Tips for How to Educate Your Kids (or Grandkids) About Money – Part 1

Brian Fricke, CFP®Cash Flow

Tips for How to Educate Your Kids (or Grandkids) About Money – Part 1

I am frequently asked for my advice about educating kids (or grandkids) about money. My wife and I developed a set of “money rules” for our two boys. I thought I would share a few more of them with you. For us, these “money rules” were built around making sure our boys understood the value of money and learning how to manage it.


Let allowances be a lesson on earning money and not just something your kids learn to expect. Pay your kids or grandkids a weekly allowance equal to their age. But, set parameters. For example each child must give away at least 10% of their allowance to charity and 10% needs to be set aside for long-term savings. The rest is available for spending, short-term saving for a purchase that costs more than one week’s allowance, or adding to their long-term savings. This allowance isn’t paid for specific chores, but operates under the assumption that the child must be a contributing member of the family with responsibilities appropriate for their age. If they don’t uphold those responsibilities, you reserve the right to deduct money from that weekly allowance.


Use the purchase of a car as a lesson on how to manage money and save for large purchases. Encourage your children to save for a car that they can buy on their own at the age of eighteen. If an extra car is important to help larger or busy families with transportation needs, one idea is to buy a family car that the parents own, but the kids can borrow. Sometimes, buying a car for your child or grandchild fits in certain circumstances, like excellent grades or earning a college scholarship. This allows for the car to still be received as a sense of pride and accomplishment — if not from monetary savings, in another form of hard work or achievement.

Long-Term Savings

Help your kids or grandkids set up a savings account that they can’t dip into unless it’s for their long-term savings goal (such as that car they want or college tuition). I recommend a UGMA (uniform gift to minor accounts) also known as UTMA (uniform transfer to minor accounts). A parent typically serves as custodian for the account until the age of eighteen. As the parent, you can monitor the account and share the monthly statements to keep your kids informed. They will ask questions when they are ready, and that’s the best way to learn.
For more financial advice, get your copy of Brian Fricke’s book, Worry Free Retirement.