Kids are like sponges. They soak up knowledge, but they also absorb your attitude and perspective. That’s why it’s important to incorporate financial literacy into your everyday activities with them. Remember that you’re modeling a relationship with money that they’ll learn from and use throughout their lives.
What are your dreams for them? Financial stability? Early retirement? A beautiful home? A successful career? It all starts with your thoughtful guidance in these early years.
While you want to teach them practical skills, a big part of financial literacy for kids is modeling how to think about money and how to manage their emotions around it. This approach is part of raising a stable, emotionally healthy child. Get it right, and you’ll set them up for a beautiful financial future.
Here are some ideas to get started.
Why You Should Teach Your Kids Financial Literacy
Teaching financial literacy to kids builds a solid foundation for a strong financial future. But beyond teaching money facts and math, show your kids how to handle their emotions around money. By guiding them through saving, spending, budgeting, borrowing and investing, you’ll prime them for adulthood.
How to Teach Kids Financial Literacy
Start by meeting your children where they are. Kids at different maturity levels need different challenges and ways of thinking. With each child, talk about money in an informative, positive way. Lessons taught with stress will teach stress — not financial literacy.
It’s all in how you teach. For example, if you’re showing your child how to grocery shop on a budget, don’t emphasize all the items that don’t fit into the budget. This can lead to feelings of inferiority or scarcity. Instead, instill in them the idea of priorities and how deciding to stick with a budget can keep the family’s finances healthy.
The good news is, you can teach your children the six principles of finance — spend, save, paydown, protect, invest, and wellness — no matter their age. Work from these age-appropriate lessons, and you’ll speak in a way your children will understand and more easily learn from.
Financial Literacy for Kindergarteners
It’s important to start teaching financial literacy to kids at a young age. The kindergarten age is a perfect starting point because these kids are starting to grasp numbers and how they work.
Here are some ways to introduce financial literacy to your kids:
The good old-fashioned piggy bank: Who doesn’t love the glimmer of a shiny coin? Preschoolers and kindergarteners can interact with and learn about physical money. They can also watch it accumulate in a piggy bank or jar over time, learning delayed gratification.
Create a “Jobs I Do” chart. Introduce the concept of earning in exchange for work. Start the conversation by talking about the work you do for money. You can list different chores around the house and give out different “earnings” depending on how difficult they are. For example, they might earn 50 cents for tidying up the living room, and work their way to a fun treat like an ice cream.
Take them grocery shopping. Begin introducing them to price comparisons, sales, and talk about how money involves trade-offs. Showing them that a trip to the zoo costs more than a movie theater visit is a fun, simple way to teach financial literacy to kids.
Financial Literacy for Elementary Kids
As kids get older, their confidence grows. Financial literacy for elementary students can harness that expanding confidence and acknowledge their growing skills. Elementary school kids can understand concepts like abundance and scarcity, and they can start planning their own finances.
You can adapt and expand on the ideas you covered when they were young to reinforce their confidence around money. Check out these money tips for kids at the elementary age:
Build decision-making skills. Money lessons for kids don’t always have to involve money. So much of finance is learning how to make decisions. So, verbalize your decision-making process, brainstorm the options, and ask for their input. They’ll learn without realizing you’re teaching them, and they’ll glow from the shared time and attention.
Incorporate the math. Proper money management involves math. So, start using it with your kids in real-world situations. For instance, if they want to spend $10 on a toy, help them subtract the money from what they have. You can even help them calculate sales tax or a tip at a restaurant as an advanced approach to financial literacy for kids.
Let them make mistakes. Let’s say your child buys that $10 toy and then regrets it. That’s okay. Don’t reinforce the regret, but instead talk it through with them. Let them know you’re proud of them for admitting the mistake, and discuss how they’d do it differently next time.
Introduce interest. Talk about the concept of interest and the time-value of money. The underlying concept that "money now is worth more than money later" is pivotal to grasping the reasoning behind many key financial concepts.
Pro Tip: Start teaching your kids that just because they can afford to buy something, that doesn't mean they should. Help them consider what else they could spend that $10 on or how it could contribute to a larger savings goal. This can be more impactful simply than advising them not to buy the thing they want.
Financial Literacy for Older Kids and Teens
When kids turn into teens, they should be familiar with money and the opportunities it allows. At this point, they should have made some savings and purchases of their own. Continue to build on what they know with these tips on financial literacy for teens and older kids.
Help them save for big purchases: Maybe your teen wants a new bike or a tablet. Instead of giving it to them, help them save for it. Build out a plan to accrue the money and help them stick with it. If you plan to help them with the purchase, commit to matching every dollar they save, up to whatever limit works for you.
Introduce jobs outside the home: When kids get older, they can start taking on more responsibilities. Part of that is working for other people. Help your teen by using your network to get them babysitting or lawn-mowing jobs. Eventually, this could lead to them getting a summer job or a part-time after-school job.
Show them the need for insurance. As your teen gets older, they may want to drive. This is a good time to teach the financial component of protection to them. Educating kids about the importance of auto insurance beyond mere legality is a great lesson in financial literacy.
Involve them in big family finance decisions. Teens need exposure to important financial decision-making challenges, because they’ll be making those decisions on their own soon. One way to involve them is to let them weigh in on the finances of making a vehicle purchase or other big money move. Listen to their input and give them the opportunity to persuade you if they feel strongly.
Talk about credit. The teen years are a good time to start introducing the concept and the risks of credit. When they reach 18, they'll be eligible for credit cards, and they should know how to pay off their balances in full and avoid overspending.
Should You Give Your Kids an Allowance?
Allowances are a big subject of debate among parents, and the decision to use them is really up to you. On one hand, allowances can give children consistent exposure to an influx of money they have control over. They can choose to spend or save it as they please.
