How to raise a frugal child

Sometimes you find clues of your kids' financial education progress in the strangest places.

“Dear Santa” – began my seven-year-old daughter's letter, published in our local newspaper – “May I have more money? I will save it to buy a house or car.” (I know. I still can't believe she wrote it, either.) “I want for my brother a horse that is real…” and “For my baby brother; he needs more clothes. Can you bring my Mom and Dad more money to buy food?” (Uh, what?)

So the letter ended with her first name, but since her school is so small and her name is slightly unique, most of our friends and family knew who had written the letter. Within a few days, I got a text asking whether we had enough to eat at our house, in addition to many in-person comments. We even got a note in the mail with $5 telling us to buy a couple of loaves of bread. I thought it was funny how this got so distorted, but I wondered if I had somehow passed on the wrong message to our kids.

Frugal Messages

I don't call myself an experienced parent; but I have noticed that kids seem to pick up more what we do instead of what we say. But where did my daughter get the idea that we didn't have enough money for food?

Probably two places. First, recently, I performed an experiment for two months, in which I paid for all our groceries with cash. If we didn't have extra cash, I didn't buy the groceries. (But we always, always had more than enough to eat.) Since my kids often go grocery shopping with me, they observed me opening the envelope of cash and considering all our food purchases. I probably didn't explain that we could have purchased all of the food we wanted but that I was curious whether this affected our food budget.

Second, we used to allow the kids to buy school lunches whenever they felt like consuming breaded, processed food; but $2.60 times two kids per day, five days per week adds up … to over $100 per month! It's not that I have anything against corndog nuggets, but I thought we could pack lunches with more nutritional value at a lower cost. So I asked our kids to limit their school lunch purchases to twice per week.

This time, I thought I explained it better. “We're trying to save money with our food so we can spend the money on other things.”

To me, it made sense — but teaching your kids to be frugal is no small task. And who knows which messages they are actually internalizing?

I was discussing the challenges with one of my friends. After she listened to me babble a few minutes about how our kids are so different in their money management skills, she said, “While you can do your best to teach them, I definitely think kids are born with certain tendencies. Some kids need instant gratification, some kids can defer gratification. You know the study about the kids and the marshmallows?”

I had heard of it. Kids who delayed gratification and got two marshmallows had better life outcomes such as SAT scores and BMI measurements than the kids who wanted a marshmallow and wanted it right now.

She shrugged. “So maybe you can help them improve, but it might be really frustrating for you to expect them all to grow up to be great money managers.”

She is right. Our daughter seems to enjoy saving money. If she gets 20 bucks for a birthday present, she asks to put all or most of it in her savings account. If our other child gets money, he has to spend it. He has rarely saved more than the household-mandated 10 percent. On the other hand, he is very generous with everything he has, while our daughter keeps a close watch on her money and her toys.

As I thought about the differences between my children, I came up with my new, number one rule for raising frugal kids: Don't expect them to be super frugal; instead, help them to be more frugal than they would have been.

Tips For Teaching Frugal Behaviors

1. One way we can help our son is to encourage him to make good frugal choices and turn them into habits. He is very good with routines and lists. Because saving 10 percent of the money he gets is a rule in our house, he has no problem doing that. He doesn't even think about it. But he would not normally make the choice to save more than is expected.

This seems advanced for an 11-year-old, but I think scheduling ways to save money (e.g., putting “call Internet provider to get lowest price” on his calendar every January when he is old enough for calls like that — yikes!) is something that would really work for him. Or when he gets a job, we could talk through what will happen when he gets a raise. Will he save his raise or slightly increase his savings rate?

2. With a child who can defer gratification (like our daughter), I think I should spend more time talking about how her actions today will improve her tomorrows. Deferring gratification just doesn't seem to take as much effort or energy from her.

3. Sometimes, being frugal requires great persistence. If money is scarce, it gets old saying no to purchases that don't fit my values or my budget. And guess what? One child is very persistent and one has something I named “challenge fatigue” where, in the face of a challenge, he gives up. My daughter's stubborn nature will probably take her far enough without too much encouragement from me, but I need to find ways to motivate my son. Creating a vision board of what he wants might work, but maybe just breaking down his financial goals into very small, easy tasks/chunks will help just as much.

