Financial Literacy: Teaching kids about money

Lidia Staron, author at OpenLoans
Lidia Staron   OpenLoans Marketing Manager
Personal Finance
I enjoy navigating people through important financial decisions.

It is never too early to start introducing the concept of money to your kids. Learn how to teach your children what matters – from managing their pocket money to saving.

Teaching kids about money.

Teaching your kids how to manage money properly is one of the most important things you'll ever do in this life. And it's never too early to start. According to a recent study published in the Journal of Behavioral Decision Making, children as young as five years old may already have feelings about spending and saving which affect their spending behavior. In fact, you need to ensure that you start them young because, right now, one in five US teenage students do not have basic financial literacy skills.

Teaching kids about money early on in life can help them avoid financial issues later in life. Don't expect schools to do this for you because only 17 states have schools require students to attend a personal finance course in high school. And only a handful of those provide quality personal finance education; just 5, in fact, according to the Champlain College's Center for Financial Literacy.

If that’s not enough to convince you, here are some sobering statistics from the National Financial Capability Study (2016) that was conducted by FINRA Foundation:

  • Only 46% of Americans have set aside rainy-day savings – three months worth of living expenses in case of an emergency.
  • Among those with student loans, 37% have been late with a payment at least once in the past year while 25% have been late more than once.
  • 39% of Americans with credit cards are likely only to pay the minimum payment, pay late fees, use the card for cash advances, or pay over the limit fees.
  • 40% of Americans surveyed feel that they have too much debt.
  • 63% of the respondents were not able to pass a basic 5-question test on financial literacy.

Obviously, as parents, we’ve got our work cut out for us. But it’s not as daunting as it seems. Lots of resources are available online to get you started. Best of all, teaching your kids about money can help you learn more about it yourself. Below are just some ideas to get you started.


Teach them the names of coins and the value associated with each one. While they won't really understand what each value signifies, it's a good start in helping them understand that money is physical and comes from somewhere. This helps them know that while we conduct a lot of financial transactions without the physical exchange of money (swiping a credit card or debit card, purchasing stuff online), money is real and has value. To make things interesting, you might want to check out some of the coloring pages, games, and activities that the United States Mint offers on its website.

Because kids this age also love play-acting, you might want to play a shopping game with them. Get play money and some toys, snacks, and other store items and act as a shopkeeper while your kid tries to buy stuff from your store. Not only will the game indulge their need to exercise their imagination, but it also helps imprint the basics of commerce in their mind.

Make money lessons fun for your kids.

Elementary School Kids:

Once your kids hit elementary school age, they can now start earning money. Instead of just giving them an allowance, pay them a "salary" for the chores they do at home. This helps teach them the concept that money must be earned; they cannot expect to have money given to them. Also, it helps instill the concept that money has value.

Help your kids open a savings account. Children’s accounts in banks usually have no fees or no minimum balance required. Encourage them to make weekly deposits to the account and point out how their money is growing. Teach them the concept of interest and how they still earn a little bit of money by putting their savings in a bank.

This is also a good time to help them learn how to make buying decisions. If they want to buy something, they need to understand the outcome – they won’t have enough money to buy another thing that they might also want. In simpler terms, this is like saying “if you buy that toy, then you won’t be able to buy the video game you want.” Helping them weigh different possible outcomes of their purchasing decisions is a step toward good money management. Here’s another tip: let them sleep on it. Help them learn how to avoid impulse buys while instilling patience.

Teaching your child about money doesn’t have to mean lecturing them all the time. You can make learning fun by playing board games that feature money management such as Monopoly or Game of Life. Sims is a good video game that will help instill the importance of working for money and living on a budget.

Middle School Kids:

This is the perfect time to teach your kid to do comparison shopping – comparing brands and prices, trying to find the best deal. It's also a great age for them to learn how to budget their money. They're going to start making money decisions on their own, and it's best if they know how they can plan for their expenses. Don't forget to teach them to give. Let them pick a charity or church that they like. By practicing giving, they will eventually learn to understand how it benefits both the recipient and the giver. Another activity that might interest your kid is an annual yard sale. They can be in charge – setting the prices and haggling with the customers.

Did you know that you can teach your kid about the value of investing at this age? Damon Williams of Chicago talks about how he was able to build a $50,000 stock portfolio by the time he was 14 in this YouTube video. And he did all of that just because he wanted to buy an expensive pair of Nike basketball shoes. If you're not knowledgeable about the stock market, then this can be a great learning opportunity for both of you.


By this age, your teen can already use credit cards. A prepaid credit card can help them practice responsible spending with a limit. Teach them how to choose the right credit card. What are the features, the costs of maintaining the card, finance charges, and the benefits or perks? Even more important, teach them about identity protection.

There are lots of other examples of how you can ensure your child is financially literate. But the most important method is by example. Talk to them about your family’s financial status. Let them see the bills, your bank accounts, credit card statements, etc. Show them how you save money for family vacations, birthday parties, and gifts. Practice frugal shopping, couponing, and patience. Remember, children learn more by watching than by listening.


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