The Money Talk: Teaching Kids Financial Responsibility

November 27, 2023 / Insight from Jane Alm, Senior Wealth Advisor

Image of two kids counting the money from their piggy bank.

As parents, one of the most valuable lessons we can teach our kids is the value of money and the skills to be financially responsible. This is not just a response to our current economic climate, but a fundamental life skill. There are many ways to teach our kids about money; your approach may depend on what lessons you want to impart, your child’s age, and what will best resonate with your child. November is financial literacy month, which is the perfect time to introduce the importance of the ‘money talk’ and start your kids on the path to financial literacy. Here are some ideas on ways to get started.

Begin When They Are Young: The Basics of Money

The ideal time to introduce your kids to the concept of money is around Grade 2 or 3, coinciding with when they begin to learn basic math. Introducing concepts like saving and spending through tangible means, like play money or coins, makes it more relatable and understandable. Children, especially at a young age, struggle to comprehend the abstract nature of digital finances. Therefore, physical representations of money can be a powerful tool in teaching them the value of each dollar.

Imagine you’re at the grocery store with your eight-year-old, talking about the cereal they like and how much it costs. If they have five one dollar play bills, and the cereal costs four dollars, you can show them in a tangible way that buying that brand of cereal leaves them with one dollar. This does a few things. First, it shows them that money is a finite resource. Second, it starts a conversation about value. They might like the four-dollar cereal, but another option, which is also okay, only costs three dollars, leaving more in their pocket after addressing a need. These are concrete ways to get them thinking about expenses, the value of money, and being thoughtful about their needs and wants.

Incorporating Allowance: Learning by Doing

An allowance isn't just a reward; it's a teaching tool. Be strategic when setting an expectation for your child, like not expecting to be paid every time you help others. Consider giving an allowance as a means of compensation for things above and beyond household chores. For example, if your child’s chores include cleaning their rooms, putting away their toys, and doing the dishes, then mowing the lawn is an above-and-beyond contribution. Give them an allowance for mowing the lawn, and the allowance becomes a mechanism for children to manage money and understand its value.

This approach helps them learn the value of money for time invested, or a service provided. It also opens the door to demonstrating the importance of saving for things they want, emphasizing patience and the satisfaction of earning something over instant gratification. This method lays the foundation for understanding that money is a result of effort and achievement.

Learning from Mistakes: A Crucial Part of Growth

Learning often involves failing. It's important to allow children to make mistakes with their money. It is okay to let them fail, and okay to not bail them out when all their money is gone. Whether it’s spending on something frivolous or not saving enough for a desired item, these experiences are invaluable. They teach the hard lesson that once money is spent, it’s gone. Now, it’s a question of what are you going to do to earn more?  Encouraging reflections on these experiences can foster more thoughtful spending in the future. It is important to think about how we can teach our children to not make that impulse buy, but to step away and think before they spend.

Imagine your child is headed back to school and they declare that they don’t want you to do back to school shopping with them. They want the money and the independence to shop for themself. If your budget is two hundred dollars, hand it over and reiterate the things on the list: a couple of pairs of shoes, five shirts, three pairs of pants. Here’s the kicker. When they come home with only some of what they need but no budget left, hold your ground! They can learn something valuable about the choices they make when, by the end of the year, they’re looking a bit tattered because they chose wants over needs! If you stick to your approach, what might the following year look like? Will they come home with different choices and money leftover? What will they have learned?

Practical Applications: Beyond Theory

Taking children shopping and explaining the differences in prices, or why saving for something like a trip to Disney World is more rewarding than instant gratification, are practical ways to embed these lessons. This approach not only teaches them about money but also about the value of hard work and planning. You can evolve the methods you use to instill financial prudence in your children with their age and ability to understand concepts. To form the right behaviours around finance is going to be an ongoing, consistent process. But if you stick with it and do it well, it will put your kids on a path to greater financial independence and right-size their expectations around needs, wants, and luxuries.

Financial literacy for children is about much more than numbers. It's about instilling values, understanding the consequences of decisions, and preparing them for the financial realities of adulthood.

Jane Alm, 

Senior Wealth Advisor

Phone : 780-412-6624

Email :



National Bank Financial - Wealth Management (NBFWM) is a division of National Bank Financial Inc. (NBF), as well as a trademark owned by National Bank of Canada (NBC) that is used under license by NBF. NBF is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF), and is a wholly-owned subsidiary of NBC, a public company listed on the Toronto Stock Exchange (TSX: NA).

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