Teaching kids about money when they’re young lays the foundation for responsible money management later in life. Children whose parents emphasize the importance of financial literacy and encourage them to spend and save thoughtfully develop a healthy perspective on money.
Lessons & Activities by Age
Researchers from the University of Minnesota suggest focusing “children’s education about money on the concepts of earning, spending, saving, borrowing, and sharing.” In her paper “Practice Makes Perfect: Experiential Learning as a Method of Financial Socialization,” University of Arizona doctoral student Ashley LeBaron explores the effectiveness of hands-on learning opportunities for teaching children about money. LeBaron concludes that parents should teach their children about money through example, explanation and applied practice.
“I think it’s hard for parents, sometimes, to let their kids make mistakes,” LeBaron said. “It’s tempting to just shield kids from everything related to money, but it’s really important for parents to get money into kids’ hands early on so they can practice working for it, managing it and learning how to spend it wisely.”
Preschool and Kindergarten: Ages 3 to 5
Children as young as 3 years old understand basic economic concepts, and by age 7, kids have developed permanent financial habits.
This is a good time to start explaining that material goods cost money. Give them a piggy bank, or better yet, help them establish spending and sharing jars, which will allow them to see what happens to their balance depending on the decisions they make.
Talk to your preschooler or kindergartener about sharing with others. Show them how to set financial goals and how to meet those goals.
And remember, parents have the greatest influence over children’s money habits, and at this age, your kids are looking to you to set an example and guide them.
Elementary School and Middle School: Ages 6 to 14
At this age, you can let your child help with the grocery shopping, walking them through your decisions to shop at certain stores, seek coupons and sales, and select certain brands according to pricing and your budget.
You should also begin discussing big-ticket items with them. Koblinger included an example of how a friend of hers used car shopping as an opportunity to teach his 10-year-old “smart ways to save, how to see through clever marketing, how to negotiate prices, and how to avoid the pitfalls of loans.”
You can even teach children this age about compound interest, using real data as opposed to trying to explain the concept in the abstract.
High School: Teens Ages 16 to 19
By the time your child reaches high school, he or she should be capable of understanding more sophisticated money management concepts and have a level of financial literacy that includes knowledge of earning, saving, spending and sharing at the very least.
Credit card companies target college students, so you’ll also want your child to be aware of the dangers of maxing out credit cards, how interest works, credit limits and the importance of building credit responsibly.
Talk to your teen about the value of money. This includes emphasizing the difference between wants and needs and making sure they know your values when it comes to money. These conversations won’t be easy, especially when they see their friends wearing designer clothes and whipping out their parents’ credit cards when they go out.
Just remember, you’re not alone. Every parent who cares about their child’s financial well-being and wants to instill positive values must say no to their kids at some point. And, just as your parents told you long ago, it’s for their own good.
How do you know if you’re on the right track? Below is a checklist that was adapted from “Money Sense for Your Children,” Alice Mills Morrow, Extension Family Economic Specialist, Oregon State University Extension Service.
You can learn more about teaching your kids about money at Annuity.org