Learning Responsibility And Money Management

How do kids learn the basics of money management? Start with their allowance to teach them responsibility and budgeting!

mom and daughter with piggy bank

Allowances for kids are a staple of family life, but they can also be an opportunity to teach children some valuable lessons in money management. Even younger kids can learn.

Self-reliance and responsibility

It's not the best idea to tie allowance money to chores. These are two separate issues, since children should be expected to contribute to the family by doing basic tasks like hanging up their clothes, caring for their pets and keeping their room tidy. Allowance amounts can vary, depending on the age of the child and the expected use of the money they receive. Allowances can put an end to the "gimmies" when kids understand that the allowance money is to be used for purchases that are not considered necessities provided by their parents. Younger children might use their money to buy small toys, while older kids often spend their allowance on music, clothes or entertainment. In either case, parents should first talk with the child about budgeting, so it's clear what the money is to be used for. Many parents require that a portion of the allowance goes into savings. In a piggy bank or savings account, the child contributes a certain percentage out of each allowance payment, learning to save for a larger future purchase or a long-term goal.


It's a good idea to pay allowances on a once- or twice-monthly basis that mirrors the way wages and salaries are paid in the adult world. Kids will then learn budgeting so their money lasts until the next payday. Children's early experiences with money set a lifelong pattern.

Be a financial role model. You can show your kids how to spend and to save by talking to them and including them — take them with you to the bank when you make a deposit, and explain to them how a savings account works. When you're stretching the family dollars by clipping coupons or choosing one product over a similar one that costs less, talk about it. You'll be showing them how you can purchase something special later with the savings you're working for today. Explaining these decisions and inviting the child to join in the conversation shapes their perception of how to manage money.

If you set limits on your own spending, do the same with your children. Discuss how much you can spend at the store on purchases like weekly groceries, and have a spending limit on particular items or events the kids plan to pay for with allowance money. Overspending should not be an option for anyone, so start them off right. Understanding money takes time and experience, and mistakes are bound to happen as part of the learning process. Children initially learn to make good financial choices through handling their allowance money.


Mark jars to designate allowance distribution — spend, save, charity — so your child can see where each portion goes.

More tips

Teaching your kids about money and debt
5 Ways to teach your children to save
5 Ways to stretch the family budget



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Comments on "Teaching children to manage their allowance"

Lisa November 29, 2012 | 9:27 AM

I really like the idea about dividing the money up into charity, spending, and saving. That's a great way to teach kids money management when they're young, and hopefully they will carry that with them as they get older.

Beth October 15, 2012 | 11:49 AM

I definitely think that allowances are good for building discipline and teaching children how to prioritize. My son has a safe where he saves a portion of his allowance and my daughter has a piggy bank. I agree with Lauren that giving kids allowances also save parents money. When we went on vacation this summer my kids bought most of their souvenirs and snacks with their allowance money.

Lauren October 01, 2012 | 4:59 PM

Great tips! I've heard that giving your kids allowances actually helps you SAVE money, because every time they ask for something you can say No and not feel bad. Tell them they need to save up for it. I've found that by the time that happens they've usually moved on to something else anyways, haha!

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