How to Teach Kids Self-Discipline with Money

An Interview Andrew Schrage

Establish rules about what percentage of your child's allowance money must be put into savings.. Image courtesy of David Castillo Dominici/

A lot of behavior problems and discipline issues stem from problems surrounding a child's allowance and chores. It’s easy to get into power struggles over these issues, especially with teens. Establishing rules, setting limits and enforcing consequences about your child's spending habits can help your child learn how to make healthy decisions about money for the rest of his life.

Teaching kids how to be wise with earning and spending money will not only prevent a lot of behavior problems, it will ​​also be a skill that helps them for the rest of their lives.

I interviewed Andrew Schrage,’s guide to financial planning and the co-owner of Money Crashers, to find out how parents can teach kids how to have self-discipline with money.

How do parents' financial habits affect kids' attitudes and behaviors about money?

The financial habits of parents have a direct effect on their children's attitudes and behaviors regarding money. Children often mimic their parents, and if a child sees a parent wasting money or going into credit card debt, they're more likely to do the same as they grow up. A child who has never been shown how to save money simply won't know how to do it once they begin to manage their own finances.

Related article: How to Role Model the Behaviors You Want to See From Your Kids

How soon should kids be allowed to start earning an allowance for completing chores? How should parents decide how much kids should earn?

In my opinion, kids should start earning an allowance as soon as they're old enough to help out with household chores.

However, I do not believe in rewarding children for things they should do on their own, such as keeping their bedroom clean.

If the child actively participates in chores such as cleaning bathrooms, mopping the kitchen floor, and vacuuming, they should be compensated. How much to pay the child should be based on the parents' current level of expendable income, as well as the amount of work completed.

Related article: The Importance of Giving Kids Chores

What types of rules should parents create to help a child manage his money?

Parents should create some rules to help a child manage his or her money, but the child should also be given a certain amount of independence. Making mistakes and learning from them is a great way to become more educated on the topic of prudent money management.

Children should be highly encouraged to save a portion of their money, and starting a bank account is a great way to achieve that goal. They should also be encouraged to donate a portion so that they learn to give back. One absolute rule that should be established once they're old enough is that credit card debt of any sort will not be tolerated.

Related Article: 10 Tips for Establishing Household Rules

If a teenager has a part-time job, should parents still set rules about saving and spending?

The same rules should remain in place, although the parent might want to consider allowing them a little more leeway.

After all, it is their money. But the rule regarding no credit card debt should absolutely remain in place.

Related article: How to Establish Household Rules for Teenagers

When kids receive money as a gift, should parents set limits with their spending or should kids be given the freedom to spend it however they want?

Freedom and independence are important to help kids learn more about money and how it works. Parents should explain to the child that the money is a gift and they can spend it how they want, but they should also reinforce the idea of saving at least a portion of it.

Related article: The Importance of Setting Limits with Kids

Are parents better off preventing an impulsive child from making an unwise purchase or are there times it makes sense to allow a child to experience a natural consequence that results from impulsive purchases?

Parents should allow it, as long as it isn't extravagant. Children will often learn on their own at a later point in time that the purchase was unwise, and this lesson will stay with them a lot longer than if they weren't allowed to make the purchase in the first place.

Related article: 10 Ways to Teach Children Impulse Control

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