Financial literacy is something that many adults these days will attest to missing lessons on in their early years. But the need for financial education has always been essential. And that’s why starting to teach children about it when they’re young can work out much better for them in the long run.
It might sound difficult to teach younger individuals about good financial habits since they haven’t had certain experiences in life yet. But it can actually be quite simple and fun. Keep reading to learn about how to teach kids about money.
What Is Financial Literacy?
Financial literacy is being able to understand how to effectively use financial skills. This might include creating budgets, investing, and other money management tools. Financial literacy helps you understand the economy and the roles that each component plays, plus how you can participate intentionally.
Having financial education creates literacy and gives people the power to build wealth and positive money experiences for themselves. You can build a stronger relationship with money when you understand how it works and how to use it effectively and efficiently in life. Teaching children financial literacy at a young age sets them up for economic success and resiliency.
Explain Basics About How Money Works
Kids might not understand the concept of money fully from an early age, but they start to take notice of coins and dollars when they’re babies. Typically, around the age of 3, children start to reach significant cognitive milestones that help them understand more, including copying others around them. This is a great time to start introducing them to some very basic money skills.
One of the first things to teach (after you’ve helped them identify coin and dollar values) is why and how money is used. Help them to understand money exchange in the economy for things they want. You might do this by allowing them to give money to a cashier at the store for a snack or toy that they wanted.
Once they understand that money is used for paying for things that we need and want, you can start to teach them all the things around your home that have been bought. As they get older, you can integrate lessons on money management, such as earning and saving money.
Use currency exchange as an example when they do fun activities like imaginative play. Support their learning by giving them toys that align with the lessons such as pretend cash registers and fake money. Continue to use the basic lessons in their everyday lives to help them become more comfortable and familiar with understanding financial education as they grow.
Teach Them About Saving Money
Once kids start understanding that money can buy things, they usually think that’s a green light to ask for everything they love. This is a great time to start teaching them about the value of money, how it’s earned, and building a savings. Explain the difference between needs and wants so they understand the consequences of frivolous spending from a young age.
You can help make the lesson a fun one by getting a piggy bank or kiddie safe. Tell your child that they’ll be able to buy something they want once they’ve saved up the right amount. This will teach them lessons on hard work, patience, mathematical skills, and being intentional with their finances all in one.
This lesson is appropriate for children who are at the age of becoming more responsible and independent (around 7 or 8 years old). But keep in mind every child develops differently, so use discernment. Depending on the child’s age, you may want to start off by allowing them to earn pretend money.
Allow Them to Earn Money
A great way to figure out how to teach kids about money is to figure out what they care about. Once you’ve figured out their values, you can attach lessons of earning money to them. Do this by providing them with opportunities to earn money to pay for the things that they love.
For instance, let’s say there’s a game that the child really wants to buy, but you’ve told them no. You can use this as a chance to create jobs around the house for them to get paid for. These can be basic chores like mopping, doing dishes, or laundry. Or it could be something more structured, such as becoming your “assistant” and helping you with tasks like organizing your work files, taking notes, etc.
If you know your child has a talent, encourage them to use their skills to make money. For instance, if your child is great with hands-on work, they could ask family and friends to hire them for tasks such as putting together furniture pieces. Again, you’ll need to use discernment about the complexity of the lesson for each age.
Let Them Make Mistakes
Another way to drill in the value of money is to allow kids to make their own mistakes. Remind them of lessons on money management, then allow them to apply these on their own. This is a great way to give them early experiences with handling their own personal finances for when they get older.
Let’s say a 12-year-old received $200 for their birthday. Advise them on not overspending and saving money for what they really want then let them make their own decisions. If they end up not keeping track of their spending and using up all their money quickly, don’t replace it─ let that be their lesson.
They’ll start to understand the old adage “money doesn’t grow on trees” and will more than likely take better care of their cash in the future. Give them first-hand experience of how mismanaging money can turn out.
Be Transparent With Your Finances
Think back on when you were growing up and watching the adults around you live their lives. Did you see them stressing over bills, talking about the stock market, or taking trips to the bank to make deposits in their savings accounts regularly? All of the memories you have about money and finances from when you were younger became a part of your normalized behaviors as an adult.
If you want to teach children about money, show them through your actions. Do things like making money a regular subject at dinnertime, explain budgets to them, create dialog around finances. Being transparent about money and making it a regular topic helps them feel more confident about navigating economics.
Of course, there are some things that they’ll understand more as they get older, and you never want them to feel the burdens of financial decisions that aren’t their responsibility. But it’s important to make them feel comfortable talking about finances. This can also help eliminate a lot of financial shame and anxiety people tend to feel around money as they get older.
Tips for How to Teach Kids About Money
Financial education will shift at every age since cognitive skills are developing so rapidly in the early years. But there are ways to make sure kids are retaining the lessons you teach throughout their young lives.
Here are some tips for effectively teaching kids about money so the lessons stick:
- Add lessons and examples to their daily lives
- Buy them toys geared towards practicing with money (piggy banks, cash registers, etc)
- Read books on money
- Watch cartoons and kids YouTube channels
- Engage in imaginative play with them
- Use items they want as motivation for money management
Start off small when teaching children about financial literacy. The older a child gets, the more you’ll be able to add to their lessons. The most important part about helping kids grasp financial education is to be consistent with lessons and lead by example.
Lean on Technology
In today’s world, technology is a part of almost every industry including financial education. Kids love watching videos from their favorite content creators and playing entertaining games. Figure out how to teach kids about money by leaning on technology that they’re already using.
Consider helping them find fun YouTube content, video games, or digital communities that promote early financial literacy. Also, be creative and come up with fun ways to include them in everyday finances using tech. For instance, you might allow them to make up a mock budget using fun apps.
Start Teaching Financial Literacy Early
Teaching money lessons at an early age is a great way to set children up for long-term success. It might seem difficult for children to learn about finances because they can become more complicated as we get older. However, figuring out how to teach kids about money is easier than ever.
There is tons of information and tools online to help deliver lessons on financial literacy. But the learning starts at home first. Try to integrate money lessons as much as possible but keep it fun and educational.
Looking for more articles about financial education? Check out the rest of the articles on our blog.