Home 9 Budgeting 9 How to Teach Kids About Money: The Best Parent’s Guide

How to Teach Kids About Money: The Best Parent’s Guide

Jul 3, 2024

As a parent, one of the most important things you can do is teach kids about money and financial literacy. 

When you teach kids about money from a young age it sets them up for a lifetime of financial stability and success. 

Girls holding money and piggy bank -
This website contains affiliate links, which means that if you click on a product link, we may receive a commission at no extra cost to you.

In this comprehensive guide, we’ll explore the key money concepts to teach, age-appropriate activities, and provide real-world examples, activities, and tools to help you raise money-smart kids.

Why Teaching Kids Financial Education Matters

Financial education is a life skill that will serve your children well into adulthood.

When you teach your children about earning, budgeting, saving, and giving from a young age you are equipping them to:

  • Make smart financial decisions
  • Avoid financial mistakes
  • Build a strong financial foundation
  • Achieve their goals and dreams

Research shows children who receive financial education are more likely to save, budget, and understand credit and debt.

Give your kids these skills early and they will be way ahead.

Introduce the Concept of Money Management

You can start talking about money with your kids as early as preschool. Even at this age, they can understand basic concepts like spending and saving.

Take a few dollars with them to the store and hand it to the cashier and they will understand how money works.

With young children, you can start by using coins and dollar bills to demonstrate how money works.

Teach kids about money and where it comes from

One of the most important lessons is to also explain to your children where money actually comes from. 

Several kids dressed as professional - How to Teach Kids About Money

Teaching them that people work to earn money – which is then used to buy things we need and want – sets a clear understanding of the initial concept of money management. 

Teach kids about money management

Another important concept to introduce is managing the money that they have earned. 

Children learn by example so taking them shopping, talking about prices, sales, comparison shopping, and discounts, and also explaining your purchasing decisions will help them have a better understanding of how to manage their finances. 

If your child wants an expensive toy for example, this is an opportunity to discuss impulse buys and teach them about saving up for the particular toy over time.

Kids can be very visual so using a coloring page to help them save will teach them time management and how they can spend money wisely.

The goal here is to open communication and normalize talking about finances so kids feel comfortable asking questions and learning.

Leading by Example

One of the most powerful ways to teach your children about money is by modeling good financial habits yourself. 

family smiling around table with laptop open and piggy banks - How to Teach Kids About Money

Kids learn by observing, so make sure you’re setting a positive example by:

  • Budgeting and saving regularly
  • Avoiding unnecessary debt
  • Making informed purchasing decisions
  • Giving to charity and volunteering

Be open about your own financial journey, including your successes and mistakes. 

Share age-appropriate stories and lessons learned to help your children understand that managing money is a lifelong process.

Key Money Concepts to Teach Children

young child wearing glasses smiling while holding money - How to Teach Kids About Money

Earning Money

One of the first lessons children should learn is that money is earned through work. You can simply introduce this concept through: 

  • Allowance: Giving your child a small weekly allowance in exchange for completing chores teaches them the value of work and responsibility.
  • Jobs and Entrepreneurship: Encourage older children to seek out job opportunities like babysitting, dog walking, or starting a small business. This fosters a strong work ethic and entrepreneurial spirit.

Budgeting and Spending Wisely

Help your children understand that money is a limited resource that requires careful planning and decision-making.

kids smiling placing coins in piggy bank - How to Teach Kids About Money

Teach them to:

  • Distinguish between needs and wants
  • Compare prices and look for deals
  • Avoid impulse purchases
  • Track their spending and stick to a budget

Involving kids in your family’s budgeting process, such as weekly grocery shopping or planning a vacation, provides valuable real-world experience.

Encouraging Savings

Have your kids save some of their allowance, gifts, or job earnings. Help them set financial goals and track their progress.

As they get older, introduce the concept of investing and compound interest. Open a savings account for your child and teach them about different investment vehicles like stocks and bonds.

woman exchanging paper bag while kids play with toys - How to Teach Kids About Money

Also, teach your kids to give back to their community and share with those in need.

Have them donate a part of their allowance or fundraise for a favorite charity. This teaches empathy, social responsibility, and money awareness.

