Financial Literacy for Kids | Our Top 10 Money Tips!

Teaching Kids About Money | How & Why To Teach Kids About Money

Today we’ll dive into a topic near and dear to my heart. And that topic is financial literacy for kids. Teaching your kids about money is one of the greatest gifts you can give a child. In this article we’ll talk through why money management for kids is so important and share our top ten tips.

Money management & financial literacy for kids is sooooo important!

Want to know the number one issue couples fight about? Surprise… it’s money! 💵 And not to depress you but sadly money fights are America’s second leading cause of divorce. Further, many Americans declare bankruptcy each year. 😞 I’ll stop the bad news train here but it’s clear money is at the center of many issues we adults face.

Most all parents share one thing in common: we want the best for our kids. 🧒 It makes sense that we’d want to teach our children about money as we do our best to prepare them for challenges of adulthood. That’s why teaching your kids about money is so important. A healthy relationship with money will lead to happier and more fulfilling lives for our children. 🤩 Who wouldn’t want that for their kids?!? I know I do. 🙋

Kids learn how to get along with others. They learn about math, reading and science. 📚 They may learn about music or athletics. 🎵 ⚽ But how many children truly learn about money? Not many! Unfortunately financial literacy and teaching kids about money is rarely part of curriculum in our schools. That leaves the job of teaching kids about money to us parents. 🤓

Raising a financially literate kid is a great goal to have. 🎯 You’ll give your child a head-start on building a healthy respect and appreciation for money. A healthy relationship with money may lead to all sorts of positive life outcomes down the road. But how can we teach our kids about money? 💰 Let’s learn ten great ways to teach money management for kids…

Money Management For Kids | 10 Tips For Raising Money Smart Kids

Curious how to teach your kids about money? Here are our top 10 tips to help promote financial literacy for kids.

#1. Let your child make choices

Life anything in life, the more we do something the better we get at it. Practice makes perfect as they say! Making choices is no different; we get better at making smart choices with practice. When we let our kids make choices from a young age it makes it less difficult for them to make choices as they grow older.

Letting your kids have opportunity to make low-stakes money related choices truly is an amazing way to teach your kids about money. There are often every-day situations where you can help facilitate an environment where they can help make choices… grocery stores, shopping malls, restaurants, amusement parks and more.

At the store you might say something like the following…  “We have $3 to buy fruit. Apples cost $1. A pineapple costs $3. Should we get three apples or one pineapple? We can’t afford both.”

You goal is to provide a low-stakes safe environment for your kids to practice making financial choices. The concept of empowering kids to make choices is something we’ll dive into below. Hint: it’s not only important in money but in all aspects of life.

#2. Guide versus tell

Most of us learn best by doing. Kids are no different. It’s often more effective to let them connect-the-dots on many of life’s lessons rather than just telling them.

Which of the two options below do you think a child will internalize best?

• Telling your child ‘money doesn’t grow on trees’
• Helping your child talk through the choices they have for the $5 and how they feel after making their choice

Consider yourself less of a teacher and more of a guide. You’ll guide your child by explaining the choices they can make, pros and cons of of each choice, and help understand the consequences and emotions that come with their choice. Let your kids connect the dots themselves if possible. Instead of being the know-nothing parent harping the umpteenth lesson on your child, it is often more effective to guide your child an let the experience do the teaching for you.

#3. Model good money behavior

You are your kids north star. They look up to you, emulate you, and learn how the world works form you. Simply by modeling good financial behavior you will be helping nurture your little one. Pay special attention to focusing on showing appreciation for what you already have. Adults can easily get caught up in lifestyle creep and our kids pick up on it.

#4. Talk about money

Having age-appropriate conversations about money is a fantastic way for your child to learn. This could mean talking about major life events like moving, buying a new car, or getting a new pet. Or it could be small things like talking about leaving a tip at a restaurant. Explaining the mechanics of getting paid and depositing it into the bank is beneficial. Talking about needs vs wants is particularly useful exercise as well.

Simply by talking about money in a way that isn’t scary or emotional you are normalizing a relationship with money and helping promote awareness of money with your child.

#5. Read books to your child that introduce money and choice

There are some awesome books that help reinforce the idea of making smart choices, how to decide between one thing versus another, and other important money topics. Order a book or two from Amazon and work into your reading list. Often having your child connect-the-dots from the book is more effective than telling them the lessons contained therein.

Our Favorite Money Books for Young Readers

But I’ve Used All My Pocket Change
Available on Amazon | Ages 3-5

A Bargain For Frances
Available on Amazon | Ages 4-8

A Chair For My Mother
Available on Amazon | Ages 4-8

All three are available on Amazon and cost less than $5. A worthwhile investment indeed.

