Education Funds

Teaching financial responsibility to kids

One of the ways to teach kids about financial responsibility is to model the finances in the home to what it looks like in the real world. In the real world, very little comes for free. I also believe that hard work gets rewarded and the harder you are willing to work, the more opportunities that get created. The hardest thing to teach kids about the real world is the idea of delayed gratification. In fact, this concept is so hard that even many adults do get the concept.

As a result of these beliefs, I am always thinking about how to instill these thoughts into my kids who constantly want to buy this that and the other thing without really understanding the consequences to spending money.

No money tree

I don’t know about you but I do not have a money tree in my backyard growing endless amounts of money. We are constantly trying to prioritize our spending because we can’t have it all without going into serious debt. Here are some of my thoughts on teaching my kids financial responsibility.

  1. The secret to financial success is to understand where the money comes from. Whenever I talk to kids about money, I always ask them to tell me all the things you can do with money. Many kids come up with concepts around SPENDING, SAVING, INVESTING, and SHARING. It’s important for kids to understand that you can’t spend, save, invest or share money until you earn it first. For me, it’s important that we give our kids opportunities to earn money at home. This is a very valuable real-world lesson.
  2. Money that is earned is taxed. Tax is an economic reality for adults earning income. We can’t spend all the money we make. Just look at your paycheques. When you make a dollar, you don’t get to spend a dollar. You have to pay taxes, benefits, and other mandatory deductions. As a parent, I’ve decided to teach this to my kids by taking half of all the money they make as a tax (25% to savings and 25% to a community pot for the good of our family). This continues to be a work in progress. The reality is we have put this money into a separate account and we are not 100% sure what we will do with it. Maybe it will be used for a family holiday or a new iPad for the kids. What I do know is it’s a way to force my kids to save 50% of everything they make and a way to teach them about taxes and how they work. It’s kind of like running the house like a government. Mom and dad are the government and the boys are citizens.
  3. Let them control the other 50%. My kids get to use the other 50% to do what they want as a way to learn on their own. They get to make mistakes on their own. It’s important to have them see the outcome of their decisions and their siblings’ decisions. Responsibility comes from making decisions and being accountable for those decisions.
  4. Be sure to give them lessons along the way. As someone who teaches adults about money, I think it is crucially important to help my kids make financial decisions along the way. Kids are curious and it’s important for me to answer their questions when asked. It’s also important to lead by example and use our own spending as a way to teach the kids.
  5. Keep lines of communication open. We recently went on a holiday to Sandpoint Idaho for 5 days before school started. At the end of the trip, I went into the hotel to check out and my third son, Jason, asked why I went to the hotel desk. I used that opportunity to talk to my kids about how much the holiday cost and whether they thought it was worth the money. The trip cost about $2000 not including meals and we tried to think about what else we could have done with the $2000 instead of going on holiday. In the end, we all agreed that it was money well spent. I am really happy about the conversation we had because they have a better understanding that holidays are not free and they have some sense of what that holiday was worth.

Responsibility comes when you make people accountable for their actions.

I’m not sure about you, but I think teaching kids about financial responsibility is far from easy. It’s one of those things you never know what the outcomes will be. It’s a dynamic process that evolves and changes.

With four boys, I also realize that kids don’t learn the same way. Sometimes a strategy that works with one does not work with another because they have different motivations and personalities. That makes teaching kids about money even more difficult.

What do you think of this strategy? Do you have any words of advice? Any suggestions on what has worked for you?


  1. Kathleen @ Frugal Portland

    I LOVE the tax idea! 🙂

    • Jim Yih

      Thanks Kathleen. It’s as frustrating for the kids as it is for adults which makes me think it’s a really good idea.

  2. Benjamin Shen

    really enjoyed this post and the ideas are great!

  3. Jay

    Do the kids get to vote you out? Fun and interesting idea.

    • Jim Yih

      Ha Ha! I never said it was a democracy!

  4. Susan`

    50% tax?!?! How much money are your kids earning Jim???
    I disagree with an allowance to begin with – “Secrets of Discipline” by Ronald Morrish says “Chores are important. By doing them, children learn to handle responsiblities. They must learn to contribute Unconditionally to the family”.
    We teach the spend, save or donate theory to our kids.
    Our 9year old girls earn cash through returning bottles to the bottle depot (doubles as an smart environmental lesson)and saving money given to them as gifts. They have also asked for
    donations to charities at both Christmas and their most recent birthday:_)
    Our 11 year old also squirrels away her gift money and has started her own small giftware business selling at local craft/market shows. She not only has an outlet for her creativity but is learning the fundamentals of costs & profits.

    The tax-man will find them soon enough – I don’t want to add that to my list of parenting roles!!

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