Managing money is an essential skill that people use throughout their daily lives. However, few children receive any financial literacy classes in school, the Financial Educators Council says. So, it’s up to parents to help their kids learn about money.
You don’t have to wait to teach your kids about money. It’s best to start with simple concepts when they’re preschoolers and gradually increase the money decisions they make. We’ve collected some ideas to help you teach your kids, based on their age.
Financial Literacy for Preschoolers (Ages 3-5)
At the preschool stage, children are just beginning to understand the world around them. Here are some simple yet effective ways to teach your preschooler about money:
Understanding Money Basics: Use real or play money to familiarize your child with different denominations. Explain that each coin and bill has a specific value. Play games that involve matching coins and bills or sorting them by size and color to make learning fun.
Saving vs. Spending: Use a transparent jar to show your child the concept of saving. Let them see their savings grow over time, which can motivate them to continue saving. Also, help your child set simple goals, like saving for a small toy. This teaches patience and the reward of saving.
Role-Playing Games: Set up a pretend store at home where your child can practice buying and selling items using play money. This helps them understand transactions and the concept of exchange.
Financial Literacy for Kindergarten to 2nd Grade (Ages 5-8)
As children enter kindergarten through 2nd grade, they develop a better understanding of numbers and can begin to grasp basic financial concepts. Here are some practical ways to teach children in this age group about money:
Earning Money: Introduce the idea that money can be earned by completing chores or small tasks. This helps children understand the relationship between work and earning. Create opportunities for your child to earn money, such as helping with household tasks.
Budgeting Basics: Teach your child to divide their money into three categories: save, spend, and share. This simple budgeting method helps them learn to allocate money wisely. Use jars or envelopes to help your child physically separate their money and visualize their budget.
Interactive Games and Activities: Play board games that involve using play money, such as Monopoly Junior or The Game of Life. These games can make learning about money fun and interactive. Use age-appropriate worksheets that involve counting money, making change, and basic budgeting exercises.
Financial Literacy for 3rd to 5th Grade (Ages 8-11)
Children in grades 3 through 5 are capable of more complex thinking and can begin to understand more sophisticated financial concepts. Here are some ways to help them develop their money management skills:
Setting Savings Goals: Encourage your child to set specific savings goals for items they wish to purchase, such as a new toy, game, or sports equipment. Help them determine how much they need to save each week or month to reach their goal. Provide your child with a savings chart or a digital app to track their savings progress.
Comparison Shopping: Teach your child to compare prices of items in different stores or online. Show them how to look for deals, discounts, and sales. This skill helps them understand the value of money and how to make informed spending decisions. Discuss the importance of considering quality in addition to price.
Basic Financial Transactions: Introduce your child to the concept of a savings account. Explain how interest works and how it can help their savings grow over time. Take your child to a bank or show them online banking platforms to familiarize them with how these financial institutions work.
Financial Literacy for Middle School (Ages 11-14)
As children enter middle school, they become more independent and can handle more complex financial concepts. This is a critical time to build on their financial literacy by introducing more detailed lessons about money management.
Income and Expenses: Teach your child about different types of income, such as allowances, gifts, and earnings from small jobs like babysitting or lawn mowing. Discuss how they can earn money and the effort involved. Encourage your child to keep a log of their expenses.
Advanced Budgeting: Help your child create a budget that includes all their income and expenses. Teach them to allocate money for different purposes, such as saving for a larger purchase, or spending on immediate needs or wants. Show your child how to adjust their budget when their income or expenses change.
Understanding Credit: Explain the basics of credit, how it works, and the concept of borrowing money. Discuss the importance of paying back what you owe on time to avoid debt and maintain a good credit score. Use a credit card simulation or a simple game to demonstrate how credit cards work.
Saving for the Future: Introduce the idea of an emergency fund. Explain why it’s important to have savings set aside for unexpected expenses. Encourage your child to think about long-term goals, such as saving for a car or college. Help them calculate how much they need to save regularly to reach these goals.
Financial Literacy for High School (Ages 14-18)
High school students are on the brink of financial independence and can benefit greatly from a deeper understanding of financial concepts. This is the ideal time to prepare them for the financial responsibilities of adulthood.
Managing Credit: Teach your teen about credit scores, how they are calculated, and their importance in obtaining loans, renting apartments, and even getting jobs. Explain how to check and improve their credit score. If your teen is ready, consider adding them as an authorized user on a credit card to help them build credit. Teach them how to use credit cards responsibly.
Preparing for Financial Independence: Help your teen create a budget that includes income from a part-time job or allowance and typical expenses such as transportation, entertainment, and savings. Encourage them to stick to their budget and adjust as needed. Discuss the costs associated with living independently, such as rent, utilities, groceries, and transportation.
Planning for Higher Education: If college is in your teen’s plans, discuss the importance of saving for higher education. Explain how financial aid, scholarships, and student loans work. Help your teen evaluate the cost of different colleges and universities versus the potential return on investment in terms of career opportunities and earning potential.
Introduction to Taxes: Introduce your teen to the basics of income tax, including how taxes are calculated and why they are necessary. Discuss the importance of filing taxes correctly and on time. If your teen has a part-time job, guide them through completing a simple tax return.
Looking for even more financial literacy support? Check out our Financial Literacy Tips for College Students guide.
Learn More About Our Financial Literacy Programs For Children
By tailoring financial lessons to your child’s developmental stage, you can equip them with the knowledge and skills needed to make informed financial decisions throughout their lives.
When your child is ready for a savings account, open a CU Grow Youth Savings Account at Arizona Central Credit Union. This account, designed for kids up to 12, provides a real passbook for kids to track their savings and prizes for deposits. If you have any questions, contact us online or call (866) 264-6421.
