For Parents

Most Important Financial Principles to Teach Your Kids

Teach your kid essential financial principles to set them up for success. Here’s what you need to know.


So, the time has come. Your child is ready to learn about finances. But the question is, where do you start? Or better yet, how do you do it in a way that keeps them engaged. The truth is that there are dozens of essential parts to finance, and figuring out exactly what to teach and when can, frankly, be overwhelming. With that in mind, we’ve put together the most important parts of finance to teach your little one’s about. 

Also, don’t worry if your kids take a little time to learn a few of these concepts. Every kid learns different things at different speeds. Remember, patience is the most crucial part of teaching. 

Without further adieu, here are the essential finance principles for your kids to know. 

Stay Organized

Organization is key to practically any facet of finance, from organizing bills to long-term money goals. And teaching your kids organizational skills helps them in other aspects of life. It can be hard to get your kids into organizing things – especially if it’s hard to get them to clean their room or manage other responsibilities. To instill a little planning in them, get them a calendar. Or, if they use electronics, encourage them to download a planner. 

You can also use a task list to help keep them focused. In the end, the most important thing about teaching organization is a sense of priority. Taking care of the big stuff first is a good rule of thumb for a reason. 

Plan For Your Future

It’s easy to just talk about retirement when you’re trying to explain planning for the future. But don’t. Rightfully so, retirement is just too far in the future for kids to grasp fully. Instead, focus on closer goals like planning for a vacation, a new bike, etc. It’s usually easier for younger minds to understand why saving for an item is important vs. conceptualizing retirement. 

All in all, planning for the future is a skill any kid needs to know.

Pay Yourself First

Honestly, paying yourself first is something even most adults could be better at, so it’s a good habit to teach young. You can start by encouraging them to put a portion of their allowance away. The point of paying yourself first is to focus on long-term savings. That makes this a great financial skill to tie into planning for the future. 

Start Saving Early

Early savings is important if you want your kid to have financial stability. One of the best ways to teach it is with a money jar. Team up with your kid and start saving coins and change in a jar. This way, the money is tangible and easy for any kid to get excited about. Once the jar gets around halfway full, ask your kid questions like, “How long do you think this money can last?” or “What if this is all the money you have for the rest of your life? With a bit of persistence, your child will see the importance of saving early. 

Spend Less Than You Earn

Teach your kid to spend less than they earn by helping them with budgeting. Stress the importance of living beneath your means and using cheaper alternatives – whenever possible. This is a great lesson to tie into any talk about savings. 

Put Your Money to Work

Ah, investing. Let’s be honest, in tomorrow’s world of bitcoin, NFT, and countless other acronyms, investing will look a bit different. But, it’s still a timeless part of finance. For that reason, it’s best to focus on the essentials instead of the medium. One method is to teach your kids how interest rates work by suggesting you hold some of their money and give it back plus extra after a while. For example, hold $1.00 for a week and then give back $1.30. 

Try to keep the return amount small to set realistic expectations in the future. Point out that although $0.30c (or whatever amount you choose.) doesn’t seem like much, it would be if there were more dollars invested. 

It’s also an excellent opportunity to teach them about business ownership. A classic example is a lemonade stand, but a more modern choice is to let them pick a passion and figure out a way to monetize it. For example, if they like making bracelets, you can sell them on Etsy and other marketplaces.

Quick reminder, don’t judge the effectiveness of a business ownership lesson based on whether or not the business succeeds. But instead, on whether or not your child knows why the business succeeded or failed and the value in making their money work.

Know The Risks

Any and every form of investing has inherent risks. That’ll be true 100 years from now and 100 after that. Ensuring your child understands financial risk can prevent them from overextending themselves later in life. 

Diversify Your Income and Investments

It’s an age-old adage, don’t put all your eggs in one basket. Teach your kid the importance of having multiple plans and avenues of money growth by having them list all their business and money-making ideas. Let them know that having multiple income streams helps provide stability and options. Once they have a list, ask them to imagine how much each venture would cost to start and sustain. As usual, inform them of risks and overextending. 

Maximize Your Employee Benefits

Let your kid know that even if they start a successful business, they’ll still start off working for someone. As such, it’s important to make the most of vacation time, retirement opportunities, and other perks. A good way to explain employee benefits is to tell them about your career benefits and how you earned them. 

Stay on Top of Your Taxes

You can use public services like cops, public schools, and hospitals to explain taxes. Use phrases like, “Everyone pays taxes to help make their state and country better.” 

Plan for Unexpected Events

Unexpected events can sneak up on anyone. To help your child understand that, give them some scenarios. Things like a sudden bill or a flat tire can make good examples. This is a great lesson to use when teaching the importance of a savings account.

Don’t Borrow What You Can’t Repay

Teaching your child about financial overextension helps them see the importance of budgeting. Let them know about the consequences of late payments, poor credit, and repossession. 

Stay Disciplined

Consistency is key to financial success. Let your child know that as long as they build strong money habits, they’ll be able to live comfortably. 

Always Be Learning

Always be learning means instilling a healthy level of curiosity in your little one. Let them ask questions, no matter how simple the answer may seem. To help fortify this trait, try to get them finance books for kids.

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About the Author

Chadhurst Sharpe

Chadhurst Jainlett Sharpe spent over six years working as a personal finance banker. He's passionate about giving young minds the tools and resources they need to succeed with money.

Last updated on: April 19, 2024