Our Favorite Book for Big Kids

How to Turn $100 Into $1,000,000
Available on Amazon | Ages 10-14

#6. Empower your child to opine on real-world choices along-side you

Similar to tip #1… In addition to looking for ways to help you child make simple decisions that arise in their life, let them in on your real-world financial decisions as well. I’m talking about things like taking a vacation or buying a car. Ask them their opinion. If they have X amount of money how would they decide what to do in your situation? Often by involving your kids and making them feel like they have an opinion that is heard will yield not only more cooperative behavior but also subtle money lessons.

#7. Talk about trade-offs

Helping explain trade-offs is a powerful way to help highlight the fact that money is a limited resource. Some ideas:

• Let’s talk about buying a gift for your sister’s birthday. We can afford one big Lego set or two small ones. What do you think she’d like best?
• Let’s talk about if we’d rather go to the movies tonight or visit the water park tomorrow. We can’t afford to do both.
• Let’s talk about taking one vacation to Disney next year or two vacations Aunt Kim’s where we can visit the beach.

Talking through trade-offs starts to help kids understand money is a limited resource and we have to be thoughtful with how we spend it.

#8. Build a simple budget and let child enter receipts

We love the idea of building a super simple budget with your child. Something very basic like the following:

Emma & Mommy’s Budget:

One way to involve your child in the budget is to have them look at the receipts and enter the amount spent. Compare it to the amount you budgeted and talk about why you spent more or less. Why did you make that choice? What does that mean for other items on our budget? In our example budget Emma and Mommy spent a few dollars more than planned on groceries so they had to spend a bit less on clothes.

#9. Shop items on sale

Helping your child learn to shop sales is a wonderful skill you can share. Think about the last time you were as the grocery store… in almost each category there is something on sale. For example, this week you buy Cheerios because they are on sale while next week you purchase Raisin Bran. You can still get cereal but you adapt to buy whatever is on sale. Learning to be flexible when buying products as well as learning how to show sales is a great skill skill.

#10. Consider part-time job when child is of age

My first job was bagging groceries for $4.50/hr. After taxes and union dues I was left with something in $3.00/hr range. I can still remember working for 6 hours and then going out with my friends afterward to see a movie. I spent everything I worked all-day for on a movie, popcorn, and soda! What?!? What was this strange new feeling that was coming over me? It was the realization that making money is hard work!

Previously, when my parents would throw me a five or ten dollar bill, I’d never experienced a similar this feeling of having and then parting with money. Sure they may have said “money doesn’t go on trees” but that was just something parents say and all I heard was “blah blah blah“. It wasn’t because I was a bad kid or ungrateful, I didn’t really understand it. It wasn’t until I had a job that I started to appreciate money. A job is a great way to learn many great life still and

You can get more ideas here about awesome jobs for 14 or 15 year olds.

The Importance of Choices | Money Management & Choice

If you focus on just one tip on the list above I’d suggest it would be tip #1 (let your child make choices). It is so important to begin learning how to make good choices even as a young child. I’d argue it may be the single most important skill we develop in childhood.

Think about it… Our adult lives are filled with choices. Endless amounts of choices. Here are just a few major choices we adults face:

Life Choices

• When to enter a relationship 💑
• When to exit a relationship 👋
• Should we get married and if so, to who 👰🤵
• What career to pursue 👷
• If we want children 👪
• When to switch jobs 💼
• When to retire 👴

Whoa that is some serious stuff (#adulting). No wonder we’re always stressed out 😬😂

The choices we make today affect tomorrow. And all these choices add up and have a huge impact on our lives and overall happiness. It’s not always pretty but learning to make smart choices is an important part of maturing and become an adult. Often its only through the School of Hard Knocks that we get our education and learn to make better choices going forward. I know I’ve definitely said “if I only knew then what I know now!“. Life is a good teacher.

There are countless choices we make involving money that majorly impact our life choices. They go hand in hand. Just think of some of the big money related choices we adults face:

Money Choices

• Buying a home versus renting 🏠
• Purchasing a new car versus a used one 🚗
• Taking a lavish vacation versus a more modest one 🏖️
• Investing in a 401(k) versus spending that money 📈

We make money related choices day after day, year and year. Our money choices accumulate and ultimately have a major impact on our financial health, relationships, and families. Creating safe money choices early on in a young person’s life can be an absolutely essential way to help promote financial literacy for kids. 

