Check out these important money lessons for kids! Set your kids up for financial success!
Why do you need to teach your kids about money?
You might want to help them:
- avoid the money mistakes you made
- become financially-independent adults
- be well-prepared for unexpected financial situations
- avoid getting too far into debt
- set themselves up on the right track for retirement (it’s not too early!)
- learn how to save money so they can buy a house or travel
Whatever your ultimate reason, you absolutely need to teach your kids these important money lessons. Do not rely on schools to provide a comprehensive financial education.
Money Lessons for Kids
According to this report, basic money habits are stuck in children by age 7.
This makes it imperative that you start modeling good money habits and actively teach important money skills to your kids starting at a young age.
If you have older kids, don’t worry! There are still a lot of things you can do to help your kids form (or re-form) their money habits.
In fact, I’m sure you have already helped them out by covering some of the basics.
Let’s take a look at specific things you can do at each stage of your child’s life:
Money Lessons for Kids: Toddlers/Preschoolers
Don’t think it’s too early to talk to toddlers and preschoolers about money!
You obviously can’t go into depth about the nuances of investing, but you can still start teaching basic concepts.
Keep it simple and introduce the basic idea that we need money to buy items at the store.
Here are some specific things you can do:
Teach them to wait.
Teach your kids how to wait for things they want (but not too long – their attention spans are short!)
Don’t underestimate lessons about the value of delayed gratification!
Let them use cash to make a small purchase.
Give your kids $1-2 dollars at the store and let them choose what to buy. (You might have to help by giving them 2 things to choose from.)
Let them practice paying and using money.
Play pretend shopping.
A fun way to learn about money is to play shopkeeper! When my oldest was 3.5 she loved this game (still does at 5 actually!).
I’d let her lead and she’d be the shopkeeper and tell me what to do and buy (LOL) and sometimes tell me to play “by card”.
Show and teach different coins and bills.
Introduce the different coins and bills and talk about them – the names and values.
You can use them to play shop and practice counting and sorting money.
Talk about how people make money.
You can talk about how parents go to work and the different jobs of people you know.
When you’re at a store or the doctor’s office, talk about the different people that you see and what their specific job is and explain that’s how they make money.
Give them a piggy bank.
Let them save money in their piggy bank. Don’t forget to take them out to use that money (maybe for a trip to the ice cream shop!).
Teach them that it takes time to save money to buy something they want.
When they receive any money (a birthday gift, for example), tell them they have to save a part of it.
Good saving habits start young!
Related: Teach Kids to Save Money
Money Lessons for Kids: Elementary age
When your kids get a bit older, you can start introducing other concepts.
Start with an allowance.
In order to learn how to manage money, kids need to be able to actually work with it. An allowance is a great way for kids to start learning how to manage money.
Make sure your kids divide their allowance into 3 groups:
There are a lot of ways to handle allowances, but it’s best not to pay for every single chore your kids do.
I teach my girls that we help each other out (for free!) because that is what you do when you belong in a family. You help each other!
Related: Allowances vs. Commissions
Let them shop with their own money.
When they shop, teach them smart shopping skills.
- wants vs. needs
- how to comparison shop
- discuss cost differences (brand vs. generic, sale vs. regular prices)
Sometimes let them choose to spend money on whatever they want. It’s better to learn a hard lesson with money when you are young than to make big mistakes as an adult!
Your child may regret spending money on a candy bar that’s gone in 2 minutes and realize they’d rather buy a toy they can play with for a long time.
Don’t forget to talk about opportunity cost – when you use your money to buy an item now, then that money won’t be available later to purchase something else.
Open a savings account.
Start a savings account when they are young. Have them contribute a portion of their money (from gifts or allowance) to it.
Take them to the bank often so they can make deposits. They can even use the account to save for a bigger purchase (with your help and approval).
Help them make a small savings goal! You can have them use a savings chart like this to track their progress toward the goal and keep them motivated.
Talk about the importance of saving (for bigger purchases and emergencies).
Explain the basics of a budget.
In late elementary, you can start introducing the basic concepts around a budget (know how much money you make and how much you spend – make sure your spending is less than your income).
Show them what a very basic budget looks like.
Explain how you save up for a large purchase – you put a little money in your account each month to save up for your annual summer vacation at the lake!
Talk about the relationship between jobs and money.
Reinforce the idea behind work and money. People go to work, get paid money, and use that to buy items they need.
Money Lessons for Kids: Pre-teens
As your kids get older, keep reinforcing the money concepts you’ve already introduced and help deepen their understanding.
Help them explore career options.
Have serious conversations with your pre-teen about choosing a stable career that will provide a steady income for life.
Talk about different career possibilities and the job requirements of each.
Answer any questions they have about your own or other people’s careers.
