“A Penny Saved is a Penny Earned” Lessons in Money Management

Benjamin Franklin coined the famous phrase, “A penny saved is a penny earned.” That sentiment may have been true two hundred years ago, but these days a penny saved can be two pennies earned with interest!

As today’s child becomes increasingly exposed to “must have” products marketed through television commercials and on the Internet, it is never too early to start educating him or her on how to responsibly save and spend their money.

As a parent, you may be all too familiar with the following scenario. Your child declares that he or she needs a new CD or cannot live without the jean jacket that everyone is wearing. Your response is, “Money doesn’t grow on trees!” This popular phrase makes sense to adults, but does your child really understand its meaning?

Even if your child is very young, you can help them understand the basics of money management. Explain the difference between needs and wants and that money is earned from working. Teach your child how to understand the value of money by making wise choices. A child as young as seven years old can learn about budgets. As your child gets older you can talk to them about credit cards, bank interest, and other areas of finance.

Establishing a weekly allowance for your child is a great way to help him or her understand the value of earning, saving and spending money. According to Linda Boelter, a certified financial planner and family financial management specialist at the University of Wisconsin, “A regular allowance helps kids take responsibility for spending decisions and encourages independence. Instead of getting money ‘on demand’ whenever they need it, children with regular allowances can learn to plan ahead–to anticipate spending needs and make choices about what’s most important.”

Here are 10 simple ways to help educate your child about personal finance and managing money:

  1. As soon as your child can count, introduce them to money. Take an active role in providing your child with information. Observation and repetition are two important ways a child learns.
  2. Communicate with your child as they grow about your values concerning money — how to save it, how to make it grow, and most importantly, how to spend it wisely.
  3. Help your child learn the difference between needs, wants, and wishes. This will prepare your child for making good spending decisions in the future.
  4. Setting goals is fundamental to learning the value of money and saving. Nearly every toy or other item a child asks their parents to buy can become the object of a goal-setting session. Such goal-setting helps a child learn to become responsible.
  5. Introduce your child to the value of saving versus spending. Explain and demonstrate the concept of earning interest income on savings.
  6. When giving your child an allowance, give them the money in denominations that encourage saving. If the amount is $5, give five $1 dollar bills and encourage your child to set aside at least one dollar in savings.
  7. Take your child to a credit union or bank to open their own savings accounts. Beginning the regular savings habit early is one of the keys to savings success.
  8. Keeping good records of money saved, invested, or spent is another important skill young people must learn. To make record keeping easy, use 12 envelopes, one for each month, with a larger envelope to hold all the envelopes for the year. Every time your child makes a purchase, encourage them to place receipts from all purchases in the envelopes and keep notes on what they do with their money.
  9. Use regular shopping trips as opportunities to teach your child the value of money.


Allow your child to make spending decisions. Whether good or bad, your child will learn from their spending choices.

Adapted from “Dollars and Sense,” in the April 1999 issue of Our Children, the official magazine of the National PTA®.

Books are a terrific resource to reinforce lessons on money management. These books are recommended by the Calvert Education Counselors.

For Younger Children:

Alexander, Who Used to Be Rich Last Sunday by Judith Viorst
The Go-Around Dollar by Barbara Johnston Adams
Pigs Will Be Pigs: Fun with Math and Money by Amy Axelrod


For Older Children

The Young Investor: Projects and Activities for Making Your Money Grow by Katherine R. Bateman
The Kid’s Guide to Money: Earning It, Saving It, Spending It, Growing It, Sharing It by Steven Otfinoski
Money Sense for Kids by Hollis Page Harman