How to Teach Our Children Financial Responsibility

If you are getting a late start to financial literacy like myself, you know the importance of understanding the ins and outs of money as young as possible to reap the most benefit and start developing good financial habits. Below is a guide about how to teach your child financial responsibility by discussing the following money topics: Savings, Income, Spending, Credit, Loans, and Debt with your kids.

There is little to no personal finance taught in schools which leaves this vital information up to us to learn on our own and teach our children. Teaching children about money at a young age will become instrumental to healthy money management when they become adults. Like any habit it can’t be established in one 15 minute conversation. Let’s dive in!


For kids having them save money in a clear piggy bank or jar does two important things. First, it gives them a physical location to store their money and start saving. Second, it gives them a visual to know how much money they have at any time and to see the progress of growth. 

As your children get older, you will be able to open up a high yield savings account at the bank and further discuss how the money will be used towards their savings goals. Developing children’s savings habits, say saving 50% of money they receive from birthday or earnings from chores, will develop early savings habits in life.

Tip: Starting an envelope system is a great way to introduce budgeting to kids. You can use this budgeting system yourself to show them how you pay for things each month by allocating money into different envelopes: phone bill, groceries, clothes, eating out, etc. 

Money can also be transferred between say eating out and clothes if you want to spend more eating out instead of buying clothes for that month. However, once the money is spent for the month it has to be replenished the following month before spending again. This teaches money management and discipline without actually spending more each month.

Parents can get their kids involved by giving them envelopes related to child expenses and letting them budget and pay for things they need. Or your children can start their own envelope buckets to see how to save for certain items over time and how money can be transferred between the buckets but not exceed what is allowed each month. 

Here are a couple high yield savings accounts:

Ally bank (I currently use do to providing virtual buckets to safe for specific goals) or Capital One 360 Performance Savings. They offer a higher Annual Percentage Yield (APY) than most savings accounts. I use Ally as they have virtual buckets making it easier to budget or save for a specific goal instead of one large lump sum savings account bucket.


Teaching kids that money is earned through chores demonstrates the idea that cash is obtained through work. This will allow discussion about different types of work, work earnings according to the economy, and as your child gets older, how to use their income to work for them and prepare for the future.

An example of this can be discussing the difference between IRAs and 401Ks and how starting early with investing through compound interest helps supercharge reaching their financial goals.  Refer to our Personal Finance for Healthcare Professionals post to learn more. While branching to other topics such as passive income or investing where your money is earning you income without having to exchange personal time (or very little time) for earnings. 

Tip: Want to start investing for your child’s retirement right now? ROTH IRAs do not have age restrictions. However the contributions must be earned income from an employer or owned business with contribution limits at the maximum earned income or up to $6,000 a year (refer to IRS or a reliable source for most up to date annual limits). I have heard of child models or actors using this income to open a ROTH IRA to jump start their compound savings for their retirement. If you are a business owner you can hire your children in your business and fund their ROTH IRA this way.

Other useful sources:

ROTH IRA for Kids

ROTH IRA for Teenagers


Having discussions and participating in examples of responsible spending will encourage them to be financially responsible about money as well. 

Some examples may be prioritizing spending. Having them understand they may not be able to buy everything they want right now requiring them to prioritize what maybe more important today and what can wait.

Lead by example with spending. Kids pick up on things quickly. If they see others around them buying impulsive or the newest cars or apparel (liabilities) each year then they will also. 

Credit, loans, and debt

Kids’ first experiences with lending may be through books or renting movies. Here they can understand the concept of borrowing something that has to be returned or there will be consequences.

Similar with spending money we do not have and paying that money back at a later date. This is a great branch for talking about interest rates, staying away from debt by not spending money you don’t have, and preparing early for big purchases in life such as a car, college, or a house so a loan (or smaller loan) won’t have to be taken.

Tip: if you have children and a credit card, add them on as an authorized user and pay the bill on time. By the time they are 18, they will have an 800+ credit score. This isn’t to replace financial lessons learned as they age but to get them off to a great start so by the time they are 18 they will know how to manage money responsibly to maintain this high credit score. 

Open Money Discussions

Having discussions about money with your children is important. This seems taboo in our culture however is a fatal mistake to improving both our own financial understanding and educating our kids about money. 

Setting aside our need to compare ourselves to others and using income as a significant measuring stick to success, happiness, and joy, we can start to have deeper, more diverse discussions around money. 

After all, money is not the end game. Our time and finding purpose is and the sooner we harness the rules of money and how it works, the sooner we can unlock more time to spend with those we love and do purposeful things.


Discussing money with kids may seem awkward and you may not even know where to start. The truth is, the more decisions, guidance, and advice you can have with your children the better off they will be at managing their money in ways that benefit them and prepare them for adulthood. 

Here is a good resource by the Consumer Financial Protection Bureau to help parents wade in the financial waters with their children.

What have you found helpful in teaching your kids financial independence?

Learn how to pass on your wealth to the next generation!

Disclaimer: Financial decisions you make are yours alone at your own risk. Rehab Rebels holds no responsibility nor liability for your financial decisions. Refer to full Disclaimers & Terms and Conditions for more details.

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