Teaching our kids about money and finances is arguably one of the most important things we do as parents. And yet, most kids are not learning financial literacy in school. It’s up to us to give our kids a solid financial education to help them succeed as adults.
When can you start teaching kids about money?
Many children as young as two or three can grasp basic financial concepts such as saving and spending. In fact, a report by researchers at the University of Cambridge found that kids’ money habits are formed by age seven.
The good news is teaching kids about money can be simple – especially while they are still young. As I wrote about recently, raising money-smart kids starts with modeling, talking about money, involving kids in decisions, and giving them responsibility.
Of course, a two-year-old will not understand your lengthy lessons in compound interest and credit cards. But, a 17-year-old will! Just remember to keep it simple, fun, age-appropriate, and interactive.
Here are a few ideas for teaching kids about money at every age.
Note – Use these age brackets loosely! Kids develop at different rates, and have such different money personalities. Adjust your conversations to your unique learner and don’t be afraid to challenge them in a positive way. Kids have amazing ideas!
Preschool (Ages 2-4)
Most preschoolers can understand the basics of spending and saving and they are starting to learn numbers, counting, and basic math.
I like the idea of using simple every day activities to foster these skills, and remember – the more visual and concrete you make it, the better.
- Talk about how we buy things with money
- Identify items that cost money
- Play store or restaurant
- Count and trace coins
- Play matching games with bills and coins
- Talk about how we work for money
- Ask, do you need this? Or, do you want this?
- Start to teach delayed gratification. (Ex: Don’t buy everything they ask for – explain we need to save for it, or wait for a birthday or Christmas)
Elementary (Ages 5-10)
Elementary school kids have more developed math and logical thinking skills. As such, they can grasp more financial concepts.
This is also the age our oldest boys has started asking for more stuff, so there are many learning opportunities to educate on delayed gratification, saving, and the value of a dollar.
- Introduce an allowance (ex: jar or envelopes with spend, save, give, and invest choices)
- Use chore or behavior charts
- Give them a budget when shopping (ex: you have $5 for the birthday gift)
- Open a savings account together, visit the bank
- Play board and card games with themes of math, counting, strategy, and money (Ex: Monopoly, Sorry)
- Strengthen math skills through worksheets, games, apps, etc.
- Encourage them to set a savings goal. Talk through the steps to reach the goal and make a fun chart to track progress (Ex: my six-year-old wants to save $1,000 by age 10)
- Talk about trade-offs (if I buy this, I can’t buy this)
- Teach basic budgeting by having them help plan or budget a family trip or dinner (Ex: we have $100 for camping; how should we spend it?)
- Explore different ways they could earn money, and allow them to try out different things (it’s okay if they fail!)
- Teach comparison shopping (how to compare labels and cost)
- Put them in charge of a garage sale or lemonade stand
- Volunteer together at a favorite nonprofit
- Take them to work with you and show them your job
Middle School (Ages 11-13)
Most middle school age kids can start thinking abstractly. They are ready to apply their knowledge. Empower them with responsibility!
This is also a great time for them to start working for extra money and to use technology to increase their learning.
- Talk about budgeting and only spending what you have. Give them control over a budget, such as a family activity
- Introduce the idea of credit (Ex: it is not free money)
- Allow them to take out a loan from you and charge interest
- Challenge them to come up with a business idea
- Set a savings goal, track progress
- Encourage them to ask questions about money and finances
- As appropriate, involve them in family financial decisions and explain your decision
- Discuss privacy and security
- Talk about peer pressure with money and material items
- Have them research items online before buying
- Continue to set and track financial goals, start talking about future financial needs such as college
- Continue playing board games and card games that make math, strategy, and money fun
- Expose them to how other cultures live (for a sense of gratitude)
High School (Ages 14-18)
Most high school age kids understand cause and effect and are starting to think about future goals and paths.
Teenagers have improved reasoning skills and are better at understanding abstract ideas, which means now is the time to crank up the financial literacy.
- Teach them how to create and manage a budget (use Apps like You Need a Budget, Personal Capital, or Mint)
- Teach them how to write checks and balance a checkbook (will checks still exist in five years!?)
- Require them to work to earn extra spending money
- Show them your pay stubs. Discuss how much you make vs. take home pay
- Talk about taxes
- Allow them to try and fail with business or money-making ideas
- Explain how a credit card works, and how interest adds to the cost of purchase (again, it’s not free money)
- Help them navigate peer pressure with spending and material items. Be sympathetic and patient – this isn’t easy
- Use technology (YouTube, apps, websites, etc.) to teach them more advanced financial topics
- Provide a debit card, pre-paid credit card, or checking account
- Research college costs and options together. Discuss if you will pay for any part of college, and their responsibility in paying for a portion (if applicable)
- Talk openly about your financial decisions, successes, and mistakes
Young Adult/College (Ages 18-22)
By the time our kids finish high school, our goal is they will be financially literate. Help your teenagers and young adults understand financial basics so they can avoid expensive mistakes, evaluate future plans, and start saving and investing early.
Here are topics to cover:
- Credit score – what it is and how to build good credit.
- How to rent a place to live
- How insurance works and how much it costs
- How to buy a car or other major purchase
- How to invest
- How to evaluate different job opportunities
- How saving early on in life can be a game changer
- The importance of talking with significant others about finances