Kids and money: A 5-step plan to teach kids about budgeting, earning, and saving

Kids might learn some Economics 101 lessons in school — things like supply and demand or what comprises the national debt. For most students, however, personal finance isn’t part of the curriculum. That means education about credit cards, interest rates, and saving money falls to Mom and Dad. Don’t worry – teaching kids about saving doesn’t have to involve an elaborate lesson plan.

The State of Kids’ Savings
Kids’ allowances average $1,560 per year – and very little of it is saved.


Percentage of U.S. parents who give allowances 80%
Average monthly allowance $120
Average annual allowance $1,560
Percentage of kids who save any portion of their allowance 3%
Value of investing $780 annually for 15 years (at a 6% return) $36,906



The sooner you start teaching kids about budgeting, earning, and saving money, the better. When kids begin to grasp the basic concept that money is exchanged for goods and services, it’s wise to also start teaching them about the importance of saving.

Here’s a simple 5-step plan to help you show your kids how to start good savings habits:

1. Start with a piggy bank. When kids are little, they might not know why they’re inserting coins into a giant ceramic pig. But it’s fun, and it establishes a habit and recognition of money early on.

2. Progress to a savings account. As kids get older, open a savings account for them. Doing so offers several benefits:

  • In addition to making them feel like grown-ups, it gives them their first real-life experience with a financial institution.
  • They’ll learn where money is kept and begin to understand how a checkbook or a check register represents real money. Plus, it’ll give you an opportunity to talk about things like earning interest.
  • It establishes a habit or routine of depositing money. It’s a simple action, but instilling that concept of setting aside money, no matter what amount, is invaluable.

3. Establish savings goals. Even a precocious9-year-old won’t care about saving for retirement or college (much to your dismay). So, to help motivate kids, make sure they get to choose what they’re saving for. Maybe that’s a dirt bike or a theme park ticket. Don’t forget to talk about needs vs. wants: Saving for a fun item is motivating, but it’s also important to help kids distinguish between “nice to haves” and necessary items. Once you’ve established a goal, you can make a deal that for each dollar the child saves, you’ll match it. Another option is providing an allowance and letting the child “manage” his own finances (with parental guidance, of course).

Parents: Your kids are watching

Kids observe their parents — what they eat, how they treat others and how they manage their money. So, be sure that you’re modeling smart financial behavior.

It’s also a good idea to include kids in planning the family budget or discussing saving and spending habit, says Karen Guy, Executive Director of the SAC Foundation. “While more in-depth financial matters can be handled between parents,” she advises, “asking kids for their input on ways to save money or making a game out of finding the best deals or coupons before the next time they go grocery shopping can be a great learning experience.”

4. Look at youth-oriented accounts. Specialized kids’ savings accounts like Cobalt Credit Union’s Dollar Dog Kids Club Account help make saving money fun.

“Every time kids make deposits to their accounts, they get a hole punched on a special Dollar Dog punch card,” Guy notes. “Once they earn 12 punches, their card gets entered into a quarterly prize drawing.”

5. Continue the education. When kids get to college (if not sooner), they’ll be bombarded with credit card and student loan offers. A solid understanding of personal finance basics when they’re younger can help make sure they understand what they’re getting into. An online financial self-help resource, like Cobalt Credit Union's KOFE (which stands for Knowledge of Financial Education), is a natural next step. The website is designed to help teens and adults avoid learning financial lessons the hard way. The best part is KOFE is FREE - a new user to KOFE just has to set up a login!

Stick with it!
Like all of the habits you’re trying to instill in your kids, repetition is important. Consistently talk about and model saving and other good financial habits, and your kids will take notice.

What do you do to help encourage your kids to save money?

Looking for more tips for teaching kids to be financial responsible? See “Kids and money: 8 tips to help your children become more money-savvy" and be sure to download our free Kids and Money Discussion Guide and Worksheet.