4. Let them make choices while living in the safety of your own home. Just two days ago, my son spent $4.20 on a cheap plastic play kit. I gritted my teeth as he made the purchase, but beyond asking whether he thought it was a good use of his money, I kept my mouth shut.

No matter if my kids end up to be frugal adults, I hope they use their talents wisely. And I hope I can always see the benefits of each personality.

How do you teach your children to be frugal? Do you tailor your financial education to your child's personality?

More about...Frugality, Planning, Psychology

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AMW
AMW
5 years ago

Anyone who has more than one child will attest that each kid will deal with things differently. Especially money. I taught my kids both the same things and they both came away with a different take. One understands frugality and the other feels it is a form of deprivation. I think “Letting them make choices” is a good rule of thumb….as long as you let them live with the consequences. One teen daughter decided to spend a third of her clothing allowance on a very expensive pair of sweat pants. I warned her and then had to hold strong as… Read more »

cherie
cherie
5 years ago
Reply to  AMW

I could write almost the same comment LOL. I have three all different with money – and the one who spends the quickest also is best at delayed gratification in other ways – weird. But I agree that the BEST way to teach is by showing, and I talk all the time about choices. I will say that there is one who always panics that we’re poor even as I’m saying we’re just making a different choice or that I don’t have any play money left [not bill money or food money – PLAY money!] – as I said, they’re… Read more »

Mrs. Frugalwoods
Mrs. Frugalwoods
5 years ago

I like that you have a household rule of 10% savings–I think that’s a great idea. We don’t have kids yet, but I think tailoring financial lessons to each kid’s individual proclivities makes perfect sense.

Further, I think adults operate in much the same way. Everyone has a unique and often complex relationship with money and identifying the system that works for you is paramount. Your #1 rule for raising frugal kids is a good maxim for all ages!

AK
AK
5 years ago

I remember in 3rd grade telling a friend at school that my family was really poor. We were far from it! Where did I get this idea? I overheard my dad talking to my mom, and he said “We’re down to our last $20.” He was talking about cash on hand, reminding her that he was going to be stopping at the bank after work. But all I heard was that we only had 20 bucks to our name. Funny what kids pick up on and how they interpret it!

Rebecca@TheFamilyFinder
5 years ago

My oldest son is frugal = deprivation. He understands the benefit if delayed gratification but cannot do it alone. He needs instant gratification. He asks me to hold the money he wants to save so he does not touch it. So, do I hold the money to help him reach his goals (used car) and finally see the benefit of delayed gratification? OR Do I tell him to just keep the money in his own savings account and not touch it. When he moves out on his own he will not have mommy there to hold his hand through these… Read more »

Lisa Aberle
Lisa Aberle
5 years ago

I have often thought about this too. A similar question, Is a mandatory savings rule really a good thing? What happens when my kids are making their own financial decisions? Will they still choose to save any money at all? Teaching discipline for anything is tough…especially since I don’t have it mastered.

Beth
Beth
5 years ago
Reply to  Lisa Aberle

YES. To not make it mandatory is kind of like telling your kids that they don’t have to eat their vegetables now because when they go off to college they can eat whatever they want anyway. Sorry 🙂 That’s the teacher in me speaking. As parents, teachers, coaches, role models, etc. we should give kids the tools and strategies to be success — even though we can’t guarantee that healthy habits will follow kids into adulthood. I’m a big fan of the 10% rule because it worked for me. (I actually saved a lot more than that, but that was… Read more »

Jane
Jane
5 years ago
Reply to  Lisa Aberle

I require my children to put 50% of everything they earn in savings. That is savings not to save up for something they want, but savings that is their wealth builder. Like saving forever till retirement. Most of this money then goes to purchase dividend paying stocks with a DRIP (dividend reinvestment program. I never ‘lend’ my kids money either. If they want something they have to save for I with the money they haven’t ‘saved’. The rest of the money they can spend anyway they wish. This is one of the flaws I see in the authors comments. You… Read more »

