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Raising money-smart children

Teaching kids how to earn, save, give and spend

In first and second grade, your children are probably learning cursive handwriting and their multiplication tables. But there’s something else they can learn—money management. And there’s no better teacher than you.

Most children know about money at a young age. But they may not understand where it comes from and how it is used. Teaching them early on can help instill in them important money-management values that will help them later on.

Plant the seeds

Explain to your children that money doesn’t magically grow in the garden. Tell them they may receive money as a gift for special occasions, such as birthdays and graduations, but that the person giving them the gift had to earn that money. Then suggest that they too earn money by doing chores around the house. 

Discuss the chores your children may want to do. Then set a payment schedule for each chore (e.g., 50 cents for setting the table at dinner time) and a schedule for how often the chore must be done (e.g., five days a week). Let your children keep track of their activity. Then at the end of each week, sit down and tally up how much they’ve earned and give them their allowance for the week.

Making children earn their money gives them a sense of satisfaction—and teaches them that money isn’t as easy to come by as they may originally have thought. Also, when children earn money, they’re less likely to be wasteful with it.

Hint: Children will be more inclined to save a $5 bill than five $1 bills. So when appropriate, try giving them the larger denomination.

Watch the fruits grow

As your children earn money or get it as a gift, they’ll probably want to spend some of it here and there. Ask them to decide what they want and whether they have enough to purchase it. If they don’t have enough money for the item they want, explain the concept of saving.

One way to do so is to set up savings accounts for them. Tell them that each time they earn money, they can deposit it into the account and watch their money grow. Be sure to explain the added bonus of interest. They’ll love the idea of watching their money grow without having to do anything.

Tell them that when they have enough money saved up to buy the item they want, they can withdraw the money from the bank and make the purchase on their own. This will give them time to think about whether they really want the item. Chances are, they’ll forget about it and want something else by the time they save up enough to buy it.

Share with others

Your children have probably learned about less fortunate people in school. Now’s as good a time as any to teach them about charity. Set a percentage that they should give to charity—perhaps 10% of their savings.

Enjoy the fruits of labor

If your children are serious about buying a particular item and have saved up enough to do so, let them do it. They will have much more respect for the item they’re purchasing if they use their own money to buy it. But before you let them spend, explain the importance of saving some of their savings for a rainy day.

A good rule of thumb for money management is the 10-10-80 rule—10% for charity, 10% for savings, and 80% for spending.

Kids can grow into money-conscious adults
The lessons your kids learn about money today will put them on the right path to financial independence tomorrow. And they’re never too young to learn.

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