Modeling Method for Teaching Kids about Money (2024)

The question I get asked the most often on Instagram is how I’m teaching my kids about money. If you’re new here, my kids are currently, 7, 5, and 3 years old. Throughout the years as a parent, I’ve tried many different approaches to teaching my kids about money. Some have worked well and others not so much.

For me, it’s tough navigating the different personalities of my kids and with one of my children having ADHD, it’s even more challenging to teach these concepts. But, regardless, I want to teach my kids about money because I’ve coached several adults who don’t know the first thing about money. I don’t want that for my kids. So, currently, we’re using the “modeling method” for teaching our kids about money.

What is the “Modeling Method”?

The Modeling Method is just basically being intentional about modeling how YOU use money. So instead of strict financial lessons, you’re more or less teaching as you live life. Which, as a mom to three very active children, this is the best speed for my family!

Now, to be honest, I have no idea if the Modeling Method is a real thing or something that I just made up. I haven’t read about it or studied it in any shape or form other than Rachel Cruze’s “more is caught than taught” motto. But it is also based on my own personal life growing up.

My parents didn’t really give us any hard and fast financial lessons. Sure, my mom bought my brother and I those fake bank checks to teach us how to write a check and tried to teach us how to balance a checkbook. However, my parents more or less modeled how we were supposed to use (or not use) money by what they did or didn’t do.

Why I love this method.

I love this method because it is easy to implement especially if you already have a solid hold on your finances. So if you’re already budgeting, saving, and planning for your future via retirement and goals, you’re already using this method. The only thing you’d really need to do is to bring your kids in the conversation by letting them see you sit down to budget or reviewing your retirement accounts.

In my honest opinion, this makes money (especially in the eyes of a child) something that is apart of everyday life. It is not a mystery nor is it something to fear. It becomes more like something that mom and dad do just like going to work. It also encourages questions from your children. I encourage you to answer those questions the best you can. You don’t have to have all the answers. And I’ve discovered that the simplest answers are the better ones anyway.

What this method is lacking.

This method isn’t perfect. But I do believe it is a good building block to build on as your children grow. What the Modeling Method is lacking is in formal instruction and practical application. Even though your children are watching you pay with cash in the grocery store and hear you talk about budgeting, they aren’t necessarily hands-on with the money.

But, I do strongly believe, that this method is the best starting point. The reason is that it gets those money conversations going. I’ve coached dozen of grown adults who have no idea how money is supposed to work. Each one has told me some variation of “my parents never talked about money”.

Keeping money a mystery from our kids does them more harm than good. We can’t allow money to be some big mystery that they are all of a sudden expected to understand when they leave our home. We have to teach them that money is just a tool – just like a hammer is. We get to use that tool to better our families’ lives or make them worse by not using the tool effectively. When we teach them by modeling how money works in our own homes, it is less scary and it becomes one of those things that “adults do”. Your kids will grow up expecting to have to know how to manage money when they become an adult. This thus makes an interest in learning much easier.

How to teach kids about money.

There’s not really a hard and fast way to implement this method. However, there are some things that make it easier. If you want to use the Modeling Method, here are some things to have to first have together:

1. You need a budget. If you don’t already actively budget then this is where you need to start. You don’t have to wait until you have it all figured out to bring your kids in the discussion. When they wonder what you’re doing, tell them. Say “mommy is learning how to budget the family’s money”. They may not know what all that means, but by using the “b” word you are setting an amazing example for them to grow into. If you’re looking for budgeting help, I have a free budgeting course that you can sign up here for.
2. Use cash. When we were deep in our debt-free journey, I always shopped with cash. And by shopping with cash you make teaching your kids how money works so much easier on yourself! How? Because when your kids see those dollars moving from your wallet to the cashier’s hand, they are seeing the transaction of money. It’s not a mystery. You buy things with money, but if your children never see you use real dollars and cents, they won’t have a concept of what the exchange of money looks like. Also, using cash makes keeping you in line with your budget so much easier. It allows you to explain that your budget is only $20 so you only have $20 to spend.
3. Communicate openly and honestly. Do you and your spouse dream big? If so, include your children in on the conversation. Let them know that mommy and daddy are working towards some big goal. Examples: saving to take the family to Disney or to purchase a new car. By allowing your children to see the inner workings of trying to achieve your big goals, you allow your children to understand that a magical unicorn isn’t just going to toss all of your dreams into your lap. You have to go for them.
4. Live your life by your budget. The final thing you need to do is to just live your life in accordance with your budget! I know that sounds super simple and honestly, it really is that simple. While you’re living your real life on a budget, involve your kids to experience what mom and dad are doing. You don’t need to give some big financial lesson. Answer questions when they ask them and ask them questions about what you’re doing to see what they notice!

Other things you can do.

The Modeling Method isn’t perfect. But it is a great building block when it comes to allowing our kids to see how money flows in and out of our homes. To make this method work even better for your family, you can try a few of these resources:

• Dave Ramsey’s Financial Peace Junior Program. We tried this one a few years ago. Although it worked okay, it did prove to not be a right fit for our children at those ages. We are looking into trying this one again in a couple of years. So we’ll see if it’ll prove more beneficial when our kids are older. But we do own the books in the Junior series and it helps facilitate money questions with my kids. You can check those out here.
• Ultimate Kids Money Book. We haven’t read this one yet but I keep hearing that even though this book is over 20 years old, it is a great resource for helping kids understand how money works. It’s definitely one that I plan to check out at the library and I wanted to make sure I mentioned it here.
• My Budget Planner for Kids. This is a software program designed for kids to help them learn how to budget money (with mom and dad’s help). If you have computer saving kids this may be a great option for your kiddos especially if mom and dad budget via software!
• FamZoo. I’ve actually met the creator of this software and I absolutely LOVE this dad’s heart! He’s a dad of five kids and he’s used FamZoo with all five of them. This one works via prepaid cards and helps your kids budget their money and allows mom and dad to be the bankers. If you pay your kids for their allowance or any birthday money via the app and then the kids get to budget it and spend/save it accordingly! My kids are still too young for this one, but I’m excited for the day they’re old enough to use it!

Okay, so I’d love to hear what you’re doing with your kiddos when it comes to teaching them about money! If you’d like to share, please let a comment below!

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