Jane
Jane
5 years ago
Reply to  Jane

I did not mean to say that they do not have enough money! I meant to say that they never feel that they don’t have enough money for the things they want. But sometimes they have to wait a week or two to get it.

spiralingsnails
spiralingsnails
5 years ago

Some adults deliberately tie up their savings in CDs so they can’t spend it frivolously. Some people choose not to have credit cards because it is just too tempting for them to resist. To me it sounds quite mature for your son to acknowledge his spendy tendency and intentionally strategize how to deal with it. Why not offer to set up a subsavings account specifically for a car, and see what happens?

Laura
Laura
5 years ago

I remember my sister’s children thinking that the ATM was like a money machine that just dispensed money freely whenever your needed it. My sister would say, “we’re not doing that today because we don’t have the money”, and her kids would say, “why can’t you just go get some?”! My oldest child is only 10, but I have already had several conversations with my children about money. Mainly about how credit cards work. I want them to understand that when we pay with something with our card, we’re still paying, just in a different way. I also stress the… Read more »

Brian @ Debt Discipline
Brian @ Debt Discipline
5 years ago

I’m not sure if I’ve classified my three children yet. They all might be spenders. 🙁 I found the best way to teach them about money is about things they have interest in. We have a great discussion on smart phones, cost and monthly bills. How many hours you’d have to work to pay for one, etc it was an good lesson for them.

Chelsea @ Broke Girl Gets Rich
Chelsea @ Broke Girl Gets Rich
5 years ago

My parents had a similar way of teaching us this kind of lesson. Of course there weren’t any smartphones, but if we were making a purchase at a store with our money, they would ask us if we really wanted to buy it (particularly if it wasn’t something we were planning on), or if we wanted to wait X number of weeks until we would have enough money to buy something they knew we were really interested in. Sometimes it worked and sometimes it didn’t, but I think this helped me nip spending impulses in the bud from a young… Read more »

MJ
MJ
5 years ago

If you are having trouble swallowing a 4.70 toy purchase, you might need to rethink your own attitudes towards money if as you say you have plenty of food to put on the table Saving has no value besides giving financial freedom. There is no merit in saving to save. Money has no value other than that it helps us have the things and experiences (both are important) to enjoy our lives. Outside of that it has no importance. I came from a family where we would definitely classify as spenders according to your paradigm and my parents and I… Read more »

Lisa Aberle
Lisa Aberle
5 years ago
Reply to  MJ

Ack, sometimes I sound so one-dimensional when I’m writing. I am very proud of my son for his generosity and for my daughter’s frugal tendencies. I am also concerned about my son’s frugal challenges and my daughter’s less generous nature. We all have good points and things we need to work on. We just have to find different ways to improve, depending on our natural tendencies. Oh, and the $4.20 toy? Here is the one-dimensional Lisa again. It wasn’t actually the money. It was about value. It’s hard to wrap months of observing my children into one blog post so… Read more »

phoenix1920
phoenix1920
5 years ago
Reply to  Lisa Aberle

I really like your response–it’s so easy to come off defensive to criticism, but your response doesn’t and illustrates the difficulties that we all have when we try to communicate a wealth of observations concisely. Thanks for the food for thought on such an important topic. I find it fascinating how kids can hear the same message and interpret it so differently based on their own personality

Julie
Julie
5 years ago
Reply to  Lisa Aberle

I agree. That was a very classy response to some harsh criticism. I have often made comments that were totally misunderstood because there is no way to properly communicate the months or years of background information/observations that have contributed to forming my opinions.

cherie
cherie
5 years ago

I will also say that not only is learning by example excellent for the now – it will enable even the most dramatic spender to find a new way to live when they’re ready – because they’ve lived it – and can ask you about it – or at least know that it’s POSSIBLE to live a different way. I spent rampantly as a young adult even thoughI had very financially responsible and fairly frugal parents. I was living in manhattan making a ridiculously large amount of money for a young adult – and still wound up in debt! But… Read more »

