This is another guest post by Kathryn who most recently wrote about feeding a family of 4 for $100/week.  This time around, she shares her ideas on how to teach kids about money.

My brother and I couldn’t be more different when it comes to how we manage our finances and yet my Dad was a great money manager who taught us from a very early age everything he knew about managing money.

I started thinking about this one day and wondered if this was the same for other families. It was then that I began asking around. “Hey, you have two siblings. Do you have similar spending and saving styles?” The answer inevitably began with laughter and an exclamation. “No, way!” I began to wonder if teaching kids about money had any effect at all.

Even my own two kids couldn’t be more different when it comes to their money personalities. My 10-year-old spends money the moment he gets it. It’s like it eats away at his soul until he’s exchanged it for commodity, usually to our distress, trading cards. My 8-year-old is as frugal as her dear old Mom. She loves to save. I asked her why it is she likes to save all her money. She replied, “It makes me feel powerful.” Well then. She never heard that from us. Honestly.

If siblings turn out so different in regards to how they handle their finances, is there anything we can do to prepare them for a strong financial future? Here are a few steps you may want to consider.

1) Model Generosity

If you give to charity, talk to you kids about why you chose that particular charity. If you sponsor a child through Compassion Canada or World Vision, have your kids write letters or send photos. Show them where your sponsored child lives and what the living conditions are like there. When you go shopping for gifts, take your kids with them and have them brainstorm ideas on what people might like. Get them thinking about the needs of others and how they might make a difference. Let your kids see you being generous with your money.

2) Watch your language

We don’t say, “We can’t afford that.” If they ask for something, we’ll say, “Sure! Do you have enough saved up for it?” If we truly can’t afford something, we’ll say, “It’s not in the budget this month, but if it’s really important let’s make it a priority for next month.” We are careful to never complain about finances in front of the kids.

3) Give them an allowance

There are persuasive arguments both ways for whether the allowance should be tied to chores or not. The issue is to decide as a family how much allowance to give, choose whether it will be tied to chores or not, and then be consistent about giving it. Many people I’ve talked to over the years give the child’s age in dollars per week or bi-weekly. The choice is yours. Some people prefer to pay their kids the same amount to keep things equal. Other people prefer to give their kids a raise on their birthdays.   Start whenever you like but most kids really begin to understand the value of money right around the first grade.

4) Consider a “clothing allowance” once they reach the age of twelve

I truly believe that this is one of the best financial decisions my parents ever made for us. By the time I was twelve I was making $15 a week. That was a lot of money in 1983! It was way more than my friends ever made. I was responsible for buying my own clothes, gifts for friend’s birthday parties, and any music, books, or magazines I wanted for myself. I never once had an argument with my parents over something they didn’t want to buy me. If I wanted something, I just saved up and bought it myself.

5) Consider paying them interest

We give our kids an interest bonus of $2 a month for every $100 they have in their bank account. It may not seem like much but it sure is motivating to a school age kid who’ll do the math and figure out the more they have, the more they’ll earn. Just like in the real world.

6) Let them make mistakes

One of the hardest things I’ve had to do as a parent is to let go and allow them to make mistakes. This doesn’t mean you can’t set boundaries. If you don’t allow certain toys or clothing items, then the rule still applies whether they buy it or not. It’s fine to allot a certain amount for saving, giving and spending. After that, spending money should be just that, for spending on whatever it is their little hearts desire, webinz and trading cards included!

7) Teach them about banking

We give our kids their allowance by cheque. We drive down to the local bank and they stand in line to deposit the money into their accounts and withdraw any spending money they want. Most large Canadian banks have free accounts for kids. I have been particularly impressed with Royal Bank and their Leo account. We called to set up an appointment to open an account and they treated the kids like VIPs with a grand tour, which ended in the vault where they each received five loonies to start their accounts.

8) Give them an early lesson in the miracle of compound interest

Let your school age child or teen play around with these online calculators for a while and watch what happens. Here one from msn, and another.  They will be amazed.

I’ve also heard great things about The Motley Fool Investment Guide for Teens for kids twelve and over. They may not listen well to a lecture from Mom and Dad but books and online calculators can inspire a change of thinking about the real value of saving over time.

Final Thoughts

We may not feel like we are making a difference to our children’s financial futures when month after month they spend money on things we would never dream of buying.  Kids will do what we do, not what we preach. Over time, if we model both generosity and gratefulness, teach them the basics of banking, and allow them to learn from their mistakes, we can be rest assured we’ve given them the tools they’ll need for a strong financial future.


  1. Christine on January 21, 2009 at 9:12 am

    Just wanted to say I really enjoyed this article. I don’t have kids yet, but I’ll remember these rules for when I do!

  2. Canucktuary on January 21, 2009 at 9:39 am

    24% interest for bank deposits?? Are you accepting new account holders??

  3. Kathryn on January 21, 2009 at 10:05 am

    Canuckturary ~ haha! I know it’s high but when you only makes 5 bucks a week, we wanted something that they could see and be motivated to save more.

