Teaching Kids About Money: 6 Steps to Raise Financially Responsible Children

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Many adults say, “I wish I’d learned more about money when I was younger.” That’s because financial habits form early, as young as age 7, according to a Purdue University study. The sooner you start teaching kids about money, the more confident and capable they’ll be as adults.

Luckily for you, you’re already making financial decisions every day. You simply need to let your kids in on the conversation. Whether it’s grocery shopping, planning a vacation, or paying bills, there are countless ways to turn daily moments into teachable money lessons.

Below is a step-by-step guide to raising financially responsible kids, complete with age-specific milestones, practical activities, and tools to make learning about money fun.

1. Why Teaching Kids About Money Is So Important

Money management is a skill most kids will learn by watching the adults in their lives. Here’s why early financial education matters:

Money habits form early. Kids are more likely to repeat what they see, so your example matters.
Financial literacy builds independence. Children who understand how money works feel empowered to make good choices.
Early education reduces future stress. Teaching kids how to budget, save, and plan ahead now helps them avoid common pitfalls later, like debt and overspending.

MidWestOne Tip: Start the conversation as soon as your child can count. Even preschoolers can begin learning simple money concepts.

2. Money Milestones by Age

Here’s a helpful breakdown of what kids can learn at different ages:

Ages 3–5: Recognize coins and bills, learn that money is exchanged for goods.
Ages 6–10: Understand needs vs. wants, start saving for short-term goals.
Ages 11–13: Create a simple budget, make spending decisions with an allowance.
Ages 14–18: Learn about debit cards, banking, and the basics of credit.

Try this at home: Give younger kids three jars labeled “Save,” “Spend,” and “Give” to help them practice dividing their money.

3. Start With the Basics of Financial Literacy

Keep it simple and age-appropriate:

Teach where money comes from (work, gifts, chores).
Show how it’s used (buying groceries, paying bills).
As kids get older, explain interest, credit cards, and loans.

You can also use MidWestOne’s online banking tools with your kids to show them how money comes in and goes out each month. Seeing it in real time can make abstract concepts more concrete.

Myth vs. Fact:

Myth: Kids are too young to understand money.
Fact: Research shows children as young as preschool age can grasp saving and spending.

4. Make Money Lessons Part of Everyday Life

You don’t need a formal “lesson plan.” Just include kids in real-life decisions:

At the grocery store: Give them $10 and ask them to help plan a meal within the budget.
While paying bills: Show them how utilities, insurance, and mortgage payments are part of managing a household.
When planning activities: Talk through how much a family trip costs and how saving makes it possible.

Activity idea: Next time you shop online, show your child how to compare prices and use coupons or promo codes. It’s also a great moment to teach them about shopping online safely and responsibly.

5. Teach Kids About Saving and Goal-Setting

Encourage kids to set specific savings goals (a toy, a bike, a trip).
Offer a small “match” for every dollar they save — this teaches the concept of earning interest.
Open a MidWestOne Club One Youth Savings Account so they can watch their balance grow.

Try this at home: Make a visual savings tracker. Color in boxes on a chart each time your child saves a certain amount toward their goal.

6. Introduce Spending, Budgeting, and Needs vs. Wants

Kids need to learn how to spend wisely and understand the difference between wants and needs:

Use the 50/30/20 rule. Teach kids to put 50% of their money toward needs, 30% toward wants, and 20% toward savings.
Practice decision-making. Give them a small amount of money and let them choose how to spend it, even if it means making mistakes.
Talk about trade-offs. Help kids understand that buying one item means they may not be able to afford something else

MidWestOne Tip: If your child has an allowance, encourage them to budget it rather than spend it all at once.

7. Teach the Value of Earning Money

When kids earn their own money, they begin to understand the connection between work and financial reward:

Assign age-appropriate chores and pay an allowance for tasks completed.
Encourage older kids to babysit, mow lawns, or take on part-time jobs.
Teach them how paychecks work (including taxes) and the importance of saving some of their earnings.

8. Discuss Giving and Community Responsibility

Teaching kids about money isn’t just about saving and spending, it’s also about giving:

Encourage kids to set aside a small portion of their money for donations.
Help them choose causes or charities that matter to them.
Show them how giving strengthens the community and ties into family values.

MidWestOne Tip: Volunteering time can also reinforce the value of generosity, even if kids don’t have money to give yet.

9. Tools and Resources to Help You Teach Financial Literacy

You don’t have to teach kids about money on your own. MidWestOne Bank offers a variety of resources to help:

Youth Savings Accounts: Open an account for your child and teach them how to deposit, track balances, and watch their money grow.
Online Banking Tools: Show your kids how to set up alerts and monitor transactions in real time.

10. Final Tips for Raising Financially Responsible Kids

Start early. Even preschoolers can grasp simple money concepts.
Be consistent. Repetition is key to forming good habits.
Lead by example. Kids learn more from what you do than what you say.
Make it fun. Use games, challenges, and incentives to keep kids engaged.

Ready to Help Your Kids Build a Strong Financial Future?

Visit your local MidWestOne Bank branch to open a youth savings account and explore our family-focused financial resources. Our team is here to support your family at every stage.

Contact MidWestOne Bank Today

Posted On: July 16, 2025 by MidWestOne Bank in: Banking for Kids Financial Education