Parents’ Guide: Teaching Kids About Money

Teaching kids good money habits like how to save money and pay their bills on time, for example, are ways to help guide them toward a healthy financial future. But financial education involves more than teaching them about “money in” and “money out.” It’s also about teaching them skills related to earning, budgeting, saving, investing, borrowing, planning, and even entrepreneurship.

You may wonder, if teaching children about money is so important, why aren’t they learning about it in school? In most states kids get at least some personal finance education, but at the high school level the topic is more likely to be integrated into another class than it is to be offered as a required, stand-alone class.² The onus, then, falls on parents or main caregivers to lead the way in teaching their kids about money and money management, especially for younger children. The good news is that doing so may be as simple as modeling good financial behaviors and as enjoyable as playing a rousing game of Monopoly.

Here are some ideas from experts for creating an engaging, kid-friendly environment that fosters their financial education.

• Involve children in family conversations about money: It’s beneficial for children to be involved in conversations about budgeting, saving, and careful spending. Hearing you problem-solve in a positive and productive way can better equip them to handle issues they may face when they’re older.
• Give your kids an allowance: Children may benefit from the financial lessons learned by receiving an allowance. Those lessons include a better sense of the value of money, what goes into earning it, and how to balance their saving and spending.
• Open up their own kids’ savings account: Set up a savings account for your children and work together to determine how much money will be deposited from, say, an allowance or birthday gifts. Teach your child to set savings goals, whether it be for a special toy, the latest digital device – or, one day, a car.
• Use money – real money: When is the last time you used physical money for a purchase? At some point we may be a truly cashless society, but witnessing real cash transactions may help teach kids the value of different denominations of bills and coins, as well as the importance of ensuring they have enough money to pay for the intended purchase.
• Involve children in day-to-day money math: Every day brings opportunities to involve children in the math of money. For example, work with children to set – and stick to – a realistic shopping budget. When eating out, show kids the check and how to calculate the server’s tip.
• Make learning a game – literally: Iconic board games like Monopoly and Life teach skills such as investing, saving, and planning. Online games such as Payback and Spent teach children about saving for special things and how to responsibly use credit cards. Games geared toward older kids teach skills related to paying for college and the importance of maintaining a good credit history.
• Make the stock market a reality: No matter how directly involved you are or aren’t in buying and selling stocks, the ups and down of the stock market typically affect most people’s lifestyles. Games such as The Stock Market Game teach the fundamentals of personal finance and investing by enabling children and their parents to build and manage an investment portfolio. 

When teaching children about money, it’s important to consider their age. Experts suggest the following general guidelines for the skills children are typically able to absorb and apply based on how old they are.³

• 3 to 6: Children are typically learning how to count increasingly larger numbers. This may be a good time to introduce money – real or play – and the value of each bill.
• 6 to 10: Children are likely better able to focus on what money can do, that we get money by earning it, and that longer-term goals may come at the cost of smaller purchases along the way.
• 11 to 13: Children may be ready to learn about the benefits and drawbacks of credit and debt, as well as interest, budgeting, and identify theft.
• 13 to 15: Children may be ready to learn about the long-term benefits of investing.
• 15 to 18: Children on the cusp of adulthood are likely ready for more information about good versus bad debt, their credit score, and taxes.

Parents who take an active role in teaching their children about money can help them build a foundation for future financial success. Children’s money habits begin to form at an early age – when they’re typically watching everything you do. Factoring in the age of the child, there are many ways to provide them with a fun, informative, and engaging financial education.