How to talk to kids about: Money

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Let’s face facts – teaching your children about money is tough. Children learn from the way you treat them and from what they see. You can tell them about savings all you want, but if you have a shopaholic side, chances are your children will pick up on that. Trust me, I’m learning this from experience. 

When my eldest child started primary one, I thought it was the perfect time for him to learn how to manage his money. Well, what can I say, I was ridiculously naïve. 

But I’ve learnt. Seeing my son through one year of primary school, here are 5 things I’ve learnt about teaching children about money.

1. Children need to be motivated

It is common to give a fixed allowance to your child either daily or weekly. The idea is to let them experience money management and budgeting. Daily allowance teaches them to divide up their money to buy food and drinks. Weekly allowance allows them to manage the money over a few days.

For younger children like mine, it’s better to start with daily – it is their first-time managing money after all. Today, schools offer catering to students where parents pay monthly. Still, I consciously decided not to go for that because I wanted my son to experience making money decisions. 

Needless to say, it was quite a disaster in the first few months. He came back with empty pockets every day in exchange for the 27th pencil for the month, or the 55th Pokémon eraser (I’m not exaggerating!). 

Then, I introduced a system. I gave him a calendar. Every day that he saved his allowance, we will mark it on the calendar. If he has a five-day streak, he gets an additional day of allowance. 

Being a kid, he still struggled with impulse. To be honest, he hadn’t had more than five streaks in 2019, but he had managed to save up on average two days a week. And that is something to be proud of!

2. Give them rewards to teach them the value of money

It’s an ongoing discussion regarding whether monetary rewards should be used with kids – with every parent making a personal decision, based on their own parenting styles and unique situations. For those who choose to use financial incentives, one of the benefits is that this can help to illustrate the relationship between work and rewards – which is essentially what being employed is all about. You could also add in a celebration with an experience, along with the monetary reward, for work well done!

This life lesson on rewards and consequences is something that will be useful to your kids, even when they enter adulthood.

Supporting the habits of saving and practising the age-old theory of reward for work will make them understand the basics in a better way.

3. Allow them to make a purchasing decision

Whenever I bring my children for a holiday or even a book fair, I try to let my eldest child make his own decisions about his purchases. For example, I would give him RM50 and he would decide what to buy. 

There were times where whatever he wanted to buy exceeded his budget, so it presented me with a good opportunity to explain to him how a budget works. 

It isn’t always a walk in the park. I had to deal with tantrums and tears in the beginning, but he now knows how budgeting works. Whenever he exceeds his budget now, he would merely put the item back and look for something else that is within his budget. That’s a win for this mama!

4. Teach them generosity

One thing I don’t do enough of is instilling the value of giving or doing something for others. I spend a lot of time focusing on my children that I forget to turn it around – make them think about others too. 

I’ve learnt a trick from my friend. She makes her kids use their savings to buy something for her every year on her birthday. Initially, I thought that was not fair to the children, but after giving it more thought, I now think it’s a genius idea. 

Children are naturally individualistic. They are not born to share. One of my children’s first words was “mine!”

Instead of just making them make homemade cards, I think it is brilliant to teach them generosity and let them experience the joy of sharing what they have, to celebrate someone they love. 

In the beginning, it may seem like it is forced, but that’s how a habit is formed. His wife can thank me later!

5. Be a good role model

This is the most important tip but the hardest to do. 

Parents are a child’s first role models for learning money management skills. Like most life lessons, what we say does not carry as much weight as what we do.

Show your kids the difference between needs and wants whenever you bring them for a shopping trip. A packet of chocolate or potato chips is a want, but a bottle of milk for your child is a need.

Explain to them the difference, and with this habit instilled, they will naturally go through the same thought process whenever they need to buy something.

As parents, we all want to give the best to our children. However, sometimes the best may not be what your child needs. For me, tough love is really hard to practice. Still, it is sorely needed to bring up a generation that truly understands how money works. They will be grateful to you when they get their first credit card!


By Iris Lee

Iris Lee started as the group editor of iMoney Group. She now heads brand communications, and she is passionate about financial education. She believes that good financial habits should be taught at an early age. Mother of two boys, she still struggles with teaching her children the value of money despite writing about financial tips every day!

About iMoney

iMoney.my is the leading financial comparison website and a trusted personal finance authority that helps people make the most of their money. Established in 2012, iMoney.my has broken new grounds on personal finance in Malaysia and is now the leading financial comparison website in the country. A firm advocate of jargon-free financial information, iMoney believes that everyone should be adequately informed before making any financial decisions.

[This article was first published on 6th February 2020 and edited on 25th January 2023.] 


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