Teaching Kids about Finances

April 04, 2020

Teaching Kids about Finances

Financial skills are necessary for a successful life, but often people don’t start to learn them until they reach adulthood.  Personal finance and making smart financial decisions may not be included in your child’s school curriculum, but kids need to be taught about finances to prepare them for independence.  Parents should guide their young ones in sound money management as they have the greatest influence on a child’s financial practices.

Finances and Family

Kids learn by doing.  Research has indicated that children as young as three can understand the concept of saving and spending, and that children’s money habits are formed by age seven.  Therefore, it is never too early to begin teaching your children about money.  While it’s best to not share financial worries with your kids, talking with them about daily money decisions can be beneficial.  For example, engage in conversation about what to buy at the grocery store, where you shop, and how you pay bills. 

You can also show children how to handle money by implementing some form of an allowance.  Not every task should require payment, so it’s good to have kids do some chores simply because they are part of the family.  At the same time, paying your child for larger projects around the house can be a teaching tool for money management and helps to develop a strong work ethic.  Consider developing a “401” account where you match every dollar they set aside in savings.  Their excitement will build as they watch their account double whenever they choose to save instead of spend.


Lessons Through the Ages:

Children are ready to handle the beginning concepts of basic money management from preschool onward.  Consider these financial tips through the stages of your child’s development:

  • Preschool Age Lessons:
    • Teach patience- Communicate to your child that we can’t buy everything we want right away, and that sometimes we have to wait. Every trip to the store does not mean a purchase. 
    • Separate- Help your preschool child divide up birthday or chore money between what is saved, shared, and spent. For example, consider labeling three jars “save,” “share,” and “spend.”  This also serves as a visual aid, since little ones can easily see the money separated between jars. 
    • Set goals- Work with your child to set a savings goal for something he or she wants to buy and then do regular check-ins to help them see how much they’ve saved and how much is still needed.
  • Elementary School Age Lessons:
    • Teach limits- Your child should be able to understand that there isn’t an endless supply of money. There are real limitations, and you have to make choices about your spending.
    • Make decisions- Have your child help with a family financial decision. For example, allow your child to pick out some items at the grocery store.  Share the cost differences between things like name brand and generic, and individual items versus buying in bulk.  Give them a few dollars, and allow the choice to be theirs. 
    • Vocalize- Talk through some of the questions you ask yourself when making purchases, such as, “Do we really need this today?” or, “Is this something I can borrow?”
  • Middle School Age Lessons:
    • Teach compound interest- Compound interest is when you make money, or interest, on both your savings and the interest you have already accrued. Teach your child about how to make money work for you.  Practice the math of compound interest with them and use online tools to assist with more difficult math. 
    • Teach restraint- Help your middle school child refrain from small purchases when they are saving. Exercising restraint to save for a larger toy or item is an invaluable skill.
  • High School Age Lessons:
    • Compare- Show your child the differences between college costs and help them compare educational options. Teach them that education is a worthwhile investment in their future by comparing salaries of those with a high school diploma and those with a college degree.
    • Plan for the future- Explain to your high school child what your plans are to save for their future. Communicate your financial plans, if any, toward their college education.  This eliminates the guesswork regarding your involvement as he or she determines college plans. 
    • Research- There is a wide array of college grants and scholarships available. Discuss these options with your child, and research the pros and cons of student loans and the government programs available to help pay back that debt.    

Teaching your children about money is necessary and can also be fun.  One of the best ways to help them learn is to engage them in the financial decision-making activities in your household.  Simply lecturing about good money principles is not nearly as successful as hands-on experience.  As an added bonus, you might discover something that will improve your own financial planning.    


Want to talk to a counselor today about this? 

Call Amplified Life at 800-453-7733 and ask for your “Free 15 Minute Phone Consultation" with one of our licensed counselors. We’ll listen, answer questions you may have, and help you plan next steps.






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