Ways of Teaching Kids About Money

Here are some creative and fun ways to introduce the concept of money to young children:

  • Play store or restaurant with play money and items from around the house. Have your child be the cashier and the customer to practice exchanging money for goods. This is the concept of money as a medium of exchange.
  • Read money books together like The Berenstain Bears’ Trouble with Money or One Cent, Two Cents, Old Cent, New Cent. Discuss the stories and money concepts afterward.
  • Set up 3 jars labeled “Spend”, “Save” and “Share”. Help your child divide up any money they get into the jars. This is budgeting and delayed gratification.
  • Go on a coin hunt around the house or yard. Have your child sort the coins and count them. Discuss the different values and characteristics of each coin.
  • Make coin rubbings by placing a piece of paper over a coin and rubbing a crayon over it. Can your child match the rubbing to the actual coin? Discuss the images and words on each coin.
  • Use snack time to demonstrate money concepts. Give your child a small allowance of goldfish crackers or raisins to spend or save throughout the week.
  • Play money games like Monopoly Junior or The Allowance Game to introduce money math and basic financial concepts in a fun way.
  • Go to the grocery store together and give your child small amounts of money to spend in the checkout line. Have them hand the money to the cashier and get the change.

Age-Appropriate Money Lessons and Activities

Ages 3-5

Ages 6-10

  • Give them a weekly allowance and help them make a simple budget
  • Open a savings account and set goals together
  • Play financial games: Monopoly or The Game of Life

Ages 11-13

  • When kids hit elementary or tween years, encourage them to start their own business: lemonade stand or craft business
  • Teach comparison shopping and how to find the best deals
  • Discuss credit card debt and saving for big purchases

Ages 14+

  • Get kids a summer job to learn about earning and saving money
  • Help them find part-time jobs or internships to earn money
  • Make sure they save a portion of every paycheck and maybe even make them help with other expenses
  • Start to teach them investing, taxes, and credit scores
  • Teach them responsibility and financial literacy
  • Have them create a long-term financial plan and budget for college expenses

Tools and Resources

Add these to your teaching:

  • Apps and Online Games: Bankaroo, PiggyBot, and FamZoo make learning about budgeting and saving fun.
  • Books and Magazines: Rich Dad Poor Dad for Teens, and The Motley Fool Investment Guide for Teens are great resources.
  • Worksheets and Activities: The FDIC’s Money Smart curriculum and the National Financial Educators Council have free printables and lessons.
  • Local Programs and Camps: Look for financial literacy workshops, camps, and events in your area, often offered by banks, credit unions, or non-profits. Some states are now requiring financial literacy classes in high school as a graduation requirement.

Ways To Teach Your Middle and High School Teenagers Financial Responsibility

As your teenager gets into middle and high school, it’s time to start introducing financial independence and more complex financial topics like investing and credit. 

When young people are given financial education they will be better equipped to make good financial decisions for their future.

young girl wearing glasses holding pencil while looking at book near a piggy bank - How to Teach Kids About Money

Explain how buying a share of stock or a mutual fund means owning a small piece of a company. Discuss risk versus reward – how investments can lose value but also provide more growth than a savings account.

Explain how credit works and warn about the dangers of high-interest debt. Use real credit card statements or a detailed spreadsheet to show how long it takes to pay off a balance making minimum payments.

If your teen has a job, open a savings and checking account and teach them to read their statements, balance their accounts, and avoid overdrafts. Introduce them to mobile banking apps and talk about digital security.

Real-World Applications For Teenagers

Earning Money and Making Smart Financial Decisions

Encourage your teen to get a part-time or summer job. They’ll get work experience and earn their own money. But first, help them make a plan for their paychecks.

teen girl working at a supermarket - How to Teach Kids About Money

Have your teen divide their earnings into three categories: spend, save, and share.

They should put some in short-term wants, a fixed percentage in savings, and some in charities they care about.

As their income grows, give your teen more financial responsibility. Have them pay bills like their cell phone bill and their own car insurance or some of their college expenses.

These real-world applications teach the value of hard work, opportunity cost, and budgeting.

Creating a Budget and Managing Finances

Make sure to give your teen practice with financial transactions.

Work with your teen to create a budget based on their income and expenses. Include savings goals and discretionary spending. Use a spreadsheet or budgeting app to track everything.

young man holding phone while looking at paper - How to Teach Kids About Money

When comparing colleges or evaluating job offers, teach your child to look beyond the sticker price. Help them understand their financial aid package and calculate their EFC.

Review employer benefits like health insurance, retirement plans, and tax-advantaged accounts.

Let them book a flight for a family trip or negotiate a discount on their new phone. Teach them to read the fine print and ask questions before signing anything.

Setting Them Up for Success

Independent Financial Management

As your child becomes an adult, let them take control of their finances. Review their budget and savings goals with them but let them do the driving.

