Hey parents! Let's talk about something super important but often overlooked: Financial Literacy for Kids. As an educator in personal finance, I've seen firsthand how crucial it is to start the money conversation early. This isn't just about teaching your kids to save a few bucks; it's about setting them up for a lifetime of financial savvy. In this post, I'll guide you through ten engaging ways to talk to your kiddos about money, tailored for each stage of their growing up years.
Table of Contents
Early Childhood (Ages 3-5)
1. Using Visuals and Simple Concepts
At this age, kids are like sponges, soaking up everything around them. Start with the basics:
Use play money to help them understand different values.
Simple counting games can introduce the concept of money.
Explain in the simplest terms how we exchange money for things we need or want.
Tip: Keep it fun and visual. Kids this age learn best through play and storytelling.
2. Storytelling with Financial Lessons
Read children’s books that have a message about saving or spending.
Share age-appropriate stories about your own experiences with money.
We’re partial to this method, which is why we wrote some books to help you on your journey! Learn more on our homepage!
Remember: The goal is to make money a regular part of their vocabulary and thinking.
Elementary Years (Ages 6-9)
3. The Concept of Earning
Now’s a great time to introduce the idea that money is earned through providing value to others. Most of the time you’ll hear “allowance” thrown around, but we prefer “earned income” or just “income.” Using this vocabulary makes getting money an action - earning. Allowance implies that money just shows up!
Start with a small earned income in exchange for some chores.
Explain how we earn money by helping other people. Maybe it's through chores, or giving them lemonade on a hot day, mowing their lawn, or any other job you can think of!
Key Point: This age is perfect for instilling the idea that money is earned, not just given. Help them understand the concept of providing value!
4. Saving for a Goal
Kids start to understand delayed gratification at this stage. They can earn income and then save up for a bigger purchase later, like a new bike or video game!
Encourage them to save for a toy or a book they want.
Use a piggy bank or a jar where they can see their savings grow.
You can use other visual aids, like a chart or arts and crafts banner!
Takeaway: Teach them the satisfaction of reaching a savings goal.
5. Basic Budgeting
Introduce the basic concept of budgeting. Remember, at its core, a budget is just “inputs - outputs = savings.” The inputs can be income from a job, interest payments from investments, or any other way you bring money in. The outputs can be normal expenses, but also charity and investments! And whatever is left over, we can save for short term use!
Use games to simulate budgeting for different needs and wants.
Discuss the difference between things we need and things we want.
Pro Tip: Hands-on activities make budgeting a tangible and fun exercise.
Pre-Teens (Ages 10-12)
6. Introducing Banking
It’s time to get a bit more real with money. When the kids are younger, you can make your own bank in the house, but now they’re old enough that it makes sense to get real accounts set up for them!
Open a savings account and teach them to monitor it. We recommend High Yield Savings Accounts specifically. Marcus by Goldman Sachs is a strong choice (we are not affiliated, just think they have the highest rates and simplest terms around).
Discuss how interest works and the importance of saving.
Remember: Show them their bank statements and explain the numbers.
7. Smart Shopping
Involve them in real-life money decisions. When you’re at the store, do you choose between different products based on price and quality? If you do - talk through that choice with your kids! Maybe on some items you take the cheapest version of the item, but on others you’re willing to pay a premium for high quality. Working through this with your kids gives them a chance to glance into the world of real money management, and see how you make decisions with your money!
Take them shopping and show them how to compare prices.
Teach them to look for deals and understand the value of money.
Key Skill: Developing a smart shopper mindset early on will pay off for a lifetime.
Teenagers (Ages 13-18)
8. Advanced Budgeting and Saving
Teenagers can handle more complex financial concepts. Look at a complete budget, maybe even shares your with them if you are willing. They can learn about all the different inputs and all the different outputs that show up on a real budget!
Help them create a budget for their personal expenses.
Discuss long-term savings goals, like for college or a car.
Important: This is a critical stage to instill the habit of budgeting and saving for the future.
9. Understanding Credit and Loans
Introduce them to the world of credit. Credit is a tool like any other, you can use it to build some amazing things, or you can use it to ruin your life. Teaching kids early about credit and how to maintain a high credit score is vital in the modern era. Teaching them to use credit cards like debit cards (i.e. pay them off immediately or every month) is an integral part of any financial literacy discussion. Show them how having a high credit score makes the dream of owning a home more achievable by keeping interest rates low on their mortgage. Carrying credit card debt and having a low credit score are a real recipe for disaster in the current financial landscape - so make sure they know how to navigate that world now!
Explain how credit cards work and the concept of interest.
Discuss the importance of maintaining good credit.
Caution: Make sure they understand the risks associated with misusing credit.
10. Investing in the Real World
Begin to demystify the world of investing. There’s so many options for investing in the modern era - things like indexes, ETFs, and Mutual Funds track specific groupings of stocks in the market. There’s always the choice of buying individual stocks as well! Now add in Crypto, real estate, and different types of bonds, and the list gets overwhelming! And these are all just vehicles, they don’t talk about tax processes like Roth vs Traditional retirement accounts, tax-loss harvesting, or any number of other topics of discussion!
This can seem overwhelming, especially for a kid starting out. Just remember, simpler is almost always better. There’s plenty of resources out there to learn about the specifics. We’re not affiliated in any-way, but we highly recommend the Money Guys show/podcast to learn. Or if you want a more personal touch, we recommend reaching out to Lawrence with Green Collar Finance. We’re not financially associated with Lawrence, but we know him from our time in the Army together, and he’s an extremely knowledgeable CFA!
Simple investment strategies will almost always beat out complex and convoluted strategies, especially for young people with a long time horizon!
Stress the importance of long-term investment strategies, use the compound interest calculator to show how little investment money it takes to be a multi-millionaire over time!
Takeaway: Even a basic understanding of investing can set them up for future financial success.
Conclusion:
Fostering Financial Literacy for Kids is a journey, not a one-time lesson. Keep the conversation going, answer their questions, and most importantly, lead by example. Your financial habits will be their greatest teacher.
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