Spending and Saving

Parent Guide to Teaching Kids About Money at Every Age

Let's discuss some ways parents can teach their kids about money at every age.

The topic of money is often considered taboo in various dynamics. Whether it’s with our friends, family, or significant others (typically until marriage), it seems we all follow an unspoken rule never to discuss our finances. The same is true among parents and their children.

A 2015 Standard & Poor survey found that only 57% of U.S. adults were financially literate, with a solid understanding of critical concepts like inflation and interest. In addition, a 2017 study indicated that children with parents who choose to discuss financial topics with them tend to have a basic level of financial literacy.

Typically, we see in most middle-class or upper-class families that the children are less aware of where their wealth comes from. They are also rarely taught the foundations of finances that include living within your means, paying yourself first, and saving a percentage of what you earn.

The fact is that many parents expect to leave these financial lessons to the school system, which despite being meant to prepare our kids for life, tends to neglect one of the most important aspects of adulthood. Because of this, parents must take the initiative themselves and ensure their children are financially literate from a young age.

As the upcoming generations known as Digital Natives begin to come of age, it’s important to combine basic financial literacy with modern solutions to better prepare them for a cashless society.

Let’s discuss some ways parents can teach their kids about money at every age.

Teaching Your Kids about Money at Different Ages

No matter what you teach to your kids, the primary influence on children’s attitudes towards money comes from your own. Experts say that constantly speaking negatively about money using phrases like “Money doesn’t grow on trees, money is the root of all evil,” etc., can cause many individuals to develop a strenuous relationship with their finances in the long run.

Start having open and honest conversations about money with your kids at an early age, starting with basic concepts that later progress to more complex insights as they age.

Ages 3 to 6

Ages three to six years old are the crucial points of cognitive development and typically when children begin to understand the concept of counting. For this reason, it’s an excellent time to introduce them to money and explain what it looks like.

Strategies like buying them a play store or cash register is a great way for them to get familiar with math as well as the general idea of payment in exchange for goods. Explain to them as simply as possible that once the money is spent, it will not return until it has been earned. Ensure they understand the cycle of cash flow rather than suggesting it will be gone forever once spent.

The four essential concepts your children should learn at this age are earning, spending, saving, and giving. These really are the fundamentals of financial literacy that we should all consider, even as adults.

Earning can be taught by a small allowance in exchange for chores, like making their bed.

Spending can be learned by allowing your child to physically give their earned money to the cashier when they want something for themselves. Using only their earned money will cause them to consider their spending choices more carefully and will have a positive effect on developing their decision-making skills as well.

The concept of saving can arise when they want something that they cannot afford with their current earnings. Show them that if they want something, they may need to refrain from spending their allowance on other things that have less significance to them.

Giving in the form of charitable habits is important to instill from a young age. Not only does it neurologically make us happier, but it can also help kids value their money through the understanding that there are less fortunate people than them.

Ages 7 to 10

Once you’ve been able to teach your child the basics and core aspects of financial literacy from a young age, the rest is pretty easy, provided you stay consistent with these teachings.

By ages seven to ten, your children will begin to perceive the concept of wealth. They may become more aware that some families earn more than others or have bigger houses than others. From here, you should explain the variables that exist within money, such as goods versus services, needs versus wants, and short-term goals versus long-term goals.

With the rise of personalized advertising in digital media and its influence on consumers, it’s crucial for kids at this age to understand the difference between emotional wants and necessary needs.

Ages 11 to 14

By this age, kids become removed from spending only with their parents and begin spending with their friends. The lessons learned in ages seven to ten will heavily prepare them for this shift.

At such a complicated age, kids will begin to experience an overwhelming need to impress their peers, and if they come from a lower or middle-class family, decisions about money will become much more emotionally driven.

In order to combat this, it will be a good time to bring up the consequences of irresponsible spending. Avoid using fear tactics and instead teach them about the concepts of credit, debt, interest, and budgeting.

As they become more acquainted with a cashless society, you will want to take out a low interest, low spending limit credit card in their name. This will help them understand the concepts of building credit as well as the risks of identity theft more clearly.

Ages 15 to 17

By this age, your kids are likely to start working part-time jobs and possibly make their own car payments. Teach them concepts about building long-term wealth through work and investments, and allow them to be open to the possibilities of multiple streams of income.

As your children begin to embark upon adulthood, trust that you’ve equipped them with enough financial literacy to succeed in life. At this age, regularly check in on their notions of spending and finances to keep the concepts fresh in their minds.

Trust that your child is capable enough to handle their finances alone while offering extended guidance whenever they may need it. 

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