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Money Management for Kids (How to Set Up Your System)

What money management for kids looks like, and how to teach them financial responsibility by learning money management skills.  

Is your child receiving an allowance or birthday money…and they don’t really know what to do with it?

Or, maybe they just seem to spend it. And that's it.

young girl with money in hand, using a calculator, text overlay "teach money management to your kids - where to start and how to set up their money system"

That’s where money management for kids comes in.

You’ve likely got the basics of money management down for yourself. After all, you’ve been doing this “adulting” thing for a while.

But, how do you help your child with learning to manage their money?

A kid money management system is your best way to organize everything when teaching kids about money. Not only that, but it'll give your child built-in opportunities to learn critical money management skills.

Let me help you think through your system for kid money management, including:

  • Where to keep their money
  • A spending plan for introducing them to some intentional spending
  • Figuring out their first budget
  • How they’ll spend their money
  • How they’ll track their spending

But before we dive into all of that, let’s lay the field for what money management for kids actually is.

What is Money Management?

First up, let’s define what money management is – whether you’re an adult, or a child.

Money Management is the collection of decisions you make and the actions you take with the money you have in order to get the best possible outcome (both immediately, and in the future). These decisions include how to spend it, how to save it, how to invest it, and otherwise, how to use your money.

There are 6 components to a complete kid money management system. And we’re going to briefly dive into each of them, here.

But one more thing – I'd like to talk about the kinds of money management skills your child will both learn when they work through managing their money, as well as will help them to manage their money.

Pssst: got teens? Here’s my teenage money management guide.

Money Management Skills for Kids and Students

Let's not forget what we're trying to do here. Besides setting up a money management system that makes sense for kids, we also are trying to teach kids some critical money management skills.

So, what exactly are the money management skills kids and students need to learn – you know, the ones that will make sure they can pay their bills (plus thrive) as an adult?

I've organized all of the money management skills for kids into the following categories:

  • Handle Your Money
  • Earn Your Money
  • Spend Your Money
  • Grow Your Money
  • Bank Your Money
  • Organize Your Money
  • Protect Your Money

Here's the full list of 119 money management skills for youth to learn before they leave home.

Money Management for Kids – the Basics

In order for your child to make decisions about their money and use it to the best of their ability, they’ll need a place to store it, a plan for using it, a way to spend it, and a way to track it.

These are basics to a kid money management system.

Let’s go over each of these parts.

1. Consistent Money Source

How can your child learn how to manage something that they don’t have, or aren’t getting consistently?

You want to create (or tweak) your kid’s money system – or the system you’ll use to get money into your kid’s hands. Here are some resources to help you with that:

And here’s how to set up your entire allowance system.

One other thing: many parents I’ve spoken with talk about how they’re inconsistent with their allowance system. I totally get it – I’m a parent, too. But, can you imagine trying to manage your own money when you don’t know the next time your boss is going to pay you?

Giving your child a consistent amount of money – whether as a pre-determined allowance amount or as a chore payday that they earn – is critical in helping them learn how to manage money.

2. Banking System

Whether your child has a piggy bank, or is ready for a checking/savings account, they’ll need some sort of banking system.

That is:

  • A place to hold the money (coming in)
  • A way to spend money (going out)

If they’re in the beginning stages of money management, then they might just start by collecting all of the change and money in their possession (you know – that $1 bill crumpled up in the corner of their room?), and putting it into a jar or a give, save, spend bank.

Psst: wondering where your kids should donate to? Here's a list of best charities for kids to donate to – charities that cost less than $12 for a donation.

Are they further along? Then you might want to take the time to set up their kid’s bank accounts.

Once you get their bank account set up – or you’ve decided to introduce them to the one you opened when they were a baby – choose from over 50 banking activities for kids to teach them how to use it (plus about banks in general).

You'll also want to check out these to help your child start to save money (or to save more than they are now):

3. Spending Plan

A spending plan helps a person – whether it’s a child, teen, or adult – set their priorities and intentions of how they want to use their money.

In other words, the spending plan is like a compass for your money management – a place where you can align your money values with actual numbers.