On the other hand, allowances can create a sense of entitlement or can lead kids to spend needlessly if they’re not handled correctly.
Allowance and Chores
Some parents choose to tie the allowance directly to chores. This approach to financial literacy for kids can teach them that they need to earn their keep. However, it can backfire if the kid then expects to be compensated for every task they’re asked to complete.
There’s a hybrid model you could also try. This includes a base allowance, with a starting point of $.50 to $1 a week per year of age. For example, you might give a 10-year-old $5 to $10 a week. They receive this base allowance no matter what. You can then give them extra tasks that pay more money.
7 Tips to Connect With Your Kids on Money
When teaching personal finance for kids, it’s helpful to use your lessons as a way to bond with them. In fact, this close interaction is a vital piece of how to teach kids about money. It’s the foundation to establish a healthy relationship with their finances as they grow.
Here are seven creative ways to connect with financial education for kids and teens.
1. Be Transparent About Your Family’s Finances
Teaching financial literacy to children involves discussing money matters in a transparent and honest manner. While you don't need to disclose every detail, include your children in financial decision-making. For example, if your child wishes to visit Disney World like their friends but you have other financial priorities, it's better to explain your reasoning than to simply say "We can't afford it."
Encourage your children to ask questions and discuss money matters, offering age-appropriate answers like, "We have $200 for groceries this week," or "We have enough." Assure them that more specific discussions will happen as they grow older.
2. Show Them the Good Money Habits That Work for You
When you’re introducing concepts like spending, investing, saving, and budgeting, talk about how you use these financial tools. Show them how you research the right price on a big purchase or how you meet with a financial advisor.
This can be a great way to teach kids financial literacy, because by observing your behavior and hearing you talk about it, they can start to understand what a healthy relationship with money looks like.
One way you can showcase a growing investment is by doing a savings match. You could mention that this is what your employer does for your savings. Make it a goal for a specific purpose, whether it’s saving in their college fund or for a toy. You could say that, for every $2 they save, you’ll match $1.
3. Include Your Kids in Saving and Spending for Your Family
Incorporate your children in the ways your family saves and spends money, demonstrating that financial decisions involve trade-offs based on values, needs, and desires. Include them in both everyday shopping and fun activities, like planning family vacations, to teach budgeting and saving for various expenses.
4. Make Learning About Money Fun With Games and Activities
There are hundreds of age-appropriate games and activities for teaching money to kids. Here are some ideas to get you started:
Play board games together that involve money, like Life or Monopoly.
Make a pizza and have them slice it to represent the slices of your budget.
Go pretend house-hunting online for their dream house on a site like Zillow.
Declutter your home and host a garage sale, donating the rest.
Games are great ways to dive into financial literacy for kids, because they’re such familiar territory.
5. Emphasize the Positives of Money Over the Negatives
Children learn from observing your behaviors, so your attitude towards money is crucial. Avoid discussing money-related stress or conflicts in their presence. Instead, focus on emphasizing the positive aspects of money, such as providing stability and opportunities. While money doesn't guarantee happiness, proper management can enhance security.
6. Tackle Difficult Money Topics With Care
We all know money management can be difficult at times. The way you talk to your kids about financial problems will have a big impact on their relationship with money. According to the American Psychological Association, you should calmly explain the situation, reassure your kids that problems are not their fault, and tell them you have a solution.
Your children can tell when something is off, and often their imagination can snowball when they’re looking for an explanation. By explaining the situation calmly, you’ll take the stress and emotion off them. Avoid letting your emotions into your financial literacy lessons for your kids.
You’ll have to use your kids as a gauge for the level of information they can handle. Explain the topic simply, and answer their follow-ups. Reassure them that the problem will be solved, and it’s not something they should be concerned about.
7. Pull in Other Voices to Teach Your Kids About Money
While a parent’s perspective in explaining financial literacy is invaluable, it helps to have reinforcements. These can be friends, family, and teachers. Also, look for mentors and other successful people in your circle that can model financial literacy for kids.
Outside support and different perspectives can be incredibly valuable. This can look like referring your older kid to babysit for a friend, or on the flip side, showing your kids how you hired your neighbor to watch them.
Self-sufficiency is important when it comes to money management. But it’s also important to model the value of community for your kids. This means being there for your network, as well as relying on them. You can showcase how money can be used to support others, along with the value of being able to ask for help.
Frequently Asked Questions
Here are some of the most frequently asked questions and answers about how to teach financial literacy to kids.
How Do I Teach My Child Financial Literacy?
Teach your kids financial literacy by starting young. Introduce them to money and be open about how you manage it. Kids learn a lot through observation. So, show them in a positive way — through your emotions and your actions — what it’s like to handle money.
What Is Financial Literacy Explained to Kids?
Financial literacy for kids is both showing them how finances work and talking about money in a calm way. Finance for kids is just as much about handling the emotions around money as it is the math.
How Do I Talk to My Kids About Money?
The first step in learning how to talk to kids about money is starting small. When they’re young, introduce them to coins and bills. Over the years, gradually build on your lessons. Introduce decision-making, and teach them how money management comes with trade-offs.
At What Age Should Kids Learn Financial Literacy?
Kids are ready to start learning about finances as early as preschool. They can learn the names for different money units. They can start a piggy bank and collect coins. As they reach elementary school, you can include them in financial tasks like grocery budgeting. There’s no wrong age to start.
Knowing how to teach kids financial literacy is a complex topic. The way you approach it can vary depending on your own finances as well as the age and maturity of your kid. The important step is starting young, involving them, and speaking to them openly.
Your kids will observe you and absorb your attitude toward money, so start them on a positive footing. This mindful attitude toward money can help improve your own financial literacy too.