  4. Sundae1888 on January 21, 2009 at 10:28 am

    Heh, the problem of giving them sweet deals early on is you can’t cut back when their allowances go up! I guess you’ll have to implement a rate freeze some time.

    On a serious side though, when do you think is the best time to wean allowance? Once they’re old enough to work part time? If the allowance is too high for the child to consider employment, he/she might choose not to work. I suppose it depends on how much the child values money vs. time/effort.

  5. Kathryn on January 21, 2009 at 10:45 am

    Sundae1888 – Below is what my parents did for me. I’m not saying it’s what we’ll do but it worked for my brother and I.

    We had to have part time work by the time we were 16. We continued to get an allowance until the age of 18 as long as we had part time work. If we went to university, they would continue the allowance until we graduated with our first degree. No job at 16 = no allowance. No university or college after high school and the allowance stopped. But they also started charging rent the September after high school if we didn’t go to university. I went. My brother didn’t.

  6. Aman@BullsBattleBears on January 21, 2009 at 10:53 am

    those are some interesting tips. Although some of the those ideas I cannot see doing myself, its certainly good to see an alternative view.

  7. FrugalTrader on January 21, 2009 at 11:54 am

    Kathryn, we’re also sponsoring a child via charity. Which charity is your favorite in terms of those that sponsor children in third world countries?

  8. Les on January 21, 2009 at 12:04 pm

    Great article. My wife are and I are expecting a boy in April and investing, money and finances is the one thing that I didn’t learn as a kid from my parents or school. I really want to teach my kid(s) about money and these are some great ideas. I also want to teach about investing though so I am going to buy some bank shares and enroll in a DRIP/SPP program for my child.

    Derek Foster’s 2nd book, I think it is “The Lazy Investor”, has a good section on teaching your kids about investing.

  9. Roe on January 21, 2009 at 12:25 pm

    My parents offered to buy me boxes of candy that cost 2x my allowance on the condition that at the end of the week I paid them back for the overage. Doing the math in the store my dad saw that if I sold each candy bar at $0.50 I would triple my allowance thus allowing me to pay him back and double my allowance. This was in Jr. High and really taught me how business run and gave me a real appreciation for how easy it was to make money.

  10. csplice on January 21, 2009 at 2:04 pm

    Great post. I am curious about your point of view on point #2. This is the only point where we don’t see eye to eye on. Why do you think complaining is a bad thing? Controling your emotions with regards to money is probably the best lesson they can learn.

    We do say “We can’t afford that, because we are saving for ???” to show them the benifit of long term saving. Simple re-adjusting next months budget seems to ignore the big picture.

    We also constuctively complain about money to show them that is is a struggle and it is work to keep finances in check. Complaining about how much we have to spend on heating this month really hit home when you show them the January and July bills side by side. It also gets them closing the door faster for about 3-4 days.

  11. Personal Finance Ology on January 21, 2009 at 2:15 pm

    Wow, $2/mo interest bonus. That is a very generous 24% return. I was always a saver, if my parents did that for me when I was a kid, I would be rich in no time(and they would be poor). There were a real lot of good tips though.

  12. Kathryn on January 21, 2009 at 2:39 pm

    FT ~ We sponsor children through Compassion Canada. I’ve done a lot of research on many of the sponsorship programs and have personally known people who’ve worked at several but overall I’ve been impressed with the work of Compassion Canada. I also appreciate the fact that they never ask for more money. When we were with world vision we got almost weekly letters asking for more.

    PFO- Good point. We may have to change that in the future. It’s not a huge deal right now because my son hasn’t kept $100 in his account yet and my daughter who has $300 is only costing us an extra $6 a month at this stage. It sure is a powerful lesson when one gets the bonus at the end of the month and the other doesn’t. :-)

  13. bob on January 21, 2009 at 4:34 pm

    The Bank of Dad is a fantastic book that uses many of the same techniques, only a bit more systematically. I highly recommend it.

  14. Craig on January 21, 2009 at 5:58 pm

    It’s the parents responsibilities to teach kids about finances and keeping them humble. I appreciate the job my parents did with me and teaching me the value of a buck, at the same time I appreciate them financially providing basically everything for me. It was a good balance. I had friends growing up who would just throw money away because it didn’t matter to them. I had good lessons, and allowance, and was taught to save for something I truly wanted to buy. And if I did borrow from my parents, I had to make sure I fully paid it back.

  15. Jack on January 21, 2009 at 6:08 pm

    I love the idea of paying them interest.

    I also remember when I opened my first RBC Leo Young Savers account (about 13 years ago at nine). I was given a personal tour by the branch manager and was super impressed – and felt very important. The free five bucks was pretty cool too. Of course it only helps RBC in the long run. Banking in Canada is like a commodity – it’s all the same. RBC has learned a lesson from the cigarette companies, “Get ’em while they’re young”. (Although I’d much rather my kids loved RBC than smoking lol)

  16. Joel on January 22, 2009 at 2:02 am

    I also think that sponsoring a child is a great tool to help our kids (and the kid overseas). We have a kid for each kid we have, we go through Food for the Hungry ( I saw them at work in Rwanda at the tail end of the Genocide, and they did a great job – best bang for my money.