Spending plans are:

  • Plan for how you want to use and prioritize any money that comes into your life
  • Shown with percentages for how much you’d like to spend in each category (such as saving, spending, giving)
  • A barometer feel for how your current spending and future spending aligns with what’s important to you
  • Tweak-able, but doesn’t change often

Here’s a kid’s spending plan free printable I created.

Hint: when your child starts planning their spending? Well…that's just a hop, skip, and jump away from them starting to save their money towards something.

4. Budget

While the spending plan is your child’s intention for how to spend their money, a budget is where the rubber meets the road – exactly how they’ll spend money in any given pay cycle (weekly, bi-weekly, monthly, for their birthday money that comes in, etc.).

Your child will use their spending plan, their expected income (remember for kids, this is allowance, chore commissions, birthday money, etc.) and their expected expenses to fill out a budget worksheet.

Budgets are:

  • For a specific period of time (daily, weekly, bi-weekly, by paycheck, by project, by event, etc.)
  • Shown in dollars and cents, not by percentage
  • Changes more frequently

You’ll definitely want to read my entire article on budgeting for kids, and maybe even check out these budgeting games for kids.

Here are some kid budget worksheets and teen budget worksheets to get started. Also, here are 12 fun budgeting activities to teach kids about the budgeting process.

5. Spending System

How is your child going to physically spend the money they’ve allocated to each category? That’s what’s covered in their Spending System.

You’ll want to check out my review of the best chore and allowance tracking apps, some of which come with a debit card (if that’s what you’re looking for).

6. Spending Tracker

The spending tracker is going to be filled out daily by your child (perhaps multiple times per day), and gives them an up-to-the-minute update of how their budget and spending behaviors are working out.

Your child will use a spending tracker to:

  • Keep track of how much money they have to spend at the beginning of a budgeting period
  • Keep track of how much they've spent in different categories
  • Keep track of how much they have left to spend
  • Reflect on their spending over a period of time

This can be done on a piece of paper, or through budgeting apps.

How Do You Teach Money Management Skills?

How do you move forward with teaching money management skills for kids, especially if you’re not sure what they know (or you have several kids or students at various stages of the game)?

There's learning through play, and then there's learning through real-world experiences.

For play, money games for kids, games to play with fake money (use these free printable money for kids), grocery store games for kids, and money toys are a great way to reinforce real-world learning.

If you're not sure where to start with real-world learning? Then use my One-Step-Further strategy.

Just take it one step further, from wherever you are.

Some examples of how to do this:

Stage 1: Go from Disorganized Money to Some Sort of Banking System

If they keep money in 87 different places around their home, wallet, pockets, and bedroom floor, then give them a place to focus their money on (piggy bank, savings account, etc.). Money needs to accumulate somewhere. Especially if you want them to see the power it can have when it starts adding up!

Psst: here's my guide on how to talk to kids about money.

Stage 2: Go from a Money Mason Jar to an Actual Bank Account

If they keep all their money in a money jar or mason jar or one location already, then add in a function to help them track how much money is actually in there. Awareness of how much money they have is key.

Stage 3: Go from Accumulating Money without Purpose to Creating a Spending Plan

If they already know how much money they have, then help them DO something with that money – like make a savings goal, create a spending plan (percentages for various categories, like give, spend, save), etc.

See how that works?

It makes it much less intimidating when you just assess where they are right now, and take it one step further.

A few “one-step-further’s” over the next six months, and your child will continue to build money management skills at a great pace.

Can you see a bit clearer how to move forward teaching money management for kids and students? The best thing you can do is to figure out where your kids are now, and what's missing from their current system (such as banking, or a spending plan, or doing their first budget). Then, take it one step at a time, one step further than they are, to grow their money management skills. If you keep doing that, then one day, they'll be teaching YOU something about money with all that they've learned!

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Amanda L. Grossman is a Certified Financial Education Instructor, a 2017 Plutus Foundation Grant Recipient, and founder of Money Prodigy. Amanda's kid money work has been featured on Experian, GoBankingRates, PT Money, CA.gov, Rockstar Finance, the Houston Chronicle, and Colonial Life. Read more here.