How to Be Rich as a Kid: Earning and Saving Money

Being financially savvy as a child involves developing an understanding of how to earn, save, and manage finances effectively. This foundation in financial literacy can empower young individuals to make informed decisions throughout their lives. The journey to becoming “rich as a kid” centers on building responsible money habits from an early age. This article provides practical guidance and actionable steps for children and their parents to cultivate financial smarts.

Ways Kids Can Earn Money

Children have opportunities to earn money, fostering independence and understanding the value of work. Many methods involve services for family or neighbors, teaching responsibility and community engagement. Common household chores like pet sitting, dog walking, or car washing are starting points for younger children. Raking leaves or watering plants for neighbors can also provide earnings.

Beyond household tasks, entrepreneurial ventures offer a creative path for kids to earn money. A classic lemonade stand can teach lessons in sales and customer interaction. Children with artistic talents can create and sell handmade crafts, such as jewelry, greeting cards, or artwork, through local craft fairs or online platforms with parental assistance. Baking and selling simple treats or offering gardening services are other ways children can earn income.

For older children, supervised online activities or digital services offer earning opportunities. Tech-savvy kids might offer basic coding lessons, design simple websites, or create digital content like blogs or vlogs with parental oversight. Online platforms can also facilitate the sale of handmade goods or photographs. Parental involvement is important for safety and appropriate content in online earning.

Tax implications should be considered when children earn money. For 2025, a dependent child must file a federal income tax return if earned income exceeds $15,000. If self-employment income, such as from a lemonade stand or pet-sitting, is $400 or more, they typically pay Social Security and Medicare taxes. Even if not required, filing can be beneficial if income tax was withheld, as they might be eligible for a refund.

Strategies for Saving Money

Saving money is an aspect of financial literacy, teaching children delayed gratification and working towards future goals. Setting specific savings goals, such as buying a particular toy, a video game, or contributing towards a special experience, provides motivation. Simple methods like using a piggy bank or clear jars labeled for different goals can help visualize savings progress.

When a child’s earnings grow, opening a bank account becomes a practical step for saving. Minors require a parent or guardian to set up a custodial or joint account. A custodial account (UGMA/UTMA) is legally owned by the child but managed by an adult until the child reaches a certain age (typically 18 or 21). These accounts hold various assets, and funds can be used for the child’s benefit before they gain full control.

Alternatively, a joint savings account allows both the parent and child to access funds, providing parents oversight and the ability to monitor activity. This account teaches children about banking. Many banks and credit unions offer youth savings accounts with competitive annual percentage yields (APYs), helping a child’s money grow.

Deposits are typically insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor. For a joint account with two owners, this effectively doubles the coverage to $500,000. This insurance provides security for saved funds. Regularly tracking savings progress, whether through a physical chart or a banking app, can reinforce positive saving habits and motivate children to build financial reserves.

Learning About Money Management

Effective money management involves making informed decisions about spending and understanding financial priorities. A concept for children is the “spend, save, give” allocation method, using physical containers or budget categories. This teaches children to divide earnings for immediate spending, future savings, and charitable contributions.

Understanding the difference between “needs” and “wants” is an important lesson in money management. Children can learn to prioritize spending by identifying essential items versus discretionary desires. This helps them make deliberate choices. Encouraging smart spending habits, such as comparing prices or waiting a day or two before a purchase, promotes thoughtful consumption.

Beyond personal finances, children can begin to grasp the mindset of entrepreneurship. This involves recognizing problems and creatively providing solutions. For instance, if a neighbor needs their lawn mowed, a child can identify this as an opportunity to offer a service, demonstrating initiative. This fosters innovation and a proactive approach to finances.

Instilling the value of money and responsible financial decisions early can have a lasting impact. When children understand that money is a limited resource earned through effort, they are more likely to manage it carefully. Regular conversations about money, involving children in family financial discussions, and allowing them to experience the consequences of their financial choices can build money management skills that serve them into adulthood.