Raise Money-Smart Kids: Tips for Teaching Your Children About Saving and Spending

 

No one wants to raise a spoiled kid. And we all want our kids’ futures to be even brighter than our own. That’s why we believe money management is such an essential life skill — one that’s never too early to start learning. By teaching good saving and spending habits to your children, you can set them up for a lifetime of financial success. Here are some tips to help you talk to your kids about money.

Start with the Basics: What Is Money?

Before diving into saving and spending, ensure your children understand what money is and how it works. Explain that money is earned by working, and it’s used to buy things we need and want. You can use everyday activities, like grocery shopping or paying bills, as teachable moments to show how money is used in real life.

Make Saving Fun

Teach your kids that saving can be rewarding AND fun. Encourage saving by using a visual aid, like a clear jar or piggy bank, where they can watch their savings grow. Set a small goal, such as saving for a toy or a day out, and celebrate together when they reach it. This helps them understand that saving is about delaying gratification for something bigger and better.

Introduce the Concept of Spending Wisely

Kids also need to learn how to spend money wisely. Start off by giving them a small allowance (consider $1 for every year of age) and let them make their own spending decisions. This allows them to shoulder responsibility and experience the consequences of their choices — whether it’s realizing they don’t have enough money for a giant Lego or learning to keep track of their own money.

Set an Example

Children often learn by watching their parents, so be sure to model good financial behavior. Show them how you budget for groceries, save for family vacations, and make thoughtful spending decisions. By seeing you manage money responsibly, they’ll be more likely to adopt similar habits.

Discuss Needs vs. Wants

One of the most important lessons in money management is understanding the difference between needs and wants. Explain that “needs” are essential items like food, clothing, and shelter, while “wants” are things like toys, electronics, and dessert — nice to have but not necessary. You can even involve your kids in making a family budget. They can help you identify which expenses fall into each category, learning financial discipline and responsibility in the process.

Encourage Giving

Teaching your kids about money isn’t just about saving and spending — it’s also about generosity and helping others. Encourage them to set aside a portion of their allowance for charitable causes or to help people in need. This fosters a sense of empathy and helps them understand that money can be used to make a positive impact on the world.

Help Your Kid Become a Star Saver

Make saving fun by encouraging your kids to sign up for our Star Savers Club — an exciting financial learning program for kids from birth to age 18. With a Star Savers account, your child not only starts saving and earning interest but also receives delightful surprises, including treats, birthday celebrations, and fun packages delivered to their home. To join, just stop into your local Farmers & Merchants Bank.

Make It Age-Appropriate

Tailor your money lessons to your child’s age and understanding. Younger children might grasp simple concepts like saving dollar bills and coins in a piggy bank, while older kids can handle more complex topics like budgeting, credit cards, and interest. As they grow, you can gradually introduce more and more advanced topics.

Keep the Conversation Going

Money management is a lifelong skill, so keep the conversation going. Continue giving guidance and support as your kids enter new life stages — getting a first job, going to college, or planning for a major purchase. Encourage them to ask questions and involve them in family financial discussions where appropriate.

Teaching your kids about saving and spending is an invaluable gift that will serve them well throughout their lives. By starting early and making the lessons engaging and relevant, you can help them develop a healthy relationship with money. At Farmers & Merchants Bank, we’re here to support you and your family on your financial journey, every step of the way.