Spending and Saving

How to Teach Your Kid About Money

Teaching money skills to children of all ages is important. It will help them build an understanding of earning, saving, and spending.

Although financial literacy classes are sometimes offered as an elective in high school, there is little emphasis on teaching money in schools today in most grades. As less and less paper money and coins are used in our society, children are limited in seeing “real money” change hands. But rather, they see you and others paying online, with cell phones, or using a debit or credit card.

Teaching about money is important so kids have more understanding before they are older; they can better handle money matters and be financially savvy.

What age is old enough to teach about money?

Many of the educational articles and researchers suggest teaching money as early as pre-school. Young children can learn to identify and count basic currency (penny, nickel, dime, quarter, dollar bill). They can also learn how and why money is used. For example, if they do a specific task at home (pick up their toys, or give their pet water), they may get a gold star on a chart. This example shows the task is rewarded with a gold star (currency). Then they can exchange their star for a favorite sticker, small toy, or snack (this is a simulation for purchasing goods). Or, they can save their stars to exchange for a bigger reward (simulating a savings account).

When children get older (about six to eight years), the stars can be exchanged for an allowance. You can also teach about money at an early age by using children’s books that feature money themes. They can also start saving money in their own piggy bank. From time to time, they can pour out the money and count it. You can play make-believe and have a pretend grocery store or restaurant. Children can shop or order food and then pay with play money. They can take turns role-playing the customer, cashier, and server. A play cash register and play food can be added to the fun!

Once they are old enough to get an allowance, they can learn about savings accounts. You can take them to the bank to open up an account. Or parents can open joint bank accounts with their children and monitor their accounts. Money (either from a birthday or holiday gift, or money that is earned through an allowance or odd jobs) can be deposited and your child can save the money for a later day purchase. You can also take money out of an ATM and explain how the withdrawal process works.

Additional skills can be taught about money:

  • counting money, filling out the deposit slip, and giving it to the cashier
  • figuring out if they have enough money to buy a certain item
  • saving, spending, and giving part of the money away
  • showing how the bank balance increases with deposits
  • learning about interest earned through saving or paying bills
  • building a relationship with a bank and banker
  • earning money to buy something they want

Middle school and high school children can be taught more advanced financial skills. For a deeper understanding, these skills are best taught in real-life situations. For example, if your high schooler is learning to drive, you can talk about the need for insurance and investigate the cost. You can introduce the stock market and discuss investing when they are curious about investments. And when they get their first job, they can learn about taxes. You can talk about saving money for post-secondary school.

At all ages, you can use current events to teach financial concepts. For example, the government discussing tax increases or tax cuts, the cost of construction projects in town, and the rationale behind highway tolls. Another way to introduce money lessons is through a number of board games like Monopoly and the Game of Life. You can also have a family savings jar and earn money as a family toward something the whole family wants. As a family, you could organize a lemonade stand or rummage sale.

How does parental behavior impact learning about money for children?

You need to practice what you preach. Talk about a weekly or monthly budget for such things as food, clothes, entertainment, bills (water, electricity, phone, internet, cable, various insurance), savings/investments, gifts, charity, etc. Let them see you pay your bills and your taxes. When you need to make a big purchase, talk to them about prices and how you plan to pay for it. If you have monthly installments or a special promotion without interest for a length of time, show them how this works, too. Explain the consequences of not paying on time. Let them see you pay bills by phone, check, and online.

Other fun money activities

  • Fill a glass jar with pennies and have them estimate how much money is in the jar. Then count the money and see who is the closest.
  • Research the people on the bills and coins. Learn why they were selected to be on that particular bill or coin.
  • Comparative shop and discuss the prices of items you buy in the store. Teach them about store brands and quality name brands as well as purchasing a large quantity for a lower price per item cost.
  • Talk about products that are advertised in commercials.
  • Talk about needs and wants so children begin to place a value on things. In time, they will begin to discriminate and realize that some things are not as important as they once thought to have.

For more actionable steps and teachable moments, check out these great articles:

  1. ESavingsBlog. “When Should You Start Teaching Kids About Money?” by Kari Cullen. August 19, 2017
  2. Ramsey Solutions. “15 Ways to Teach Kids About Money.” February 25, 2021.

Conclusion

Teaching money skills to children of all ages is important. It will help them build an understanding of earning, saving, and spending. In the end, they will be better prepared for money challenges as they get older. They will be more confident in dealing with money and making financial decisions.

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