What To Teach Kids About Money at Every Age

Just like singing the ABCs, riding a bike and driving a car, teaching your kids about finances – the nuts and bolts of how money works and how it can work for them – is an important part of preparing your children for life on their own.

A recent, independent national study concluded financial education does inspire good financial habits in everyday life – like saving more and spending less than your income. In fact, 49 percent of those studied who received just more than 10 hours of financial education spent less than what they earned, compared to 36 percent who received less than 10 hours.

During the lifetime of our kids, we surely can squeeze in 10 or more hours to teach our kids to be financially successful. Here’s a guide to help you teach your kids about finances at every age and stage of their development.

Financial literacy — What to teach when you have toddlers and preschoolers:
Even our youngest kids can benefit from beginning to understand about money. Start when your kids are young with some of these fun ways to introduce the concepts of money.

Play restaurant and grocery store. Just about every kid loves to imagine they are chefs in a restaurant or shoppers at a store. Guide their play to have gentle money conversations by asking, “How much does this cost?” or “How much money do I need to pay you?” Establish with your child that goods and services must be exchanged for money.

Talk about prices and let them help you grocery shop. Let them hold the groceries or organize your grocery basket. Talk to them about the prices of items or let them tell you which you should purchase based on the prices you explain to them.

Start coin recognition with money and counting games. Use pennies to teach your preschoolers to count. Move up to nickels and dimes as they begin to learn to count by fives and tens. With these counting games, they will quickly master the value of each coin. From there, you can teach them to count cash and make change.

Financial literacy — What to teach when you have elementary-age kids:
When your kids are in elementary school, you can start discussing budgeting and saving, and you may even introduce an allowance.

Give your child a weekly allowance. Tie allowance to chores or some measure of working to earn money. Elementary-age children now can learn to link efforts with earning potential. Start small with both the allowance and the chores assigned. Allow your children to see success in their efforts and their earnings, and increase both the allowance and their earnings as they master each set of responsibilities. Encourage your children to understand that hard work and responsibility are tied to how much they earn and the ability to advance and earn more.

Take them shopping with their allowance or set budget. Now that your kids have their own source of income it is important to teach them what their money is worth. Using real-life shopping examples is fun and educational. While on a shopping trip, discuss the things they want to buy versus what they can afford. Allow them to purchase something with their money and demonstrate how the money is no longer available once spent. Explain how long it would take them to save up to the money they spent using their allowance.

Talk through your household budget. Make conversations about money a common and non-stressful topic. Talk through family budget like the price of shoes, clothing, food and other necessities. Then discuss additional goals like a vacation or car purchase. Discuss ways to save up for the goal or trim back to afford the new budget item. The more you normalize financial setbacks and successes, the more your child will understand the necessity to have a financial plan for all aspects of life.

Financial literacy — What to teach when you have middle-school adolescents:
As our kids start to grow in maturity and responsibility, so should their knowledge of financial matters.

Open a savings and checking account with your child. As your child grows older, he or she will begin to accumulate more money – from allowances to first jobs – and a savings or checking account will allow you to teach them the basics of banking. If you set up a checking account, it is a good idea to first have a representative from a financial institution explain how checking accounts – and overdraft protection and other benefits – work. You can also start discussing how to budget and save while allowing the savings account to grow.

Work together to set long-term financial goals. Would you like your child to save up for a car when he or she starts driving? Could they add to their college savings account? Talk through some long-term goals they have, and set up sustainable, trackable financial ways for them to contribute. Seeing their hard work go towards bigger goals will help them understand and appreciate the work it takes to achieve financial goals.

Giving back. You’ve probably talked with your middle schoolers about giving to others. You’ve probably donated to food drives or volunteered at a nonprofit or a church. Now is a great time to talk about how to give back financially. Talk about your own financial contributions or discuss where you’d like to donate to as a family. Have your teens give back part of their income either separately or as part of your overall giving as a family to allow them to build the habit of financial charity.

Financial literacy — What to teach when you have high-school-aged young adults:
With just a few years left before these kids go off into the real world, now is the perfect time to talk them through the ins and outs of financial life on their own.

Practice real-time budgeting. Set up your home to be a faux-rental home, with you as the landlord. Explain the different bills needed to be paid, and give your kids a (real or imaginary) budget each month to meet all their needs. Have them pay for food, clothes, car and any other expenses they might encounter on their own. This budgeting, while still in the safe environment of home, will help them make mistakes when it is easily fixable.

Prepare for college expenses. Start early in high school talking about the financial considerations regarding college. Look at the real costs of the colleges they would like to attend. How will your child contribute? How much will it cost per semester? What scholarships could your child apply for to help offset costs? With these answers planned out, your child will be prepared to share in the financial responsibility of attending college.

Start a nest egg. A savings account is great, but start talking with your high schooler now about their long-term financial future. Could they take their savings and work towards opening an investment account? Is opening a money market account or buying a short-term bond wise? Could he or she buy property while in college to create rental income from roommates and an investment for after college? Talk with a financial advisor to find options for investing savings now to help prepare them for financial independence as they age.

Financial literacy at any age — The takeaway: Financial literacy does not have to be overwhelming. Teaching our kids about how to budget, save and invest should start while they are young and continue all throughout their life. Start with the basics when they’re little, and involve a financial advisor once they are ready to make financial decisions that will shape their future.

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