Teaching financial lessons to children

With help from the Iowa Falls State Bank, here are some quick tips for shaping positive financial attitudes, even in very young children. Parenting in the early years can lay the groundwork for how your child will think as an adult.

Resist the urge to splurge

Many parents, grandparents, and families want their little ones to have the best of everything. They shower the child with “things.” For adults, it’s a way to celebrate a new child in the family. But for children, these gifts create a sense of abundance. Instead of one or two treasured stuffed animals, the child has a collection. These gifts are setting “abundance” as a norm, and with these gifts come an expectation that more is better. It’s a dangerous message that children will wrestle with all of their lives. Children who are content without mounds of material trappings will live simpler lives, less tempted by unnecessary spending and consumerism.

Consider giving an experience! Research shows that his alone can make a child feel more happy, than a simple toy. The long term effect on child produces more bonding within the family, fewer behavioral problems in children, a stronger sense of identity, a sense of security for children, higher rates of academic success, and lower rates of violence

Say ‘no’ and stick to it

What begins as showering children with unasked-for gifts can quickly turn into child-initiated requests. The world is full of colorful toys, and children can develop a bad case of the “gimmees.” Asking for more, kids may use every tool at hand, from coy cuteness, to whining, to tantrums. Adults have to teach children early on that they cannot have everything they want. Think of the implications of this lesson on credit card use and debt.

Wants vs. needs

Teach your child the difference between wants and needs. Kids may “want” many things, but “need” far less. Discerning between needs and wants will help children sort through the advertising messages that will bombard them. Evaluating needs and wants – on both a small and large scale – helps adults control expenses. Money that would be otherwise spent on “wants” can be put to work in long-term savings, investments, or retirement. These are values that secure a future.

Teach smart shopping

When your child is old enough to understand that money works in stores, start to show your child how to stretch a dollar. When you buy, be a smart shopper, and talk about the steps you take to save money. For example, if you buy an item on sale, put the coins that equal the full purchase price on the kitchen table and then take away a number of coins to show how many coins you saved. Next show what you could buy with the savings – or by adding just a few more coins. Gradually teach your child to follow your lead. It’s an important life lesson, and your child will thank you for it later.

Build a four-bank system

When your child reaches age 5 or 6, begin teaching that money can be used in four ways: spending, saving, investing, and giving. Separating these funds show children that money is used for more than spending. In fact, you may insist that any allowance is split among four categories. It’s a lesson that will shape your child’s attitude toward using money from allowances through paychecks.

Raising money-smart kids in today’s world can be complicated – often a daunting task, given the messages of the modern marketplace. Whether you are a parent, grandparent, godparent, aunt, uncle or friend, you can help a child you know learn to make smart choices today.

Begin with simple messages when your child is very young. Each new stage in your child’s life will bring a new set of circumstances and pressures. As the child matures and situations concerning money arise, build on those simple messages by layering on more detailed and complex discussions.

Your actions will help prepare your child for decades of financial responsible tomorrows.


Carrie Kube is a director for Iowa River Valley Early Childhood Area Board. All thoughts and opinions expressed are that of the author and not the board and/or its community partners.