Raising Money Smart Kids By Empowering Safe Money Choices

Raising a financially literate child is undoubtedly an admirable goal. ✅ Kudos to you for even reading this article and contemplating the issue; the hectic pace of life makes it an afterthought for many parents. Addressing money matters early on will go a long way in helping build a healthy respect and appreciation for money. Building this strong foundation may lead to all sorts of positive life outcomes down the road. But how can we teach kids about money?

4 Ways To Help Your Child Learn To Make Good Money Choices

Giving kids the ability to make money choices is an amazing way to teach financial literacy. The technique of giving kids choices as it pertains to money is far and away my favorite tool to teach kids about money. How can we help them make money choices and learn money management?

#1: Be a guide instead of a teacher

To get best results, consider yourself less of a teacher and more of a guide. You’ll guide your child by explaining the choices they can make, pros and cons of of each choice, and help understand the consequences and emotions that come with their choice. Let your kids connect the dots themselves if possible.

Again, we are giving our kids practice at making these choices when the stakes are low. No matter choice they make they can learn and connect the consequences to their choice. Over time they’ll get better at better and making choices that suit their values and personality.

#2: Use everyday life situations and your natural environment when teaching money management to children

What types of environments can I create for money choices?

• Saving for a bigger toy vs getting a smaller one today
• Giving to charity or a church instead of buying a treat
• Buying two on-sale shirts vs one full price ‘cool’ shirt
• Deciding between two items at the grocery store
• Investing in savings account and watching the money grow

Again, your job is use these everyday situations that arise to guide as opposed to lecturing about what is right and wrong. We are giving our kids an environment where they can hone they decision making skills when it comes to money.

#3: Recognize that you don’t need to be a personal finance pro to help your child

All of us have different levels of financial literacy. Just because you may think you’re not a money expert does not mean you have little to offer when it comes to teaching about money. Remember the goal here is to give our kids the opportunity to make money choices and then helping them make sense of the consequence and related emotions. Any of us can do that.

When our kids grow up can’t be over their shoulder 24/7 advising them on the choice to make. Our children will ultimately have to make that choice on their own. Scary but true! Good to start giving them practice now!

#4: Learning to make good choices takes practice; give them a safe space to practice

Most everything in life takes practice to become good at it. Choice is no different. It’s very tempting to always want to intervene a la a helicopter parent or lawnmower parent but it really is vital to give young people choices so they can learn natural consequences and get that all-important practice.

Interested in some age specific ways to help teach money management? Keep reading for everything from teaching preschoolers about money to money management for teens!

Money Management For Kids | Teaching Preschools About Money To Money Management For Teens

In the below table.

You’ll notice there are no tips in the table or text below about stocks and bonds, insurance, etc. These are certainly important concepts tha. Building a strong foundation of making smart choices before delving into these topics.

Summary: Earning, Saving, Budgeting, and Spending Dialogue For Kids

	Kids Ages 3-5	Kids Ages 6-12	Teens Ages 13+
Earning	Mom/Dad work to earn money. Money is needed to buy things.	You can earn money through an allowance.	You can earn different amounts of money at different types of jobs.
Saving	We save money so we can buy things we need or want in the future.	You can save your money so you can buy something you want.	You can get in the habit of saving and see your bank account grow.
Budgeting	We often need to plan ahead when buying things.	You can plan your buying choices ahead of time.	You can make financial goals for yourself.
Spending	We can chose to trade our money for things.	You can check the price at Target and Walmart to see who has a lower price.	You can compare the prices of cars, colleges, and other major purchases.

Teaching Preschoolers About Money (Ages 3-5)

• Count everything (at the grocery store, in the mall, at home, etc)
• Explain that when we exchange money for items when we buy them at the store
• Talk about how through our work we earn money
• Get a piggy bank
• Show them the different coins and bills

Teaching School-Age Kids About Money (Ages 6-12)

• Explain the concept of needs versus wants
• Highlight that money is a finite resource; we have to carefully think about how to spend our limited supply
• Allow small stakes natural consequences for overspending or impulse buying
• Consider providing an allowance for doing chores in the house
• Talk about how saving money can allow us to buy items we need

Teaching Teens and Young Adults About Money (Ages 13-18)

• Introduce the concept of building wealth and investing
• Talk about good debt (mortgage) and bad debt (credit card debt); explain the concept of a credit score
• Explain the concept of taxes and the importance of paying them
• Share how different jobs require different training and result in different income
• Encourage your child to make a small charitable contribution to help understand giving

We hope this article has helped share some perspective on financial literacy for kids and how to teach kids about money. This is such an important topic and we hope all families can help their children develop a healthy relationship with money.

Want to read more about kids and money? Check out our article on “55 Ways to Make Money as a Kid!“.