From Allowance To Saving Jars: A Kid Friendly Guide To Money Management

With a background in finance, reading P&Ls and planning budgets came naturally to me. Explaining money, spending and savings to my toddler, however, requires a whole new level of creativity. 

When I asked my 2.5-year-old if he had money, he proudly said yes. When I asked where he got it from, he replied, “we buy money.”

While we laugh at these responses, moments like these remind us that kids need real guidance to understand what money actually means.

Why do kids misunderstand money today?

What we focus on raising kind, confident, and smart kids but financial literacy often gets pushed aside because of a familiar mindset:

• “They’re still small.”

• “We’ll teach them later”

What children are quietly observing…

• Payments happen without cash.

• Orders appear at the doorstep like magic.

• Adults say, “we’ll buy it next time”, without explaining why.

What kids end up believing is that

• Money is invisible.

• Money is unlimited.

• Money is instant.

The realisation…This misunderstanding starts much earlier than we think!

Beginning with the basics:

Where does money come from? Start with what kids can see: In today’s tap-and-pay world, physical money feels invisible and automatic to children. So, the first step is to make it real, visible, and connected to everyday life. (Yes, time to withdraw some cash from the ATM, something you may not have done since a wedding dinner invite or even hunt under the sofa for hidden coins).

Simple ways to introduce the idea of money in children:

1.Make money visible and tangible by letting them see and touch real cash- notes and coins: One of the simplest and most effective ways to build early money habits is through the Spend, Save and Share jar system.

• Spend: Money in this jar can be used to buy items. 

• Save: Money in this jar is to be kept somewhere safe and to be used in later time or emergencies. 

• Share: Money in this jar is to be used to share with others via donation, purchasing food for the poor, etc.

Caution! Share jar keeps score.

Help kids to set goals for each jar - shorten the goals for younger children so that they feel it’s attainable and be encouraged to continue with new goals. It is a great way to show them that money is something we hold, give, and receive - not just tap on a screen. 

2. Let them experience spending:

• Involve them when paying at cafes post a meal. Let them hand over the cash or tap the card with you.

• If they can count, let them go through the bill, and use cash and help them count the change.

  
  

3. Use play to build understanding: Introduce kid-friendly family board games like Monopoly Junior.

With simple rules and single-digit currency, it’s an easy and engaging way to teach young children the basics of addition, subtraction, spending, and saving. Through play, they naturally learn about earning, waiting, planning, and making choices, all while having fun together as a family.

4. Open a joint bank account for your children: While in my personal opinion it’s one of the worst places to save money (think 0.1% per annum), it’s an excellent tool for kids to learn how to save and see their money grow. 

• Deposit growth: Get a bank passbook for a more tangible “view access” for kids and get an update each time a deposit is entered (Ang Pau/Duit raya haul from Chinese New Year/Hari raya is a great opportunity). 

• Interests: Savings or current accounts will have, albeit very minimal, interest. Explain to your child that saving helps to earn interests and more interests can be earned from Fixed Deposits, but their money will be locked in for a period. 

  
  

6. Explain money they receive: Talk about festive gift money like duit raya or angpows.

• Explain that this is money given with love and blessings, and it can be saved, shared, or spent thoughtfully.

• Help children make intentional choices about money instead of seeing it as “free” or unlimited. One creative alternative to the Spend–Save–Share method is to give them a fixed spending allowance when you travel together. As you explore landmarks and new places, allow them full autonomy to decide if they want to spend it and what they want to spend it on. Keep the amount small, yet meaningful enough to buy something they value. They may make impulsive or unwise choices, and that’s part of the learning. Let them experience the outcome of their decisions, then gently review their spending together afterward to help them reflect and learn.

The goal at this stage:

It isn’t complex math or financial planning. It is just helping children learn that money is earned, exists in real form, and is used with intention.

Needs vs Wants:

Even adults struggle to prioritise between needs and wants, so it’s no surprise kids need guidance too. Teaching them to tell the difference early helps build mindful spending habits that last a lifetime. Practical ways to teach this:

• Shopping catalogues: Use supermarket catalogues or screenshots from apps like GrabMart or PandaMart. Go through them together and ask your child to sort items into “needs” and “wants.” 

• Shopping lists & budgeting: Involve older kids in making the family shopping list. Start with low-in-stock essentials at home and explain why these “needs” come before “wants.”If they don’t know what things cost, they can’t budget- simple. Get older kids to track prices of everyday item/s for a calculated time period, then sit down together to plan a weekly budget. Set a total, go shopping, and see if your crew can stick to it. Budgeting, but make it real life!

  
  

Getting Involved in Decisions:

Empowerment starts with inclusion, especially with older kids. They don’t have to make the final decisions but involving them in the process helps them understand how money choices are made in real life.

Currently auditing mum dad's budget!

For example, when planning a family vacation, assign them to work on a holiday project, listing possible activities. Get them to compare costs between locations and activities and discuss which option makes the most sense. It opens the door to an important lesson: money matters, but it’s not the only factor in decisions, especially when it comes to experiences like travel.

Join the Money Conversation!

At IBU, we believe kids learn best from real-life moments. Contribute your creative ideas in the comments to share how your family talks about money - your story could inspire another parent to start today.

About The Author:

Chua Pei Wen is a mom of two boys- a toddler and a soon-to-be toddler. When there's no havoc and background screaming, she enjoys crocheting while indulging in reality shows. Occasionally, she attempts to experiment with new dishes, subjected to approval (or rejection) of her boys!