Raza
Raza
5 years ago

When I was in 1st grade, my grandmother gave me $100 for my birthday. She did the same every year until high school. My parents never allowed me to spend it. When I was a freshman in college, I decided to spend a summer in Egypt. That money that I saved from 1st grade funded my entire trip to Egypt. Plane tickets, rent, food, Arabic classes, etc. It was the best time of my life. I now have 2 young kids, 7 and 3.5 and my 7 year old has nearly 250 saved up. I’m so proud of him. He… Read more »

Kim
Kim
5 years ago

I remember thinking we were poor when I was growing up because we always shopped at this super cheap outlet mall for clothes while my classmates had trendy, more expensive clothes. Now, as an adult, I can appreciate my parents’ spending habits (living below our means) and apply many of their spending/saving principles to my financial life.

Emily @ Simple Cheap Mom
Emily @ Simple Cheap Mom
5 years ago

Oh Man, that’s some letter to Santa! I’d really like to know what she was thinking when she came up with that one! I hope that our Little Miss grows up to be a frugal superstar, but I’d settle for an adult who is responsible with her money and lives within her means.

Wiggles @ FirstYouGetTheMoney
Wiggles @ FirstYouGetTheMoney
5 years ago

What a great article. Teaching kids good money habits while they’re young should be at the top of every parent’s list. This can have lasting effects on the way they save and spend.

Beard Better
Beard Better
5 years ago

I honestly cannot ever remember my parents having a direct conversation with me about frugality when I was a child. Now that I’m an adult, and our relationship has changed, we talk a lot more openly about money, and I’m surprised at how much we agree on things like purposely living below our means. I suppose that I learned just by observing the way they did things: couponing, buying generic brands for many things, buying household necessities in bulk all at once from Sam’s Club, etc. I’m quite happy with that, and in fact may have gone the other way… Read more »

spiralingsnails
spiralingsnails
5 years ago

We are just starting our financial education journey with our oldest child, but our 5 year old’s personality is already altering our teaching plan. She EXPECTS to save up to buy the things she wants, and she is a very generous giver – the two things I was most intent on teaching her! So instead I guess I’ll focus on teaching her how to get the best bang for her buck, balance her priorities, and how to keep track of her money (when she’s old enough to do the math). I think a whole lot of financial personality is inborn,… Read more »

Dee
Dee
5 years ago

This was one of the best articles I’ve read on teaching children frugality. I’ve never thought about tailoring my teaching to the unique personalities of my kids. That’s a great point.

Beth
Beth
5 years ago

I love how this article encourages using different strategies and tactics that work for your children’s personalities, abilities and motivations. It’s important to have consistent rules like always saving 10%, but one-size-fits-all advice doesn’t work for adults so why do we expected it from kids?

Kudos! Lisa, I hope you’ll post an update as to how these strategies are working.

Holly
Holly
5 years ago

I am one of three adult children and the three of us got very different messages from our parents behavior. My Dad was obsessed with paying off the mortgage. He worked two jobs so that it would get paid off while my mom stayed home. No vacations until the mortgage got paid off. I learned get out of debt, save money–delay gratification. I also believe that money will get me the things I want in life. My brother heard–you’ll never get the things you want so he became a spender. The oldest gets by but does not feel she has… Read more »

HappinessSavouredHot
HappinessSavouredHot
5 years ago

Great ideas! I think frugality, like anything else, is a matter of habit. It might be hard to adopt in the beginning, but as soon as you start noticing the benefits, you realize that you want to go even further than you had envisioned. This is happening to me with my Less is More project. And the kids? They love getting our attention way more than getting stuff!

Nick | Millionaires Giving Money
Nick | Millionaires Giving Money
5 years ago

I think I’ve to some degree taught my son the importance of frugality, savings and investment by playing Monopoly with him on a regular basis. He understands that he will get wages every time he goes around the month which I explain is his wages. I have also taught him to save the money and made the distinction between collecting and paying clear. He now hates to pay for items unless he really needs it. He has also learnt the importance of investing because he can collect a return. i too hope I am sending the right message and only… Read more »

Linda Vergon
5 years ago

(This comment came from Nicholas, a reader of our daily newsletter.)

