Raising money smart kids is a passion of mine, and it’s an important skill for the 21st century. I’ve seen the upside and the downside, first hand. of teaching kids about finances…

My childhood, my life, and my career have always had a deep connection to the retail financial industry. In one way or another, from a very early age, I have helped people to manage their financial situation, invest their money, and ultimately achieve the life goals that money often (not always) enables.

I grew up playing under the desk of my father’s home-based office. He was the founder of a financial advisory firm, and I learned a lot about money from him (and still do!) both at the office and at home. Thanks, Dad!

I was working for him filing financial records by the age of 12. I had my financial advisor’s license even before I had my University degree, and 20+ years later I’m still working in this industry  coaching  financial advisory firms on their business practices; at least when I don’t have my Empowered 4 Growth hat on.

In my career, I tend to work with those who have strong financial knowledge, made good choices, and put their hard-earned money to work for them.

My husband, on the other hand, sees the opposite side of that. In his career he often deals with those who have not had the benefit of a solid personal finance education and the havoc that it can play on one’s life and credit rating.

I can 100% say that I live, eat, and breath personal finance. It’s of little wonder that I am so passionate about raising money smart kids.

It is a set of life skills that is often missed in formal education and is woefully needed.

While I believe that most schools could do a better job of introducing this topic into the curriculum, it is a true real-world-skill. As a real-world-skill, it can be best taught through experience.

It is a set of life skills that is often missed in formal education and is woefully needed. However, as a real-world-skill, it can be best taught through experience.

Here are 6 experiential ways to teach your kids to be money smart:

1. Give them an allowance

A kid’s allowance gives them firsthand experience with managing their own money and all the ups and downs that can come with it. You can decide as a family what the right amount is, and if there are any boundaries associated with the money. Once you have set the boundaries, it becomes their opportunity to learn. Sit back (easier said than done sometimes) and let it happen.

In our family we give our kids a certain amount for spending, for giving to charity, and for saving for longer-term and larger items (e.g. their first car, education, a down payment on a home). With their spend money they have free discretion, but boy-oh-boy that can be hard to watch! All my own personal money mindsets come rearing up!

Last week my son who had saved his spend money for quite a while decided to spend $40 on candy, and all I could do was watch and let him learn. I did point out that this was 10 weeks of allowance, but I tried to do it in a “hey, did you know?” kind of tone. He will connect the dots later when he runs out of this candy in much less than 10 weeks, and the next time he wants to purchase something and doesn’t have any money left.

If you want to hear more about how our allowance system works, check out our recent blog: It’s Allowance Day!

2. Bring them into the family budget

No, you don’t have to tell them the details of how much you specifically make and spend, but you should be talking to them about your family budget. Explain the categories of bills you have to pay, and how you make decisions around discretionary items.

Last year, we noticed that our family budget had gotten out of control with small, discretionary items that were adding up. We decided to go on a ‘budget detox’ to bring things back in line. We sat the kids down and explained what this would mean and how we would cut back our spending.

In the grand scheme of things, they were little expenses that we decided to cut for a while — Starbucks every day, ordering in pizza instead of making it at home, etc. We broke some bad family spending habits, it reminded us to appreciate these treats, and our kids learned a lot about budgeting and money!

3. Let them help you make financial decisions that impact the family

Buying a new car? Selling or buying a home? Mortgage financing? Let the kids in on the negotiation of the big and medium-sized decisions. They are sponges and will learn so much from just watching you. You may also be surprised at the input and feedback they have.

We have recently been going through a real estate transaction and the kids are watching closely and taking it very seriously. When we involve them in the conversation, their learning, their self-worth and their confidence all take a step up.

4. Help them open a bank account and an investment account

Opening a bank account for your kids is a relatively common rite of passage in childhood today. Our kids deposit their savings into the bank every month or so, and each time they make a deposit they swell up with pride.

The investment account, however, is perhaps not as common but holds such immense learning potential. When I was young my Father would hand out single shares of the Irwin Toy company to kids coming to our house for Halloween. Each year we would make the trip to Toronto for the annual shareholders meeting, which was perfectly targeted for kids with all their new toy inventions on display.

Nowadays it may not be so easy to hand out share certificates, but the value in learning about how companies get financed, and how individuals participate in the ownership of public companies is very intriguing to a lot of kids, my 9-year old son included.

Since he has expressed an interest, we have started to explain this complex world to him in terms he can understand and showcase companies that he sees every day. We have set up an account for him with a small amount of money that he can invest in a few shares of companies that interest him.

Another great alternative is to set up a mock investment portfolio where kids can pretend to purchase and sell their shares of companies to see what the result would be. It’s great practice!

5. Encourage them to find ways to earn extra money

In Melanie’s blog post on Kids Earn Money, she tells of her Dad’s often repeated line: “There is money everywhere – if you keep your eyes open and pay attention, you’ll find it.”

Inspire your kids to find age-appropriate ways to earn a little extra money if they are showing interest. Going hand-in-hand with that – it also means that we can’t and shouldn’t give kids everything they want. They need to find their own internal motivation. It is the fuel for creative ideas and allows them to learn that they can do things that they put their mind to.

Finding things around the house that kids can do to earn extra money is great, especially for the younger set. We have a guideline that our kids can earn extra money around the house, as long as it’s a task that we might pay others to do for us from time to time. After our son asked, we put together these options for him. Feel free to use this pdf or create your own.

For older kids encourage them to get out into the real world to earn additional money. See the next tip!

6. Help them start a business

From a lemonade stand to a full-out enterprise, kids are learning tons about money, and more, from starting their own small businesses. Cost of goods sold, budgeting, pricing, revenue, profit, financing, and loans are just a few of the things that kids can learn about in any size of business.

We feel passionate about the opportunities for fun and learning when it comes to kidpreneurship, and we have written extensively on this in other blogs. Check out Kids’ Business Ideas: Choosing the Right Business for your Kid and Kidpreneur Business is a Real Thing.

And, stay tuned for kidpreneur resources and programs coming soon!

I hope that this gives you a head-start as you think about raising money-smart kids. If you still feel you need help and could benefit from a supplement to these real-world experiences, I have heard fantastic feedback about Dave Ramsey’s personal finance curriculum for middle school and high school students. As soon as my kids are old enough, I will be signing them up!

Now, it’s your turn – what are you going to do to raise money smart kids in your house?