How To Teach Kids About Money

Object lesson to teach your child financial responsibility.

As parents, we all want our children to succeed in every aspect of life.  One of these hopes for success is wanting them to succeed financially.  I truly believe if we can learn how to teach kids to manage money teach our kids smart money skills when they are young, they will be much better off financially as adults.  I am excited to share this great object lesson to help you know how to teach kids about money.

We talk to our kids about money constantly.  We give them chores and an allowance to help them learn how to save, work and spend wisely.  But, I wanted to teach them a little more about the money world as adults.

I began brainstorming ideas and came up with a game plan that ended up having a greater impact than I ever could have imagined.

• Related:  Teach Kids About Money With The Money Confident Kids Website

Kids Money Object Lesson:  How to Teach Kids to About Money

To begin our money object lesson we announced to the kids that we were having a family meeting and that they all needed to come join us (cue groans).  I ignored their sour face expressions and got started with our plan.

Phase 1:  The Marshmallow Bank

We started the lesson with what I called “The Marshmallow Bank.”  The point of this was to teach the kids how money grows when invested over time.

First, I gave each of the kids 5 marshmallows.  I told them that those marshmallows were theirs to do whatever they wanted with.  But, if they wanted to put the marshmallows in the marshmallow bank the marshmallows might grow.  I reminded them that the more marshmallows they added to the bank, the more they would probably get in return.

My 12 year old and 9 year old decided to put all five of their marshmallows into the marshmallow bank.  However, my 5 year old chose to eat three of his marshmallows and put the other two into the bank.

The “bank” was in my closet.  We left them there while we moved onto Phase 2!

Phase 2:    Real Life

For Phase 2 I really wanted to give my kids an understanding of exactly where mom and dad’s money goes each month and WHY we just can’t give them every.single.thing. they ask for!  I truly wanted to help them understand adult financial responsibilities.

To prepare for the lesson, I got enough cash to resemble how much money my husband earns in one month (I did this during the first of the month when I had a bunch of cash on hand from my cash envelopes).

I obviously didn’t get out the EXACT amount of money that my husband earned, instead we pretended that a quarter was $25, $1 was $100, $5 was $500, $10 was $1,000 and $20 was $2,000.

Next, I filled three bowls with snacks.  The first bowl had cheerios in it and a $50 sign, the next bowl had fruit snacks with a $100 sign on it and the last bowl had a few mini candy bars in it with a $500 sign.

I gave the kids all of the “money” that our family has to live off of for one month.  I explained that after they paid all of their monthly bills than they could use whatever money is left to go shopping at our “store.”

The kids were SO excited about their money and the possibility to get those candy bars.  All of those bills looked like a gigantic wad of a sum to those three young kids.  They could not wait to buy out the entire store!

And then the bills began…

Now for the bills….(why must there always be bills to pay?!?!).

We listed off every bill that we have to pay each month and how much that bill cost us.  As we listed off each bill, the kids had to pay us from the money stash we had previously given them.

We included everything!  They had to pay for life insurance, car insurance, retirement savings, college savings, sports and piano lessons.  They paid for electricity, groceries, car repairs, and a few date nights.

We had them put money into their emergency savings account.  If it was on our real budget, the kids saved for it.  As the huge wad of cash slowly dwindled the looks on the kids faces kept dropping and dropping.

Once the bills were all done being paid my daughter exclaimed, “But where did all of our money go?!?!”  The kids had about $10 leftover, an equivalent of $1000.  Not enough to buy each of them one of the coveted candy bars.  They had to settle for a few fruits snacks and cheerios.

Phase 3:  The Lesson

At first the kids were a little upset.  They were asking questions like, “So does this mean we don’t have any money?!?!”  and “I don’t understand where the money went.”

We explained to them that we do have money.  We have enough to pay for everything in our budget, everything that they had to pay for.  We have enough for the soccer camp, the piano lessons, food on our tables, the necessary clothing and occasional fun family activity.

But, we do not have enough money for ALL the things.  We talked about why and how we make a budget each month, how some months we might budget for a fun family activity and another month we will budget for new school clothes.

As the conversation continued I could see the understanding start to set in their eyes.  They began to realize the importance of a budget and why they are told no to some of the things they ask for.  They learned the importance of saving money each month and budgeting for the many bills that come with being an adult.

Phase 4:  Investments

Now, it was time to check how our investments were doing in the “marshmallow bank.”  When I went to go get the marshmallows I tripled the amount of marshmallows each of the kids had in their bowl.

My 12 and 9 year old ended up with 15 marshmallows and my 5 year old had 6 marshmallows.  My 5 year old was a little disappointed when he saw how little marshmallows he had compared to his two older sisters.

This gave us the perfect moment to explain to the kids about investments, and how, if done wisely your money will grow.  We demonstrated how the more money you invest, the more money you will earn in return.

In Conclusion

I was so very happy with how this money lesson turned out.  My kids really seemed to understand and grasp what we were teaching them.

The conversations we had throughout the lesson were very real and mature and I am hoping this is something my kids will remember as they grow up and begin making their own personal money choices.  And once we were all done we totally let them have a few of the mini candy bars…..just because I try to be a nice mom.  Sometimes.  😉

Pin This Article for Later:

Related Articles:

This is What Happens When You Give a Teen an Allowance

Teaching Kids to Help with Family Chores: Including free chore chart printable

A Financial Tale of Two Sisters

I hope this article helps you know how to teach kids about money.