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Financial Literacy & Money Sense For Kids

Financial Literacy and Money Sense for Kids


“Financial literacy?” you say. Then you think, “But my child is only five!” Truth be told, it is never too early to start teaching your children how to manage their money. Unfortunately, for most parents making a list of important life skills to teach their children, financial literacy won’t make the list. Many would more likely think of things like reading skills, math aptitude, homemaking skills, etc.

Money sense is arguably one of the most important skills you can teach your children to aid in their future success.

Start Teaching Financial Literacy Early

As soon as your child starts asking for things, the first lesson they must learn is that those things cost money, and money has value. When you spend that money, it is forever gone.

Would you be surprised by the fact that most children understand by age three that coins and bills can be exchanged for things, like say that piece of candy or toy new toy that they want? By the age of six or seven, they can even better grasp the financial concepts of earning and saving to go along with that spending instinct!

Teaching children financial literacy skills is a process that happens over time. You’ll want to start at an early age with simpler concepts and work up to the more complex ones as age and cognitive ability allow. The skills lie in learning (or teaching) the value of saving, spending conscientiously, and understanding the difference between wants (the just-for-fun stuff) and needs (the necessary expenditures).

financial literacy

Start with the Basics: Allowance

A good way to help your child learn how to handle money on their own is by giving them an allowance. When your kids are somewhere around the ages of 5-7, have a conversation with them concerning money, including your own values and beliefs concerning money.

Set up a fixed allowance amount and plan with your child how that money will be allocated. For example, a common measure is $1 per year of age, thus $7 a week for a 7-year-old, $14 a week for a 14-year-old.

You can then discuss managing the money by designating certain things within that allowance. For example:

  • 40% toward spending
  • 40% toward short-term savings (new video game, bike, toy)
  • 20% toward long-term savings (when older: cell phone & bill, car, college)

You could also reduce one or more of these and add in something like a percentage for charity or a giving-back project of some kind. Lastly, be sure to define what they are expected to pay/save for. You pay the mortgage, electricity, groceries, etc, but they pay for special snacks they want, toys, etc.

This post is focused more on teaching financial literacy to younger children. For tips and ideas on teaching the teenage/high school years, check out Money Management for Teens.

Find Opportunities to Teach

Take your children to the grocery store and involve them in looking at the prices. Talk about what things offer more or less value for your money. These are great ways to get them involved and more aware of the cost of things.

For instance, if your five-year-old wants a candy bar, they can find it and check the price. Do they have enough money? How much do they need to save to get it? Or how much money will they have left after buying it?

How about the bank? When your kids reach the age of 10 or so, you even can take them in to set up their own savings account (check with your local branch concerning their guidelines). Then maybe once a month you can take your child to deposit money from their weekly allowance that was set aside for savings and allow them to keep the ledger for the account. Some banks also offer accounts you can share with your teenager, with apps so you can keep an eye on things from your phone.

It is important to allow your children to spend their money as they choose, within your guidelines. They need the opportunity to make mistakes and learn from them. Above all, talk to your kids about money. They see us handling and using money every day but if we don’t talk to them about the what, how, and why, then they will miss out on many wonderful learning opportunities. There are ways to make learning about money fun.

The Basic of Financial Literacy & Money Sense For Kids

  • Start Early – As soon as your child starts asking for things, the first lesson they must learn is that those things cost money, and money has value. When you spend that money, it is forever gone.
  • Start with Allowance – A good way to help your child learn how to handle money on their own is by giving them an allowance. You can then discuss managing the money by designating certain things within that allowance.
  • Go to the Grocery Store – Talk about what things offer more or less value for your money. These are great ways to get them involved and more aware of the cost of things.

Money Sense Resources for Use With Young Kids

Jump$tart Coalition is a national coalition of organizations dedicated to improving the financial literacy of pre-kindergarten through college-age youth by providing advocacy, research, standards, and educational resources. Jump$tart strives to prepare youth for lifelong successful financial decision-making.

In Charge is an organization that offers resources for parents and teachers to help their children from preschool through second grade to learn important financial literacy concepts.

Dave Ramsey, the well-known financial educator, also has books to help kids learn money smarts, including Financial Peace Kids: Teaching Kids How to Win with Money.

Board Games such as The Game of Life, Pay Day, Monopoly, and The Allowance® Game are great ways for your family to be together, have fun, and learn about money all at the same time.

Do you have any recommendations on how to teach kids financial literacy? We’d love to hear from you!


Featured Image by Oleksandr P

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One Comment

  1. We know, financial literacy is at an all-time low. We have an opportunity to teach kids money sense. It covers ways that can help to give children money sense such as teaching and modeling healthy financial habits and budgeting.

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