  17. Jorge on January 22, 2009 at 7:53 am

    Great post! It’s scary how much influence parents have on their children’s financial (and other) behaviours and attitudes. I’ve had a lot of success using the 10/10/10/70 technique with my kids. Teaching them to donate first, then save, invest and spend, etc…
    We have recently started sponsoring a child in a 3rd world country as well, to teach them to appreciate how good they have it here. We’ll see how well that works, they are currently 6 and 8.

  18. Stuart Fleming on January 22, 2009 at 4:30 pm

    Loved your article Kathryn – very concise with lots of excellent pointers!

    Does anyone else find reading all the replies equally fascinating? There’s such a broad spectrum between people, their experience with money and what they’re teaching their children about money…

    I agree with Jorge: the four-part division of income is a great way to instill a habit of wealth creation + charity + spending.


    The guy who stops parents and teens from fighting about money

  19. Goal Hunter on January 23, 2009 at 1:52 pm

    Nice ideas. We pay our kid based on “Stickers” He has 3 things that he needs to do, which we agreed on with him and which change from time to time depending what he needs to work on. Every day we check to see if he earned a sticker for each of the tasks. At the end of the week we pay him a quarter per sticker. He doesn’t have a bank account yet. He’s only 4 so he doesn’t really care about anything except toys and candy :) but he did save up for a few weeks to get a $10 dinosaur.

  20. sammy on January 24, 2009 at 1:08 pm

    i think parents should teach children to save money and build from there. start young. we use music and a child’s character named sammy rabbit and have had good success not only connecting with kids, but with adults as well.

    as the author pointed out, language and communication are important.

    allowance has pros and cons, but if it can be consistently administered, it has a better chance of being successful as a teaching tool. the biggest negative other than sometimes being difficult to consistently manage is if it takes to much of a focus away from earning money. for many kids, some of the most informative and instructive lessons they’ll learn about money comes from earning it.

    keep up the great work! we need more people advocating smart money habits and skills.


  21. Stealthy on January 24, 2009 at 2:48 pm

    Excellent points. I’m a firm believer in teaching children young about saving and onto investing. I hope to start following these steps in a couple of years (I just got married).

  22. Guffin Mopes on January 24, 2009 at 10:47 pm

    I love — LOVE — the interest bonus for children. That’s actually an amazing idea that I look forward to implementing.

    Real world lessons are the best.

  23. Jorge on January 29, 2009 at 9:19 pm

    Nice article. Raising financially savvy kids can be really tough, especially when they are getting bombarded with advertsising 24/7!

    I wrote a nice post on my blog about using the “Money Savvy Pig” which has been really successful with my kids, ages 6 and 8.

    You can check it out here if you are interested:


  24. JG on February 4, 2009 at 12:49 am

    I have 4 kids, the older is 9 and found very interesting this post.

    For me, I have learned after 30 the benefits of savings and becoming financially free…. never late to start. With that in mind, I would like to save the learning curve for my kids.

    Bank account is a great idea, however it is ensuring you will have on loyal customer for life and a secure income of stream for the bank. There goes dilemma #1…

    The aggressive marketing campaings to incentive consumism in kids tv channels creates loyal spenders and consumers…there goes the savings.

    I would like to find more about games, in my days I was passionate about monopoly and I haven’t found a game that would give kids such empowerment and basic concepts of passive income.


  25. mgronqui on April 8, 2009 at 1:41 am

    Thank you so much for this post Kathryn! I don’t have kids yet, but when I do, I will use these rules.

    A related article I’d like to share is how to eat healthy and nutritious meals for only $5 a day. It can be viewed here:

  26. masihmark on September 9, 2009 at 4:54 pm

    Hi! Kathryn!

    I just found your blog. You have share a very good article on parenting actually.
    can i post your article in my blog to share with my readers?


  27. masihmark on September 9, 2009 at 5:05 pm

    Hi! Kathryn!

    Nice blog. I recently just found your blog. You have share a very good article on parenting actually. Rising kids is a tough jobs and take a real effort to make them success. I had a request to you,can i post your article in my blog to share with my readers?


    • FrugalTrader on September 9, 2009 at 9:28 pm

      masihmark, feel free to link to the article – we prefer that you do not copy the text.

  28. Lianne on September 25, 2009 at 9:26 pm

    Hi, Kathryn. I love your idea of giving kids their allowance in cheques. The more they go to the bank, the more comfortable they feel. And it’s equally important to have them get used to dealing with people at the bank as well as online and at the ATM. My kids still freak out over going to the bank and they’re teenagers. But one day, they’ll have to negotiate a mortgage and it won’t be on the computer! (Or maybe it will…?)

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