The Ultimate Guide to Teaching Kids About Money

One of the essential skills we, as parents can pass down to our children, is financial responsibility. But, unfortunately, money management is a difficult skill for many adults to master, so how to teach kids about money when we’re not even sure if we’re doing it right?

Discussing money and personal finance used to be taboo; parents didn’t discuss financial concerns with their children, and children didn’t ask. Unfortunately, that led to many teens and young adults not knowing how to budget, save money, or maintain a good credit score.

So what’s a parent to do in order to pass down responsible money habits? Fortunately, we’ve done some of the hard work for you. We gathered insight from some financial and educational experts and put together a list of practical money lessons for preschoolers to high school!

1. Discuss Why You Work

Best Egg financial services highlight that you should talk to your kids about why you work. The concept of work and money is exceptionally vague for little ones. They probably do not even understand what a job is; they know you go to work but do not understand what that means.

If you have elementary or preschool-aged children talk about how you work to earn the money that pays for everything in your home. When you do your work well, the company gives you money in return.

2. Chores and Allowance

Young children can begin to do household chores in exchange for an allowance; this will drive home the concept of working and contributing to earn money. These chores should be age-appropriate and be extra in addition to their typical responsibilities.

Younger children love piggy banks because they can watch the coins add up. For older children or teens use a kid-friendly debit card service such as Greenlight or FamZoo to pay them for their chores.

3. Help Children Understand the Difference Between Wants and Needs

To a child, everything is a need. They need the newest pair of Nike shoes, they need that newly released video game, and they need ice cream and candy from the grocery store.

Natalie Abenhaim, a Community Manager at gohenry, outlines the importance of helping children differentiate between a want and a need. For example, they need food, but they do not need pizza.

When your child is spending money they’ve earned or been gifted, discuss things they really want and whether they have enough or need to save more. It is important to help kids understand that sometimes we have to save up for things we want.

4. Play Money

Include play money in your child’s dramatic play area and encourage role-play that involves exchanging money. Fun ways to incorporate money into play include pretending to be a customer at a grocery store or a patron at a restaurant. Early money concepts come from children interacting with money, numbers, and counting.

5. Use Cash

Very few of us carry cash around to make purchases. Many of us even have direct deposit, so our paychecks go directly into our bank accounts. To be honest, I am not sure that my younger son has ever been inside a bank. I remember going to the bank with my parents and always getting a lollipop, but I also watched money being exchanged and handled.

When children see physical cash being used, it solidifies that cash and money have value. Craig Everett, a professor of finance, said in an interview with U.S. News, “Using physical cash is much more effective in teaching kids about the value of money. For kids under 8 years of age, coins are the most effective because of the differences in size and weight. Young children really enjoy activities of counting and exchanging coins."

6. Have them Get a Job

Depending on your child’s age, you could have them get a part-time job. A summer job for high schoolers or babysitting gigs during the school year is an excellent way for teens to learn the value of hard work and earning money.

When teens earn $100 from working ten hours at the local book store or mowing lawns, they will spend more cautiously than if grandma gave them $100 as a birthday gift.

7. Open a Bank Account and Set Savings Goals

You can help your child set up a checking account and even a savings account to help them learn about budgeting and to set up savings goals.

Setting up a bank account will also teach your teen about interest, banking fees, and how to monitor their spending and saving. And, even though they are rarely used in most situations, your teen should know how to write a check.

8. Teach Them How Credit Cards Work

My sons are convinced I have unlimited money because of my credit card; even though I almost always use a debit card, it is a plastic card of unlimited money to them. I’ve explained numerous times how the card is connected to my bank account, and if I don’t have money in the bank, the card won’t work; I think my oldest is finally catching on… at least, I hope so!