Five Ways to Teach Kids Important Lessons about Money

Are you happy with your child’s understanding of money? Many people want to ensure their children learn positive values when it comes to money, but they are not sure how to instill them. The California Society of CPAs ( offers these five tips for parents who want to teach their children how spending—and saving—work.

Talk about Money as You Go

Kids who watch their parents pulling money from an ATM may not understand how that money got there in the first place. That’s why it’s a great idea to talk to them about the transactions they see you make.

At the ATM, explain that you made money by working at your job, put it in the bank to keep it safe and now you’re taking it out to spend. When using a credit card, explain to your child that what you’re buying isn’t “free” because you will be sending the credit card company money to pay for your purchase later.

Such discussions can put these transactions into perspective and help kids understand how everyday exchanges work.

Get Kids Interested in Interest

You can open a savings account for your child as soon as he or she is born or do it together as soon as you feel your child is old enough to understand and appreciate savings. (Be aware that children under 18 likely will need a parent to co-sign for them.)

Look for banks that don’t require minimum balances or charge monthly maintenance fees for kids’ accounts. In addition, be sure that deposits are FDIC insured.

Once your child has an account, encourage him or her to deposit checks received for birthdays and holidays until he or she is ready to spend the money or to save up for a special purchase. If you give your child an allowance or if he or she has a job, suggest depositing at least a few dollars each week so that saving becomes a habit.

When the bank statement arrives every month, point out the interest earned on the account, explaining that the balance will continue to grow as long as it’s left untouched. Watching the balance and interest increase over time can really help provide an incentive to keep saving.

Introduce Your Child to the Benefits of Work

If your child has asked you to buy something special for them, suggest that they earn the money themselves and help them brainstorm ways to do it. Whether they babysit, rake leaves for the neighbors or check groceries in a supermarket, a part-time afterschool or weekend job can help show kids what it means to earn money for the things they want to buy.

Set a Good Example

Children learn a great deal simply by observing their parents’ behavior and the choices they make. Set a good example by establishing prudent savings habits yourself, especially for important long-term goals such as a college education for your kids and your own retirement.

Know Your Stuff

When you sit down to talk to your children about money, you may want to be armed with some practical information on a wide range of consumer spending topics so you can best answer their questions.

Two programs sponsored by the CPA profession can help. 360 Degrees of Financial Literacy provides a wealth of resources on all your family’s financial concerns. Another program from the CPA profession,, is specially designed to help young people get on track financially.

The California Society of CPAs provides financial literacy programs for schools and community organizations. These programs cover such topics as saving, budgeting, proper credit card use and retirement planning. To find out how to schedule a financial literacy program, go to

Consult Your Local CPA

Of course, your local CPA can provide details and advice on a variety of financial concerns. Be sure to turn to him or her with all your financial questions.

Copyright 2011 American Institute of Certified Public Accountants.

The Money Management columns are a joint effort of the AICPA and the California Society of CPAs as part of the profession’s nationwide 360 Degrees of Financial Literacy program.