Vital Money Lessons for Kids (2024)

Dave: I will never tell you that the Ramseys have done everything perfectly, but we do have money-smart kids. Rachel, who is almost 26, was a baby when we fought our way back from bankruptcy.Rachel: My parents took the time to teach me how to handle money, and now I have complete confidence in my ability to manage my finances. You can give your kids that incredible gift, too.

Rachel: People make huge, expensive mistakes as adults because they were not allowed to make inexpensive ones as kids. Their parents want to spare them the pain of tough lessons.I remember a trip to Opryland we took when I was 6. Each of us kids had money that we'd earned doing chores. Well, I blew mine within 5 minutes! I remember that terrible moment when I put my hand into my pocket and found nothing but lint and shattered dreams. I ran to Mom and Dad begging for more. "Please, I'll pay you back later!"Then Dad said something that has stuck with me. "Rachel, when the money's gone, it's gone. Once you spend it, you can't get it back. If you're out of money, then you're done for the day." I drove them crazy whining. But they wouldn't budge. I had to deal with the fact that I had wasted all my money on an impulse.Dave: From our perspective, it was not nearly as dramatic. She ran out of money and got no more, end of story. No amount of cute, pouting or persuasion changes the math—you're still broke. I meet 54-year-olds who haven't learned this lesson yet.

Dave: Years ago, one of our girls wanted a Celebration Barbie. When we got to the store, we counted up that she had saved $5; the doll was $25, so we left the store without it. Tremendous character can be built by understanding the reality that Barbie is not in your budget.Rachel: But don't go overboard. One mom told me her son had saved $300 for a PlayStation, but he'd forgotten about the tax. "So we left the store without it," she said proudly. My jaw dropped. I thought, Are you kidding me? You pay the tax! If your child saves $300, you want to reward that behavior, so he remembers saving as a positive experience.

Rachel: Sunday night was payday in our house, so we'd grab our chore charts off the refrigerator. If I only did three of my five chores, guess what? I got three dollars, not five. Our parents never paid us for work we didn't do. That's not how life works.Dave: My wife, Sharon, and I wanted to instill drive and dignity into our kids' characters. These qualities do not develop when we hand our kids money for nothing, because that gives them the impression that they are the center of the universe.

Rachel: And not just for small stuff, but for things like cars as well. I often hear adults say, "I'll always have a car payment." I can't stress enough how important it is not to believe this lie. The average car payment is often between $450 and $500 a month. If your child can save up and pay cash for cars, she will have that money each month to save or invest.Dave: Remember, your kids are watching you. If you tell them to save but go into debt yourself because you want a car you can't afford, they'll do what you do, not what you say. A $500 paid-for-in-cash car will get you to work. Let your kids see you make sacrifices to keep from borrowing money. And if you save the money you would be spending on a car payment, it doesn't take long to save enough to pay cash for a better car.

Dave: Sometimes parents tell me they're getting their teen a credit card to teach them to be responsible. Are you joking? Credit cards don't teach responsibility. They teach that you can buy something you can't afford today but hope to pay for tomorrow. When you teach a child to lean on a plastic crutch, you are teaching him that he doesn't have to delay pleasure, that he shouldn't sacrifice or save up.Rachel: Too many college students see getting their own credit card as a rite of passage into adulthood. It's not. It just starts the vicious cycle of being in debt and taking part of your paycheck each month to pay credit card bills. A debit card is much better because it means you have the cash to pay for what you're buying.

Dave: One year we took the kids to deliver gifts to children whose parents were in prison. They saw firsthand how, but for the generosity of others, these kids would have had a meager Christmas. It was mind-blowing for my kids! We called those the bubble-bursting moments—when the "everyone lives as good as you" bubble bursts. Things like this helped to create gratitude in our children.Rachel: Mom and Dad had us put aside 20% of what we earned for giving. I'd suggest at least 10% of your child's money be earmarked for that. It helps if she contributes her own earnings (not money you hand her) so there's a connection between working and choosing to give.