying and fun experience for the whole family. It might even give you a renewed focus on your own money skills.

Recommended: How to Manage Your Money Better 

Teaching Kids Money Management

Teaching kids about money sets them up for healthy financial habits in the future. Children as young as three years old can start to grasp the basic concept of “We need dollars to get ice cream.” Talking about money and being transparent about your own financial life (“I got paid today,” or “I need to pay bills tonight”) begins to ground kids in the ebb and flow of finances. It helps a child learn the value of money.

Parents can use a routine trip to the grocery store to point out price tags and how some things cost more than others. Asking a salesperson or cashier, “How much is this?” can clue children in to a transactional truth: You have to have money to buy something. Paying bills in front of them helps illuminate household expenses, too. Now, let’s dig into specific strategies. Here are five ways to boost money management for kids:

1. Start with an Allowance

Having an allowance teaches kids how to earn, spend, and save money responsibly, all while contributing to the household. Most adults work for a living, so an allowance can be explained as a child’s or an adolescent’s version of a job.

The ground rules for a child’s allowance vary from family to family; some start a child off with an allowance at age four, and others at age 14. How much is paid varies, too; ask your friends what they dole out, or do a quick internet search of current allowance averages. Here are two common approaches:

•  Chore-based allowance. This is pretty straightforward. A child does chores in order to get paid. This system can instill a strong work ethic that will benefit children in the future. Some say a drawback of this method is that it could send a message that household chores are optional. Children shouldn’t be “bribed” to clean their room or take out the trash. But for many families, it works well.

•  Fixed amount allowance. You agree to pay your child a set amount of money every week or month, with the understanding that they contribute to keeping your household running. This arrangement allows a child to feel part of a greater whole — to be responsible for the tidiness of their room and offer to help with the dishes because that’s what family members do. But some may argue that paying children money for possibly doing nothing promotes a weaker work ethic and a sense of entitlement.

The choice is yours, or you can develop your own approach. There is no right or wrong way to establish an allowance for a child. As long as you’re clear and consistent about the rules and the monetary amounts, your kid will benefit from having cash in their money jar and from learning the value of money.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!

2. Focus on Saving

Once the allowance dough starts rolling in, many kids, especially younger ones, will want to rush out and buy as many $1-dollar toys as possible or a bunch of candy. Teaching your kids the importance of saving money is a vital component of good money management. Here are tips on doing just that:

•  Provide them with a special place to put their money. You could open a bank account for an older child. If you go this route, it’s a great teachable moment. Talk to them about why you are choosing a certain bank for the account: Is it the interest rate? The low fees? For younger kids, keeping money close at hand can work well. Having their own piggy bank or child’s safe will make saving more fun.

•  Offer motivating contributions. Make a deal with your child: If they can save a certain amount, you’ll kick in a little bit more. This rewards them for exercising restraint, and it’s similar to a vesting or “company match” principle, which you could explain to an older child.

•  Help them set saving goals. Just as adults are motivated to save when they want to have enough money for, say, a vacation or new car, guide your child to create target amounts to save and for a specific purpose. Or, you may have a child who just wants to see how high their savings can go. Which is fine! You can encourage them to save just to find out how much they can stash. It can be framed as a great way to start a nest-egg or emergency fund for future use.

3. Motivate Them with Purchases

That idea we just mentioned about saving towards a goal is a good one! Encouraging children to buy a big-ticket item with their allowance, like a bike or a video game, motivates kids to save money. Perhaps they’ll want to save a nice round number to give to a charity they are passionate about, or want to save enough to buy a scooter. Show them the ropes of how much to put into their fund and how often to reach their goal. Make a list with your child about their dream purchases. Share how rewarding it feels when you’ve worked, saved, and finally get to buy the thing you’ve always wanted or give to a cause that’s close to your heart.

4. Explain Budgeting

Teaching kids how to budget their money can help them reach their savings goals and ingrain healthy saving habits as they get older. There are a variety of budgeting strategies, such as a zero-sum, envelope, and 50/30/20 budget. If your child is old enough, acquaint them with how these work. Let an older child try out their favorite method: If they have an allowance, encourage them to track their savings balance in a journal, noting what they earned and what they spent every week. Being mindful of their deposits and expenses can help teach your child the value of money, an awareness of their spending habits, and how to change them to reach a savings goal. These are all great steps in teaching kids to budget.

Recommended: What is the Average Savings by Age?

5. Encourage Them to Invest

Earning. Saving. Budgeting. These concepts are essential when it comes to teaching kids about money. Once they’ve grasped them, and their piggy bank is filling up, you can even lead them to investing their money. Start simply. Perhaps by saying, “What if there was a place you could put that $5 dollar bill, and have it turn into $10?”

Starting a savings account is a great way to teach kids about banking and investing. You can give them coin roll wrappers and take a trip to deposit them and grandpa’s birthday check. You might want to open a joint high-yield savings account with them, which will allow them to see the interest compound and accrue in real-time. Online banks often have the best rates for these.

Another way to build their financial IQ: Include them in casual conversations about your own investment strategies. Open the door for questions about stocks and the marketplace. When they’re ready, there are apps and online games where kids can practice investing with virtual stocks, so they learn about building a portfolio. You could collaborate with them to pick a stock and let them observe the rise and fall of its value. This kind of hands-on experience can really help children learn and become invested in money management.

Recommended: Tips for Teaching Your Kids About Investing

Benefits from Teaching Kids Good Money Habits

Teaching kids about money can help them understand the value of a dollar and is a key step in their financial literacy. Children who are aware of the concept of cash from an early age may be more self-confident about their spending habits and have less financial anxiety. The earlier you start, the easier it will be to impart more complex financial lessons as they age, setting them up for success when they get that first summer job or go off to college.

This can feel like a leap for parents who were raised in a “don’t talk about money” household or one in which only sons were given a peek into family finances. Talking about money, spending, savings, and taxes may feel a bit uncomfortable at first. But consider diving in: Like those other “capital T” talks you have with your kids, it’s an important topic to share.

The Takeaway

Teaching kids about money and how to manage it can prepare them to be financially responsible adults. Earning gives them purpose. “Saving for a rainy day” teaches the rewards of delayed gratification. Budgeting and investing can instill a sense of confidence and independence, not to mention pride. Like so many important topics, money is one of those things parents can tackle and set up lifelong good habits.

While we’re on the topic of good financial habits, shopping around for the best deal at a bank is a valuable step. SoFi, for instance, offers Checking and Savings accounts that can help your money make more money. Sign up with direct deposit, and you won’t have any overdraft, monthly, or minimum-balance fees eating away at your cash. And you’ll earn 4.60% APY, which is 41x the national average of other checking accounts.

With SoFi, smarter money management is just a click away.


When should you start teaching kids money management?

Children as young as three years old can begin to understand the concept of paying for something and saving money in a piggy bank. Some parents start giving kids an allowance between the ages of four and seven, which can also help teach financial literacy.

What are the benefits of teaching kids money management?

Teaching kids about money sets them up for good financial habits in the future. It teaches responsibility, money savviness, and independence — a great asset as they grow toward adulthood.

How do you teach kids the value of money?

Start by being transparent about your own spending and investing habits. Introduce the concept of saving with a piggy bank. Encourage them to have a goal, like saving for a new bike. Then help them achieve it by providing an allowance and showing them how to budget.

Photo credit: iStock/kate_sept2004

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store
SoFi Android App, Get it on Google Play

TLS 1.2 Encrypted
Equal Housing Lender