Talking to your kids about money might not feel easy, but educating your children about financial basics and how to be smart about money is one of the most important things you can do for your children.
the good news? You don’t need a finance degree to teach kids about money. Just focus on financial basics and apply some of the following general lessons based on the age of your kids.
How to Teach Kids About Money
Most of what kids learn about money at this age will come from watching you. You can also increase their understanding with some simple games. Consider these tips to give kids positive examples and allow them to imitate your behavior.
Start with the basics: Toddlers and preschoolers
At this age, kids learn by watching and doing. Focus on helping them recognize money and understand simple concepts through play.
Try this:
- Show them different types of money – like coins and paper bills – and name them
- Play pretend with a store or restaurant using toy money
- Let them “pay” for small purchases with your guidance
The goal with younger kids is simple – to build familiarity and curiosity.
Build practical skills: Elementary school age kids
Financial education for school-age children can move beyond awareness. Focus on teaching skills that will give kids control over their resources and help them apply these lessons in daily life.
Give children an allowance so they can learn to manage money:
- Provide a small, consistent amount of money
- Some families tie allowance to chores, while others don’t
- The ultimate goal is to give kids a chance to practice managing money
Use an allowance to teach kids about budgeting.
Help your children understand financial responsibilities by having them divide their allowance or any money they earn into categories such as saving, spending and giving. Decide what percentage of each child’s allowance should go toward each category and make sure they stick with it.
Let kids decide how to spend their money.
Let kids choose how they spend their money. Even if their choices aren’t ideal, those experiences can help them learn the value of money, the consequences of impulse spending and the importance of saving for bigger goals.
Help kids open their own savings accounts.
If possible, help your child open a savings account. The process of finding the right account can also be a teaching experience, as you can talk to them about looking for accounts that have no maintenance fees, no minimum balances and have a good interest rate.
Prepare for independence: Teen years
As your kids grow closer to being on their own, it’s important to teach them about the financial world of being an adult, along with practical tools they can use.
Encourage your teens to get a job.
Not only does a job teach responsibility and important social skills, but it can be a teen’s first experience with earning a salary. Walk your teen through their first paycheck so that they see how taxes and other payroll deductions work. Then, when tax season rolls around, help your teen complete and file a tax return.
Teach them to manage their bank accounts.
When your kids become teens, you will want to help them open a checking account in addition to the savings account they already have. Most banks have checking accounts available for kids as young as 13, as long as a parent or guardian is co-owner on the account. Do research together about different account options and what sorts of fees (monthly maintenance fees, overdraft fees) or perks (free online and mobile banking, free direct deposit) are available.
Once the account is set up, walk them through the basics of writing checks and using debit cards. Explain the difference between a debit card and a credit card. Although not many people mark their transactions in a printed register anymore, you should talk to your teen about the importance of keeping track of their transactions in some way so that they don’t spend more than they have. At first, sit down with them to review their statements and talk through how they are spending money.
Help them build credit responsibly.
Building a good credit score takes time, so when you feel like your teen is ready, get them a credit card with a small credit limit. Talk to them about how to use the card: you might want to set the expectation that they only use it for emergencies. Or, you can have them use it but explain that they will be expected to pay off the balance every month. Be sure that they understand how interest rates work and what will happen if they don’t pay off the balance – including the impact to their credit score and long-term financial goals.