Finances play a big role in our everyday lives. Habits like paying for groceries, adding a new subscription, going out for dinner, or even buying a morning coffee can impact our finances.
Since money plays a major role in our lives, it’s a smart idea to start financial education for kids early. Explaining budgeting basics, how to save and the value of money can help build a bright financial future for your children. Below are our recommendations for how to start teaching kids about money.
Model Responsible Money Practices
Children are very receptive to adult behaviors at home. What they see us do, they may also do. This can come in handy when teaching kids better money habits. Set an example for kids by discussing the basic budget for the week, demonstrating how to avoid impulse buying and the importance of paying bills on time.
One of the best ways to teach children about finances is simply communicating to them as you make family financial decisions, including your spending and good saving habits. Involve the entire family in these conversations to set an example of what healthy financial communication can look like.
Modeling personal finance skills like these can have a positive impact on how kids will view finances in the future.
Start Young with Money Basics
Wondering when to teach kids about money? It’s never too early to start learning! Children can grasp basic money concepts by age 3, and by age 7, their money habits can be set.
Figuring out how to explain money to a child isn’t difficult, and learning about money doesn’t have to be boring. Play money games for kids like grocery store and have them pay you at checkout or use online games like Money Bingo. Have your kids count coins and cash (with supervision) at home to help establish the value of each piece. When grocery shopping, have them compare prices on their favorite brand name and store brand snacks to give them the opportunity to recognize price differences. This can also expose them to the concept of saving.
There are many ways to teach the basics of money, and an important aspect to remember is to make it fun and exciting. Children learn better when they are having fun, so get creative!
Make Saving a Habit
Once the money basics have been mastered, it is time to teach kids about saving money. Along with exploring savings options for your kids, you can practice delayed gratification for their goals. When this habit of budgeting and saving up for what they want is established early, it can be easier for them to do on their own later in life.
Have the child start with an attainable, short-term spending goal, whether that be for a small toy or candy. Then, find a way for your kids to make money. If you have the means to provide a child allowance, assign small chores around the house for them to show that money is something that is earned.
Then, use a clear jar or an open piggy bank that clearly shows their money growing. When they hit their goal, celebrate and take them to get what they saved for. Repeat this process, and as they get older, start encouraging long-term savings goals for larger purchases like a laptop, a car or college.
Explain the Power of Giving
Not everything in life is about getting paid. Giving back, whether it be through time or money, is a rewarding and beneficial experience. Teaching kids financial literacy also includes sharing money with others. Donating can help them build compassion and empathy. If you want your child to develop charitable money habits, have frequent conversations with them about it, volunteer with them at your local organizations and encourage saving money as a family in a donation jar. This demonstrates to them that you understand the value yourself.
Leading by example, starting with the basics, making savings a habit and explaining the power of giving can be fantastic ways to help build a bright financial future for your kids. Just remember to start early, get creative and have fun! For more about financial literacy, check out our latest episode of A Penny Or Two For Your Thoughts podcast, Pay Yourself First or our free Financial Wellness Center for quick modules about money basics, loans and payments, buying a home and paying for college.
