How to Model Good Financial Habits for Your Kids 

by | Jun 7, 2024 | Finance

“Do as I say, not as I do” is a classic line we’ve all heard about how adults sometimes do things with nuance that kids should not follow. However, we know kids pick up habits and behaviors from the role models in their lives – parents, grandparents, aunts, uncles, their friends’ parents, and more. If you want to build solid financial habits for your kids, it starts with you!  

Luckily, many of the things you do on a regular basis are fantastic teaching opportunities for kids. With just a bit of intentional priming to provide the context kids need, they can understand what you’re doing. In this blog, we’ll cover the ways you can model strong financial habits for kids in your life at many different points – so they will do as you say and as you do! 

Image of a mom and young daughter in between the aisles of a grocery store, the child has a notebook and pen and the mom is showing her a box near a cart full of groceries. The image represents modeling good financial habits for your kids.

Modeling Good Spending Habits 

Spending is a fantastic place to start on this habit-formation journey for kids of any age, because there is a tangible and literal connection between having money and exchanging it for an item.

You can use cash when making purchases to instill in kids that money is finite; it goes away in exchange for whatever you’re buying. If you use a card for ease of spending tracking or credit card rewards points, make it a point to use cash sometimes for the express purpose of teaching.

Next, model comparison shopping at different retailers. Discuss with your kid(s) about why you might go to two stores in one errand trip to save money by getting the more affordable items at each store. You can also go online and showcase shopping for the same item at different retailers to find the better deal.

If you use coupons, call those out too. Show your kid(s) any retailer shopping apps you use and how you select specific items because they are on sale at the time. If you use a browser extension to find coupons when shopping online, show how you search for those to save a little money on something you already planned to purchase.

Shopping for value, such as price per unit (ounce, pound, or each) vs. the retail price, is another great lesson to model. Make it a game – who can figure out the better value product first? Many retailers will list the unit price on the label, but sometimes they list some by ounce and some by pound for similar goods which can trip you up. It’ll reinforce math skills at the same time! As your kids get older and can handle multiple concepts, you can showcase how sometimes it makes sense to buy the name brand product with a coupon or go for the store brand without a coupon based on which is a better value.

Jesus J. on the Milli team models good financial habits for his kids by walking them through the purchasing process to instill that money is finite. He says, “If my kids want something, they need to save money and when it’s time to purchase, I chat with them to determine if what they want is truly something they would use more than once. Inform them that this is how much they have and after the purchase, how much they will have left over. I have them understand how purchases on non-essential items can impact balances.”

Ultimately, your regular household purchases are great opportunities to demonstrate how you uphold the family budget with your spending choices. Speaking aloud about things you may already do can help those lessons stick! 

Modeling Good Savings Habits 

Saving is the next financial concept to model for kids. After covering how spending is what money is literally used for, saving broadens the concept a bit.

Start by discussing and modeling saving up for purchases. You can make it tangible for kids with a classic money jar or piggy bank. This visual element is especially important for younger kids who are still learning that money is finite, and builds that sense of delayed gratification. 

Of course, Milli’s Jars are a great digital tool for this! Jars are especially helpful for more expensive purchases where you want to accumulate interest in the meantime, or for older kids who already grasp the concept of saving. 

You can also model setting aside a portion of your income for the future. For younger kids, you can do this through discussion about your own saving for things like retirement, family outings, or purchases around the home, and waiting to buy things until you have the money in full for a purchase. 
 
Then, reinforce this with kids by helping them set aside a portion of their chore money, allowance, or gift money. For younger kids, that physical jar or piggy bank is a good option. For older kids, you can introduce banking to them (more on this next).

Maria K. on the Milli team hopes to instill good money management in her pre-teen kids, imparting on then that, “Just because you have the money does not mean you need to spend it. Spend smart and save more! You should always have a nest egg built,” and models this by, “practicing what I preach! I explain to them things I am doing along the way and why.”

Discussing your family’s savings goal can also model the connection between having something to save for, and making spending choices that support that. Make it the topic of conversation at a family meal or while shopping and evaluating if a purchase aligns with your goals.  

Image of a family with two parents and two kids around a piggy bank jar inside a home. There is an icon of a pie chart overlaid.