Offer advice but don’t bail them out if they make a mistake. Natural consequences are a great teacher.

Encourage your child to learn about personal finance. Suggest books, podcasts, apps and websites. Discuss financial news stories together.

Teach your child to think long-term and not to make emotional decisions. When faced with a big financial decision like buying a car, teach them to weigh the pros and cons.

Encourage them to sleep on major decisions and to create a plan before spending money.

Tools and Resources

In addition to your guidance, supply your child with tools to increase their financial literacy. Consider these resources:

Budgeting Apps For Teens

The best budgeting app for a teenager will depend on their specific needs and financial goals. 

woman and young girl sitting on a couch looking at the phone - How to Teach Kids About Money

Look for apps with educational content, parental controls, ease of use, and fun gamification to help them build good habits. 

Get your teen involved in the app choice process to get them to buy in and budget.

Here are some of the best budgeting apps for teens:

1. Greenlight

Greenlight is a debit card and app designed specifically for teens and their parents.

It allows parents to:

  • Set spending limits and payments for chores
  • Monitor transactions in real-time
  • Automate allowance payments

For teens, Greenlight enables them to:

  • Track their spending
  • Set savings goals
  • Learn financial responsibility through hands-on experience
2. FamZoo

FamZoo is a family-oriented app that functions like a virtual family bank.

It helps teach kids and teens about money management through:

  • Setting up allowances and chores
  • Tracking spending and progress toward savings goals
  • Providing prepaid cards for each family member
  • Offering financial literacy content
3. Goalsetter

Goalsetter is a savings and financial literacy app aimed at kids and teens.

Its key features include:

  • Savings goals and auto-save rules
  • Interactive quizzes to build financial knowledge
  • Parent-paid interest on savings to incentivize good habits
  • Abilities for parents to match savings contributions
4. Acorns

Acorns is an investing and savings app that can help teens get started with investing.

It offers:

  • Automated investing of spare change from purchases
  • Diversified portfolios of ETFs
  • Educational content to learn investing basics
  • Parental controls and visibility
5. Goodbudget

Goodbudget is a budgeting app based on the envelope budgeting method.

For teens, it provides:

  • Virtual envelopes to allocate money for different spending categories
  • Shared envelopes to collaborate on budgets with family
  • Syncing across devices for easy tracking
  • Reporting to analyze spending habits

Model Your Financial Behavior

Most importantly, model good financial behavior for your kids. 

woman holding pen looking at teenager holding a phone near an iPad - How to Teach Kids About Money

Admit your money mistakes and share what you learned. Celebrate your financial wins. Demonstrate generosity by donating time and money.

Your kids are always watching and will follow your lead.

Frequently Asked Questions (FAQs)

At what age should I start teaching my kids about money?

You can start teaching basic money concepts as early as age 3-5. Tailor the lessons to be age-appropriate, starting with simple ideas like recognizing coins and bills, and gradually introducing more complex topics as they mature.

How do I explain where money comes from to my kids?

Explain that money is earned through work, such as jobs or chores. You can also introduce the concept of investing and how money can grow over time. Use simple terms and real-life examples to make it relatable.

What are some effective ways to teach kids about saving money?

Set up a savings account for your child and encourage them to deposit a portion of their allowance or gift money. Use clear jars for saving, spending, and sharing to visually demonstrate how money is allocated.

How can I involve my kids in family finances?

Involve your kids in budgeting for groceries, planning family vacations, and discussing the family budget. This provides real-world experience and helps them understand the importance of financial planning and decision-making.

Start the Financial Literacy Conversation Today

Talking about money with your kids is an ongoing conversation that evolves as they grow and mature.

By starting early, teaching at their level, and leading by example you set your kids up for a lifetime of financial stability and success.

Use the tools and resources in this guide to make financial education fun for your family.

It’s never too early or too late to start talking to your kids about money.

Get started today by:

  1. Setting up a weekly allowance
  2. Opening a savings account for your child
  3. Planning a family budgeting activity
  4. Choosing a money book or game for your child

Whatever the age, talk to your kids about money, it will pay off for their future.

The Budget Academy
Fab Kellum author of the Girl, Get Out of Debt! blog

Hey you! Welcome to The Budget Academy. I am Fab, a mom, and an entrepreneur at heart. Like many, I have overcome financial struggles, and now I get to share with you how I became debt-free and what I learned on my own personal journey.  I have a Finance and Real Estate background and am passionate about helping others succeed and achieve financial freedom.  So, please don’t be shy, let’s connect and start this journey together! Learn more about me here.