Core concepts for teaching kids about money

The average U.S. household owes credit card companies $7,084, and half of adults have less than three months’ expenses saved. The good news is, by teaching kids about money, parents can help them avoid these and other financial challenges in adulthood.

When teaching kids about money, there are three core concepts to cover:

  1. Effective earning
  2. Effective spending
  3. Effective saving

Learning to earn

Your child’s first step toward money mastery is learning the value of generating money. Take some time to teach your children about the value of cash flow, which comes from a solid work ethic.

“Kids need to know that without cash flow, nothing will happen,” says Crissy Hayes, Vice President of Operations at SAC Federal Credit Union. “That’s why parents have to set good examples in their work and in earning money for their children to model.”


  • Demonstrate that hard work brings positive rewards by giving your children jobs around the house to earn their allowance.


Good spending habits

This is another core concept surrounding kids and money. The first step is making sure your child realizes that when money’s gone, it’s gone. You can teach even small children to create a budget to guide their spending. You can also teach them how to use credit wisely.

“As an adult, your credit is important to your livelihood,” Hayes points out. “But if you haven’t managed your credit as a young adult, you won’t be able to purchase big items like a home or car when it’s time.”


  • Help your child create a budget for purchases based on earnings.
  • If the budget is all spent, resist the urge to step in for the rescue.


Building up savings

Teaching kids about money includes reinforcing the differences between a savings account and a checking account; a savings account is not a fund that should be dipped into when heading to the mall or the movies. Children learn this principle easily when they see their parents’ savings accounts grow through regular deposits and few, if any, withdrawals.

“As a mother of three, the earlier I started showing my kids the importance of saving money, the more they consistently wanted to save their allowance, birthday money, etc.,” Hayes says, adding that parents should make the saving process fun.


  • Open a savings account for your child at your credit union. Take a look at SAC’s Dollar Dog Kids Club savings account, which uses rewards to teach kids about saving.
  • Determine how much will be deposited each week and encourage your child to stick to it.


The two sides of rates

Rates on savings accounts can work for you while rates on credit accounts can work against you. Children need to understand both types of rates.

Savings and investment account dividends

  • Kids can start learning about dividends by opening a dividend-yielding savings account.
  • This is also an opportunity to teach them about other dividend-yielding investments like certificates.
  • Children will enjoy seeing how their money makes money for them.

Credit or loan account interest

  • Teach kids that credit interest is money you pay above what you borrowed.
  • Show older children and teens how making minimum payments on a high credit balance could keep them in debt for many years.
  • Be a good example to your kids by paying off your credit balance each month.

When you focus on kids and money and follow these and other common-sense tips, how much more stable will your child’s financial future be?

For even more information on teaching kids about money, see our other posts about kids and money and get more tips from SAC’s Crissy Hayes and Karen Guy in “8 money-savvy tips to teach your children” on