Modeling Good Money Management

Once kids have graduated past the piggy bank level of spending and savings, you can model money management with them. The two key themes are storing money and budgeting. 

First, discuss the role of using a bank to store your money. Discuss how you can earn interest on savings in the bank and how banks facilitate digital payments, whether it’s with a debit card or bank transfer for something like utility bills. You can also set up a bank account for your kid(s) to let them experience the banking system firsthand, even if they are just using it for saving and are not yet going out and making purchases on their own. Getting familiar with the banking aspect of money management can help can set them up for success by making them more informed consumers later when they are choosing more advanced financial products and services.

The second element is managing money. Model this by bringing kids into the family budgeting process. You can simplify the budget depending on the age of your kids, if round and more easily divisible numbers are a better fit for their math skills. If you prefer to keep your specific finances private (kids sometimes have no filter!) use simplified and made-up numbers until you know your kids are developmentally ready to understand the family finances.

As you discuss budgeting, you can illustrate how money has different purposes and how one aspect of money management is storing it in certain accounts for specific purposes. You can showcase how people use different accounts for savings, checking/spending, retirement, and brokerage accounts for investing. This can help impart the concept of long-term savings and open the door for future discussions about relevant tax considerations when making financial decisions.  

Modeling Responsible Credit Usage

Another important aspect of your kids’ financial literacy development is understanding credit and the role it plays in our lives. Discuss the role of loans as using it to obtain something for which you cannot pay in full, but that it comes with the cost of interest. If you’re paying back a form of credit such as a mortgage, auto loan, student loans, or any other type of loan, discuss that with your child! Discuss your reasoning for taking out the loan, what it looks like to be paying it back, and how that fits into your financial picture. 

Data shows that Gen Z is using some types of credit more than Millennials at the same age point, such as general-purpose bank credit cards and auto loans. It’s also important to note that this sampling of Gen Z carries higher credit balances even when adjusted for inflation. Setting an example about responsible credit usage can help your Gen Z or even Gen Alpha child when they are beginning their adult lives.

Data showing that from 2013 to 2023, balances for credit cards, auto loans, unsecured personal loans, and mortgages are higher for those in the 22-24 year old age range at the time, reflecting higher inflationary pressures on Gen Z
Source: TransUnion Consumer Credit Database, Bureau of Labor Statistics

Another important data point: 51.8% of people who complete a college degree program have federal student loans. If your child is on the pathway to college, modeling informed credit usage can help set the example for when it comes time for them to choose a school and how they will fund their education.

Modeling Building Financial Literacy 

Our last point builds upon lifelong learning habits. You can model good financial habits for your kid(s) by demonstrating your commitment to continually building your financial literacy. Integrate financial media in your everyday life! Read finance books, read finance news articles, watch financial related TV programs, and listen to finance podcasts in the car with your kids. Depending on the content your kid may grasp the material. Maybe it will spark conversations! If you learn something from the media, bring it up the next time it applies while spending or saving. Ultimately, this step is more about showing that you can always expand your knowledge and choosing educational media is one way to go about it.  

Conclusion

As you embark on educating the children in your life about the things you value, there’s no substitution for modeling those values. If you want a kid to eat their vegetables, you have to eat yours too! The same goes for money. Fortunately, modeling good financial habits can happen almost daily! 

One of the easiest and most frequent opportunities you have is modeling good spending habits; start there and expand on to other topics like saving and budgeting especially as your child or children grow up. Bringing kids into the money discussion can help you understand their thought process and how you can best reinforce lessons further. As you encounter new financial considerations in your own life, using those as an opportunity to model strong financial habits in your kids can keep cementing the education. 

If you’re looking for a bank that makes it easy to model the process of saving, sign up for Milli! While Milli does not offer custodial accounts, many parents use their own Milli account to demonstrate saving to their kid. Some choose to set up a Jar for each kid or for specific family-related expenses and use them to reinforce the savings behavior. Download Milli on the App Store or Google Play and sign up today!  
 
Keep reading on the Milli blog: 

How to Avoid Lifestyle Creep
The Time Value of Money: How Money’s Value Changes
Parental Leave: Navigating Income Gaps and Benefits
Financial Planning for Your Children and Family’s Future