I love the fact that her daughter is thinking about what Santa can bring for the entire family! That speaks to her character. What a blessing.

Felix Money
Felix Money
5 years ago

Great tips! We don’t have kids yet, but are planning to soon. My spouse and I often talk about how we would teach them the value of money and good financial habits. It’s a shame that our school system totally lacks financial education.

Aitor
Aitor
5 years ago

Thank you Lisa, this is so true! Now that we’ve passed the Christmas Holidays we see how our kids don’t even play with the tens (close than 40 presents of all sizes that they’ve got from friends and family). When just a few weeks ago they suffered if they didn’t get as many presents as the next kid, or didn’t get the exact toy car they’ve asked for. Frugality is like you say a matter of education. Something that if learned when young will help for the rest of your life. Thanks, I’ll link to your article in my Twitter… Read more »

getagrip
getagrip
5 years ago

We freakin’ worry too much. Do what you reasonably can to teach them. The best way is to walk your talk, since they observe more than listen. Don’t forget to explain things you do in a context they can appreciate, though they may not understand until they hit their twenties or thirties. Stick to simple messages of value repeated to them like a commercial jingle you can’t get out of your head. I really like the saying, you can have anything you want just not everything you want. That’s a really good one to use before the Holidays or Birthdays.… Read more »

Maggie H
Maggie H
5 years ago

I make my kids save half of all the money they earn and birthday checks are deposited and birthday cash is for spending (they usually get both from the two grandparents). For the most part I let them spend the remainder however they like, sometimes my son will walk to the drug store and buy soda and candy and that’s fine with me. They are usually pretty frugal kids. They are a bit broke since the holidays so I have been hearing some grumbling about how unfair I am because I won’t let them touch their savings. I tell them… Read more »

sam
sam
5 years ago

Frugality in my mind, is a lifestyle choice. My view as a parent is not to force our child to be frugal or lavish with money, but to teach them basic money management skills and let them make their own decisions regarding how they want to manage their money. I think the important lessons are more about debt and being able to delay gratification for a better reward. I think those lessons are valuable in regards to finances and outside of that realm as well. Self-restraint, making good decisions, and not living life solely for materialistic things are all great… Read more »

Melanie
Melanie
5 years ago

Great thoughts. Our youngest son is the sweetest boy on earth but he is seriously money-hungry. We blame Minecraft, with all the gold and “jewels.” He keeps begging for a gold bar for his birthday. (Not hardly, little mister!)

We jokingly call him Mr. Krabs.

Mike
Mike
5 years ago

When our boys receive cash presents and earn allowance, it is earmarked for savings (45%), spending (45%), and charity (10%). Every 6 months, we add up all the money they’ve saved in the charity box, match the amount they’ve saved, then pick a charity which helps children in some way. We help the boys narrow it down to 5 or less options, then let the boys select the charity. It seems to be working – both boys are actually savers by nature, so every once in a while we force them to spend a little something on themselves, too.

Michael
Michael
5 years ago

This is an awesome post, and I think you’re getting the balance right. I wanted to point out to people that you can actually overdo teaching about frugality. My parents were very good at teaching my sister and me the value of savings (both through words and actions), but now that we’re grown up, they have had to start teaching us how to spend. Case in point – I am now 25 and have been in work for 2.5 years since graduating from university. I have almost a full year’s salary in general savings (excluding pension, to which I have… Read more »

Wendy
Wendy
5 years ago

I grew up in a house where my father was a gambler and money would be gone before it arrived, my mother was a saver (probably through necessity driven by the behaviour of the other parent). My early attitude to money was that it is there to be spent and had no qualms borrowing more when required (even for things i didn’t really need) but only if I had a plan of how it would be paid back (student loans, credit cards, store cards etc). I am now in a position where all of my debts are cleared and fortunate… Read more »

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