Financial literacy for kids

Financial Literacy for Kids: 9 Tips for How to Start Teaching

Financial literacy is a difficult subject for most adults, even more so for children. It takes time and patience to educate children about how money works, but that doesn’t mean that extra time spent talking to your kids isn’t worth it. 

It’s tempting to shield your children from financial stresses, but that doesn’t give them the best grounding for the future. Eventually, children will grow up and have to make financial decisions for themselves. Helping your kids understand the value of money from a young age prepares them for their own financial stresses later on. 

Teaching personal finance to kids doesn’t have to be boring. There are lots of fun, creative ideas you can try with your kids, such as reading and indoor games, which can be used to both pass the time on a rainy day and teach your kids skills they’ll need later in life. 

Make Children “Work” For Money


Don’t worry—we’re not talking about sending children off to a workplace in their early years! Many children are given some form of an allowance to be spent on toys or treats of their choosing. Providing a weekly or monthly allowance is one way to teach kids money management skills.

You can give your children an allowance in exchange for completing chores like cleaning their room or washing dishes, or you can pay children for doing simple household tasks. This is a great way to incentivize children to help around the house more and can be a fun way to spend a Saturday. Simple tasks like cleaning their room or washing the dishes can teach children that money doesn’t come for free.

If you do this, you need to be consistent. Don’t give in if your child doesn’t do their assigned jobs but still wants their allowance.

Teach Children How to Save

A child dropping coins into three different jars, labelled "education," "savings," and "toys."

Even if you give your child an allowance, there will come a time when they want to buy a new game or some sports equipment that costs more than their allowance covers. At this point, you can choose whether you give your child the money or whether you teach them to save up for it.

Your child might get frustrated if they aren’t able to buy the items straight away, but this is the right way to equip them for the future. When it comes to learning how to overcome financial problems, people can’t always ask others for money. Kids need to learn that saving might be the only option. 

Saving money also teaches kids how to prioritize the things they want and that sometimes it is more rewarding to delay gratification rather than it being instant. 

Incentivize Good Financial Behavior


If your child is making wise financial choices such as saving and being sensible with what money they do have, reward this. Provide an incentive for children to save money based on real-world scenarios.

“Matched savings” are a good way of doing this. For every dollar your child manages to save per week or month, you could match it with another dollar. This is a way to show them that money can grow if they make the right choices. 


Consider Consequences for Bad Decisions

This tip may sound harsh, but teaching your child how to deal with consequences and disappointment is vital to financial literacy.

If you need to borrow as an adult, then your consequences are having to pay interest. You might want to introduce a similar system for your children. You can get them to repay the money they borrow to buy their newest game with interest or do some extra jobs to earn an allowance to pay for the money they have borrowed.

It can sometimes go against all of your instincts as you want to provide for your children. This isn’t about taking money from them or making a profit! Instead, it is about teaching children that to borrow money, they need to know there will be consequences and that borrowing in itself has a cost.

If you don’t want to let your child borrow money, that’s fine too. It can be a great lesson on finance for kids if you’re going to show them that they can’t access everything they want straight away. Generally, for most people, borrowing money is inevitable at some stage in life, even if only for a mortgage on a property. That said, it usually is better to save and buy something outright, so giving your child a choice can be an excellent way for them to learn.

Financial Literacy Games for Kids

A boy and his mother playing a board game.

By now, the vast majority of parents and educators have realized that many skills can be taught using games. Games such as Minecraft have even been used as educational tools.

But games don’t just have to be played on a console. Board games like Monopoly can be a great way to teach children about how money works. Monopoly, for such a simple game, includes quite a complex financial system. You can mortgage properties and collect rent, learning many of the basics of economics. Children may not grasp these concepts all at once, but they can understand the basics with a little coaching.

Another great way to teach your children financial literacy is to encourage them to play games to increase their money skills. A quick look at app stores and games marketplaces will show you that there are plenty of games that have a monetary system within them. 

“Tycoon” games are one of the simplest ways to allow your kids to learn about finances and how money works. It’s not 100% realistic, but players have to manage their money to win the game in these games. This is quite a stealthy way of getting your children to learn about money, as kids will feel like they are having fun playing a game.

