How to Start Teaching Kids About Money

Financial literacy is an essential skill. I wish I had learned about all things money growing up in school. I often wonder how much more quickly I could have achieved financial freedom had I been taught about budgeting and investing instead of spending my time memorizing the Pythagorean Theorem or running the mile. There are so many things I wish I could go back and teach my younger self about money.

As parents, caretakers, family members, and family friends, we need to prioritize teaching kids about money from an early age. By instilling financial literacy in our kids, we can equip them with the skills and knowledge to make informed decisions, avoid financial mistakes, and build a strong foundation for financial freedom. 

Teaching kids about money doesn’t have to be tedious or technical. Keep it developmentally appropriate and make it fun! In today’s blog I’m going to discuss some tips about when and how to teach kids about money to set a strong foundation for kids to begin building their own financial literacy.

Age Appropriate Ways to Teach Kids About Money

It's never too early to start teaching kids about money. As early as ages 4-7, kids can begin learning fundamental concepts about money. 

At this stage, focus on activities that are interactive, engaging, and age-appropriate. 

Some key lessons for teaching kids ages 4-7 about money can include:

💵 Counting Bills and Coins

Introduce kids to the different denominations of currency and help them understand their values. Encourage them to get their hands on bills and coins and sort and count money to familiarize them with the concept.

💵 Paying at the Grocery Store

Involve kids in the process of paying for groceries. Let them hand the money to the cashier, receive the change, and discuss the price of the items purchased.

💵 Managing Their Own Money

Consider implementing an allowance system where kids earn money by completing age-appropriate chores. This allows them to learn the value of money and practice managing their own finances.

💵 Avoid Arguing about Money

While talking openly about money and involving kids in the world of personal finance early on can be beneficial to their understanding of money and its power, it is crucial to avoid arguing about money in front of kids or involving them in financial disagreements. We want to create a positive association with money and reduce potential anxieties surrounding financial matters. After all, our money habits are established by age 7.

Children ages 8-12 are ready for more advanced financial lessons. Try some of these:

💵 Saving for Goals

Encourage kids to set savings goals, such as saving for a toy or to buy a ticket to the zoo, movie theater, or theme park. Teach them the importance of patience and delayed gratification by saving a portion of their allowance towards these goals.

💵 Opening a Bank Account

Introduce kids to the concept of a bank account and the benefits of depositing money in a safe place. Take them to a local bank and help them open their own savings account and set aside time for a recurring trip to the bank to make their transactions. Although most of our banking is done online now, this hands-on experience will be more meaningful and help them more quickly understand how banking works than just doing it online alone. 

💵 Allocating Allowance Towards Savings

Teach kids the habit of putting aside a portion of their allowance towards savings. This helps them understand the importance of saving regularly and budgeting their money.

💵 Creating a Grocery List with a Budget

Involve kids in the process of creating a grocery list and setting a budget for the family's shopping. This teaches them the value of money and the importance of making thoughtful choices. If they want to throw Cheetos into the cart every trip, help them understand how that cost adds up overtime and can impact the family budget. 

Children entering their teenage years, ages 13-15, are ready for more complex financial concepts. For pre-teens and teens, try:

💵 Budgeting

At this stage, you’ve likely already exposed them to a budget in some shape or form whether it’s been having them help with the family grocery budget or teaching them to set aside some of their allowance for savings. At this age though kids are ready to take on more. Teach kids how to create and maintain their own budget. Help them understand the significance of tracking expenses, setting financial goals, and making informed spending decisions.

💵 Buying a Car

Sweet 16 is the time for a new set of wheels. Gone are the days when a teenager can buy a used 1992 Honda Civic for $900 from a sweet old lady in their town. Many of today’s teens are borrowing to make their first car purchase. 

Regardless of your teen’s financial situation or the availability of cars suitable for new drivers in your area, guide teenagers through the process of saving for and purchasing their first car. Discuss the costs involved, the importance of researching options, and the benefits of making wise financial choices. Discuss financing options and how to begin saving for this big milestone purchase. 

💵 Needs vs Wants

Help teenagers differentiate between needs and wants. Encourage critical thinking by discussing the importance of prioritizing necessities over unnecessary expenses.

💵 Using a Debit Card

Introduce teenagers to the concept of a debit card and explain how it differs from a credit card. Teach them responsible usage, emphasizing the importance of tracking transactions and staying within their established budget.

As teenagers transition into young adulthood, ages 16-18, lessons about money are more crucial than ever. Some crucial lessons to cover during this stage include:

💵 ROI of College

Discuss the financial implications of higher education choices. Teach teenagers about student loans, scholarships, and the potential return on investment associated with different career paths.

💵 Store-Valued Cards

Educate teenagers about the advantages and pitfalls of store-valued cards. Explain how they work, the potential fees involved, and the importance of responsible usage.

💵 Basics of Investing and Accounts

Introduce teenagers to the basics of investing. Teach them about different types of accounts, such as savings accounts, individual retirement accounts (IRAs), and the stock market. Help them get started investing now so they can achieve financial independence earlier. 

💵 Managing Household Expenses

Encourage teenagers to take on responsibilities related to managing household expenses. This could include budgeting for groceries, utilities, and other necessary expenses, preparing them for independent living.

How to Teach Kids About Money

Let's explore some effective ways to teach kids about money.

1. Lead by Example

Kids learn best by observing the behaviors and attitudes of their parents and caregivers. Practice good financial habits yourself, such as budgeting, saving, and making informed financial decisions.

2. Make It Practical and Fun

Engage kids in hands-on activities that involve money as much as possible. This can be through playing games, creating imaginary stores, or by real-world applications like paying the bill at a restaurant or helping with the family grocery budget. This makes learning about money fun and relatable.

3. Encourage Questions and Discussions

Money shouldn’t be this mysterious thing with a ton of negative stigma attached to it. Create an open environment where kids feel comfortable asking questions about money. Encourage discussions about financial topics and involve them in decision-making processes, such as planning a family outing within a budget.

4. Allow Room for Mistakes

It's important to let kids make financial mistakes in a controlled environment. This enables them to learn valuable lessons from their experiences and develop a sense of responsibility when it comes to managing money. If possible, talk about your own mistakes with money. Encourage kids to see money management and personal finance as important and valuable, without feeling overwhelmed by the responsibility.

Wrapping Up

We all have the opportunity and responsibility to teach kids about money when it's developmentally appropriate. We can equip them with the necessary skills to become financially literate adults, capable of making sound financial decisions and avoiding common pitfalls. Let us empower the next generation by teaching them about money and setting them on a path toward financial freedom.

Ready to further your family's financial knowledge and skills? I encourage you to sign up for my Teaching Kids Money mini course. This mini course is only 30 minutes long but has 10 lessons to help kids understand income, credit, savings, investing, and more.