The list of skills adults need to teach kids before adulthood can feel daunting. Making sure they can do their own laundry or cook their own meals is complicated enough, but what about financial literacy? Teaching kids about money is something many parents shy away from — some because it feels overwhelming, others because they don’t have great financial literacy themselves — but it’s vital for kids to learn financial skills.
“Money touches everything,” says Jen Reid, a financial advisor and founder of BASE Financial Planning. “It’s really important to help kids have a good relationship with money and be setting a good example and environment for them to learn.”
While some adults learned how to open a savings account or balance a checkbook during their own childhoods, the truth is that money is just… different these days. Digital spending takes precedence over cold hard cash, and the childhood savings account of the past might look like a Teen Venmo account in today’s world.
Money management apps and kid-friendly debit cards offer kids tips for saving and spending, but those don’t replace the value of in-person financial literacy education from trusted adults in their lives. Here’s how experts say you can help kids gain financial literacy and when to start teaching kids about money.
Why is teaching kids about money important?
Giving kids a safe space to learn about finances sets them up for adulthood, says Reid. They need to understand how savings, budgeting and credit work if they want to thrive as adults. “It’s so they can start a business, go to school, buy a house, start a family, travel the world and essentially provide for the life that they deserve,” she adds.
As a mom of a now-19-year-old, Andrea Shockling says she sees in hindsight how she should have approached money differently. Her son got his first “real” job, in the service sector, at 18. Throughout high school he did odd jobs and internships to earn some income, but that first paycheck with taxes taken out came as a shock to him, she says.
“The biggest mistake parents make when it comes to talking about money with their kids is not talking about it.”
—Rebecca Brown, financial coach
“Since all of this happened post-high school graduation, it had an extra layer of realness and a steep learning curve.” In hindsight, she says she wishes she had begun those talks earlier, and thinks a paycheck throughout his high school years would have helped to solidify budgeting skills before he heads off to college.
When is the right time to start teaching kids about money?
Kids can start learning about money and developing financial literacy as early as toddlerhood. “For toddlers, begin by counting money, handing money to the cashier, inserting a credit or debit card and starting a piggy bank,” says Rebecca Brown, a financial coach who works with clients of all ages — and loves to help adults without money sense develop some.
While Shockling may regret waiting too long to talk about money, Brown says it’s truly never too late to learn financial literacy. “I became a financial coach because I became debt free after years of living paycheck to paycheck as a single mom,” says Brown. “I love to teach, and I desperately wanted others to learn that financial freedom is available for everyone, regardless of their background or past money mistakes.”
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Brown says many adults have shame around money, as it’s a topic that we’ve been conditioned to not talk about. That’s the opposite of what kids need, though. “The biggest mistake parents make when it comes to talking about money with their kids is not talking about it.”
It’s also critical to work through some of those complex feelings before passing them on to your kids, says Reid. “Figuring out where those feelings come from will help you be able to talk to your kids about money — and help them learn and understand how to have a healthy relationship with money and finances.”
How to teach kids about money by age
While each kid matures at a different rate, Brown and Reid offer some general guidelines for teaching kids financial literacy by age:
Toddlers and preschoolers
Before elementary school, kids mostly learn from observing the world around them. Talk about money, costs and budgeting in a positive way. Calm, neutral talk about money is most helpful at this age. Kids can help pay for items at checkout counters starting as young as age 2.
Additionally, involve kids in daily spending. While many adults use digital payment methods regularly, it’s important to let young kids see actual money so they understand it is a tangible thing. “Children learn best through concrete methods,” says Brown.
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Elementary school kids
By early elementary school, consider giving kids an allowance Whether it’s tied to chores or not, it’s a good practice for them to have “income” they learn to manage, save for things they want, and make decisions about.
Because parents don’t want to burden their kids, they often avoid talking about bills, the cost of vacations, college expenses and their salaries. “We all make mistakes when it comes to money, and it’s OK to share them with our children,” Brown says.
Likewise, it’s OK to tell children you cannot purchase something because it is not within the family’s budget at that time. Loaded phrases like “We are broke” or “We don’t have any money” are confusing for kids, so understanding that a budget earmarks funds for different family needs is crucial.
Middle schoolers
As tweens, many kids can begin earning money outside the home. This starts in small ways like cutting grass or being a mother’s helper, but can transition into hourly paid jobs around high school. Help kids manage the money they earn, but give them some freedom to make decisions — and fail at times.
Teens and young adults
By high school, kids should be involved in talking about their future finances. It’s good to have a goal, like saving for a car, college or extracurricular activities.
Most newly-launched adults still need some guidance with money, but resist the urge to micromanage young adults and their finances.
Money management tools for kids
There are many ways to help kids learn to manage money, and new apps and programs emerge all the time. Some families use concrete methods like “give, save, spend” containers or envelopes, which Brown is a fan of. Some other expert-recommended options include:
- Budgeting apps like YNAB.
- Debit cards designed for kids, like Greenlight or Go Henry.
- Simple, free tools like Google Sheets to track income, spending and savings.
Don’t be afraid to ask for help from a professional, either. Reid and Brown love to work with families interested in improving their financial literacy. Parents can lean on family and friends who may have better money sense, too. Shockling asked her brother, who is skilled with finances, to set up an investment account for her son when he began his first real job and provide guidance that she wasn’t able to.
Financial literacy activities for kids
While tech is a useful tool, parents should also lean into methods that make budgeting and financial literacy feel real. Financial literacy activities that give kids a glimpse of real-life money management are a great way to start teaching these concepts to kids of all ages. Here are some ideas:
Practice with toy money
Practice paying the household bills using toy money to help kids understand some funds are earmarked for necessities, while other money is for entertainment. Talk to kids about how much the rent or mortgage costs each month. Show them the utility bills and the price of groceries.
Give kids play money equal to the family’s monthly income, and help them assign funds for each necessity. Many kids have a hard time understanding needs versus wants, so this game can help them understand responsibilities versus “fun money.”
Budget for a special family day
Even something as simple as giving kids a budget to plan a family fun day helps them decide how to spend their money. They may have to choose between ice cream or bowling to keep the day under $50, for example — but that’s a good thing. Alternatively, choose a recipe and go shopping together for the ingredients while talking about sales, coupons, price per ounce, and other savvy shopping tips.
Play a financial literacy game
Don’t forget the basics, too — Monopoly and Monopoly Junior are classic games that teach the basic concepts of money, loans and expenses. There are also educational games designed specifically to teach kids about money. Money Bunch takes players on a bike ride through “town” where they will face different spending decisions. Lakeshore Learning’s Making Cents Money Game is loved by teachers, but works well at home too.
The bottom line
While money conversations may be overwhelming, it’s clear that it’s a necessary one to have with kids of all ages. Whether you’re starting fresh with toddlers and a toy cash register or trying to backtrack with teens who don’t know a lot about money yet, it’s never too late to start.
Talking openly about financial growth — and missteps — have made the biggest impact on her child, Shockling adds. “Talking about it made [finances] relatable to my son, and also removed a lot of the shame and stigma that prevented me from asking questions when I was younger.”