There are some games specifically designed for teaching children about money. Some of these require children to answer financial questions before they advance to the next level. Others include money as part of the gameplay. Both children and adults find games to be helpful when it comes to learning new knowledge and staying engaged.

Read Financial Literacy Books With Your Kids

A young girl reading a book.

Even for children born into the digital age, books can be a handy learning tool. Aside from playing financial games, children can lose themselves in a good book that teaches them all about financial literacy while still being entertaining. Or better yet, read aloud with them.

Many of these books are nonfiction, designed as an educational tool, but that doesn’t mean that they can’t be enjoyable. Many children find learning about money to be interesting. After all, money is essential in life, and kids may be fascinated by the subject when they are young.

A lot of books about money are fiction books. There are also many fiction books geared towards money, saving, and budgeting. There’s even a Berenstain Bears book that focuses on money and financial worries. This can provide a way for kids to learn about finance without reading anything too dense and boring for them.

Tie Finances into Math Lessons

Boy counting coins using a calculator.

Your kids should already be doing math lessons in school, but that doesn’t mean you can’t do some added extras with them. If you think about it, math and finances are intrinsically linked. Finances are a great way to learn about numbers, and financial dealings with banks include subtraction, addition, percentages, and more. You can even teach kids about compound interest as a more advanced lesson.

If you homeschool your children, an option taken by many parents worldwide, you can make sure you tie in some math lessons with a focus on finances.

Go Through Budgeting Activities With Kids

Budgeting is something you have to do all the time as an adult, so why not involve your kids? This is one of the most effective financial literacy activities for kids, and it is something you can make fun for them.

Let’s say you are budgeting for groceries for the week. You could let your child get involved by having them help you budget and create a list. This is made even easier if you can do your shopping online, and it means that you can let your kids have input on choices and learning.

If you want to keep it even more simplistic, why not have a day of baking with your kids, and let them budget for the ingredients. You can even take them to the store with their budget and see what they opt to buy.

Budgeting activities can be fictional if you would rather not involve your children in a real-world situation. Give them an imaginary budget to plan a party. If you have multiple children, you can even make it a game or a competition between them.

As children get older, it might even be a good idea to talk to them about salaries and income and prepare them for budgeting on a month-to-month basis, teaching them about all the monthly bills that they will come across when they get to a certain age. When the time comes to send your child off to university, you don’t want them struggling with financial literacy and understanding. This can lead to bad decisions.

Trust Your Children With Bank Accounts

A child holding a piggy bank.

As soon as they are old enough, decide whether to let your child manage their own bank account. This is a key step when it comes to personal finance for kids. They will be able to collect money digitally this way. 

This is quite a symbolic moment for a child, and it shows that you trust them to look after and manage money. Many children will appreciate this and want to repay the faith you have shown by making good choices.

There are even systems offered by some banks and other financial institutions that let you give them an account but retain ultimate control. This means you can see what they are spending money on and ultimately monitor anything you think might be dangerous, untoward, or just irresponsible of your children. This can provide some peace of mind.

Be a Role Model

It is up to you how much you share about your financial situation with your children. Some people believe there is no harm in children knowing your financial position. You might want to get them involved in your own budgeting and tell them things like how much you spend on rent or mortgage payments and what you have to spend on groceries or even luxuries every month.

It doesn’t have to be that in-depth, and you don’t have to share things with children to educate them. Instead, setting a good example can simply be ensuring there is food on the table and that you don’t make bad financial decisions. 

Conclusion

Teaching your children how to manage money, even before earning, is the right thing to do. After all, raising a child is said to be the greatest investment in the future. You don’t need to bombard them with every aspect of financial literacy early in their lives. Still, you should make sure you give them a sound financial footing and teach them the perils of debt along with the best ways to budget and get through life without falling into financial trouble. Following the simple tips in this guide will help immensely. Just be sure to tailor your teaching to your children’s age and development so as not to overwhelm them with information.

About Daniel Brown

Daniel Brown
Daniel Brown is an experienced and knowledgeable financial advisor at spoolah.com. He has been in this industry since 2008 and has a strong understanding of economic trends, all types of financial planning, ways of creating plans for meeting short-term and long-term financial goals, etc.

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