Teaching Kids the True Value of Money

by RC on September 16, 2008

Teaching kids about money involves several aspects. First, kids generally learn about the face value or denomination of money, usually when a parent or relative gives them a few coins, and may explain that a penny is 1 cent, a dime 10 cents, etc., and what each is worth relative to one another. 10 pennies is equal to a dime, 5 nickels equals a quarter, and so on. Later on, but they do not have to necessarily be in order, kids learn that money can be exchanged for goods, such as when a parent might explain that in order to get a toy that the child may see in a store, or on TV in a commercial they (or you) must exchange money for the toy. A little later on usually, kids learn that when they receive money, they can save that money up to buy something they want. They may not have enough money at the time, but if they save up money they receive, one day in the future they may be able to buy that certain toy or item.

Unfortunately, this is where a child’s education about money sometimes ends, even into adulthood.

The “real” value of money, in essence, is that it can represent future opportunity and freedom. Money should not only be thought of as a vehicle to purchase things, but as having value to allow one to make choices in life that one would otherwise be unable to make without it, have the means to take care of oneself or family, and have the freedom to make choices that being in debt does sometimes not allow us to make. Often, we are constrained by financial obligations and all of those things we must have and save up for, that we do not realize we are limiting opportunities and the freedom of choice when it comes to our lives that financial freedom can bring us. Not having enough money can limit our job choices, where we live, and what we do with our lives.

How do you teach kids about the value of money ?

  • Start them saving early-Give them an allowance starting at a young age, and get them used to saving money-just for the sake of saving.
  • Teach them not to save just to spend- If they save money for things, instead of saving for their future, it will be difficult for them to realize the freedom money can give them in the future. Making them save a percentage, and not taking every cent in the piggy bank to buy a new toy or game, is a good idea.
  • Stress the importance of choice and freedom- saving money for education, experiences, etc., as opposed to materialistic things. It’s not always about things. Sometimes having money in the bank allows you to do things you would not be able to do without money.
  • Use real life examples- Explain that if they buy the new Star Wars toy, they won’t have any money left. This will limit their choices in the future.
  • Let them make mistakes, but point them out so they learn from them. It’s OK to let them make mistakes, but try to teach something when they do.
  • Teach them to be generous- All the money in the world won’t buy friendships, relationships, or love. While money can be an important tool, relationships with people are more important in the grand scheme of things.
Photo by Eliazar

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{ 9 comments… read them below or add one }

Uncommonadvice September 18, 2008 at 7:06 am

This may seem controversial but I wouldn’t even discuss money at all with my kids until they are at least 16. Below that age they just don’t have the maturity to understand.

Money is a bit like love – sometimes you need to make your own mistakes no matter how many times you’re given good advice by your parents.


RC September 19, 2008 at 6:48 am

@Uncommonadvice- Not sure if you mean discussing the parent’s finances or money or trying to teach them the basics of money, etc. I understand not wanting to talk to them about the parent’s finances, but I would not agree if you are talking about money in general-although I do agree sometimes you have to let kids make mistakes-i.e., you should not necessarily “bail them out”.


Phil September 21, 2008 at 6:29 am

“Teach them not to save just to spend”

Very valid point, I can admit that I do this all the time. I save so I’ve got a pile of cash to waste. tut tut! I’ve definitely become more sensible with money since I started working more. I think for kids to understand money they truly have to earn it.


Julie September 22, 2008 at 3:55 pm

I think kids should learn about money, definitely before sixteen. These days by the time kids are sixteen they are so independent. This might make a savings account for kids because it has online access, a 3.50% APY, no monthly fees, and a $1 minimum: http://shorebankdirect.sbk.com/ Plus, I work with ShoreBank – I know they have a commitment to environmental lending and social responsibility, so it teaches kids responsible investing as well.


RC September 23, 2008 at 6:48 am

@Phil- That was one of my biggest problems for a while. I worked hard, but I saved my money to spend it!


RC September 23, 2008 at 9:44 pm

@Julie- I would agree-I think it is important to learn about earning and saving money at an early age- Thanks for the tip on Shorebank- have not heard of them before but the interest rate looks pretty good.


Jen November 5, 2008 at 7:55 pm

I don’t think it’s ever too early to teach your kids about money. I also think using a credit card in front of kids may give the wrong message as they don’t associate it with spending and the fact that you eventually have to pay it back.


RC November 6, 2008 at 10:31 pm

@Jen- I agree, I don’t think you can start too early. Interesting thought about the credit card usage, and you may be on to something. I think too many adults have the problem of not associating credit card usage with actually spending money, so I am sure kids probably see it the same way as well.


Rajeev Singh May 2, 2009 at 5:25 am

While I agreein principle that saving is a habit and the earlier it starts better it is, I also feel that making kids forcefully save might send the worng signal if its not done correctly. Rather make them understand the value of money and whta it can do for them. Make them “earn” their money by showing good conduct and nice behaviour. Thsi will send them a message that nothing comes free and this is something to be earned and not demanded by crying hoarse.


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