Show them how to set up a budget.
When your child starts working regularly, they should start keeping a personal budget. Now is the time to show them how to set one up so that they’ll be ready when they start working.
If your kids want to buy an expensive item (that you normally wouldn’t), help them set up a savings plan to contribute a portion toward the purchase.
Teach them to be content and grateful.
As an adult, I find it really easy to fall into the comparison trap.
Hey, why does she get to buy a brand new BMW and I’m stuck with my 10-year-old Honda!
This can be especially hard for pre-teens who might be watching friends get the latest electronic gadgets or go on fancy trips with their families.
Help your kids learn to be happy and grateful for what they have and not compare their life with other people.
Show them how to give back.
Teach (and model) for your kids the benefit of giving (time, talent, and treasure) to build up the community and to help others less fortunate than themselves.
This teaches them to be grateful for what they have and also to be concerned for others.
Talk about marketing techniques.
Show your kids how companies use marketing (advertising) to influence your purchases.
Talk about buying brand name vs. generic items.
Explain how the cost of advertising drives up the price of an item when a cheaper, generic item may be just as good.
When you shop with them, talk out loud about how you decide what to buy, how you compare prices, and why you make the shopping decisions you do.
Money Lessons for Kids: Teens
When your child reaches the teenage years, it is time to start slowly giving them more money independence and help them make solid money decisions (about work, saving, spending).
This will help them prepare for independent living that will come soon enough when they head off to college.
When your kids, hit the teenage years you need to:
- get them working
- teach them how to manage bank accounts
- discuss credit and how to build it responsibly
Discuss debt (especially credit cards and loans).
Debt is a BIG topic. Make sure your teens understand what credit cards do.
They need to understand the dangers of credit cards and the fee and interest charges connected to them.
You can help your teens understand interest charges by comparing the interest a bank pays you to keep money in the account vs. the interest charged by credit cards to loan you money.
(HINT: Most interest rates charged by the credit card companies are at a MUCH higher rate than the interest the bank pays you to keep your money safe. In other words, if you have some money in the bank and are maxing out your credit cards you are definitely losing money!)
Consider letting your teen have a student credit card (with a low limit) so that you can provide help and guidance with using it responsibly and understanding the pros and cons.
You can set a limit that they can only use it for certain purchases each month and they will be responsible for paying off the balance.
Teach them to pay the full balance off each month.
Help them understand how keeping a balance leads to actually paying more for each item than the original sticker price (due to the interest charges).
Smart credit card managing can help them slowly build up a good credit score.
If your teen plans to go to college, make sure you also discuss student loans.
Debit vs. Credit Cards.
Your teen should have a clear understanding of the difference between debit and credit cards and exactly how each one works.
Explain the basics of buying stock and investing.
When they start working, have them open a Roth IRA and start contributing to it! (It’s never too early to save for retirement!)
Help your working teen understand their paycheck.
This is also a good opportunity to explain why your salary isn’t how much you take home. Ensure they understand the difference between gross and net income.
Explain all the parts of the paycheck: taxes, Social Security, insurance premiums, etc.
Open a checking (and savings) account.
Now is a good time to open a checking account (and savings, if you haven’t already) and teach your teen how to properly balance it.
This is a good side lesson to budgeting and preparation for managing personal bills when they head off to college.
Set up a budget.
When your teen starts bringing in an income, sit down and show them how to make (and keep) a monthly budget.
Preparing for college.
Student loan debt is a real, serious thing.
More than 15 years after my college graduation, I have friends who are still paying student loans. Thankfully, I’m debt-free!
Compare college costs and discuss payments, as well as alternatives to the traditional college route.
Take a serious look into all available scholarships (and loan options).
Related: 9 Ways to Pay Off Debt Fast!
Getting a job.
Your teen should start working, even if it’s a side job like babysitting for family friends or mowing the neighbor’s lawn.
Once they start working, you should talk about them about how to make wise purchases and discuss what things they’ll now be required to pay for (for example, you’ll buy basic clothes, but they’ll need to pitch in for the designer jeans).
Finally, I think it’s always a good idea to help your kids learn from your mistakes.
Talk about any financial mistakes you made (having too much credit card debt, taking out too many student loans) or things you wish you had done earlier (starting investing when you were younger, started a retirement account earlier).
This can help set your kids on the right financial track while they’re still young.
Show your kids that you can choose what to do with your money. It’s best to avoid phrases like We can’t afford this. or This is too expensive.
Instead, focus on what you are choosing to do with your money. Remember we are saving money for the big summer vacation we have planned?
Help your child make choices to stay out of debt, save religiously, and spend wisely.
Your goal is to get your kids to see money as a tool to help them reach their goals and help others!
Did I miss anything? I’d love to hear about your lessons for teaching kids about money!