How to teach kids about money

Ages 2 and 3: Introducing money basics through play

At this stage of development, children may not fully understand the concept of money and its value, but it's the perfect time to introduce them to the basics of money management in fun and engaging ways.

Start by teaching the basics like coin and bill recognition through activities like a coin identification game, where kids match coins by color and value to reinforce their understanding of different denominations. Role-playing games, such as pretending to be cashiers managing store finances, are another effective way to teach young kids about transactions and the principles of commerce.

These interactive activities not only make learning about money for kids enjoyable but also lay the groundwork for essential financial literacy skills they can build on as they grow.

Ages 4 and 5: Understanding the value of money

At this age, children can begin to play an active role in everyday money transactions, making it an ideal time to introduce the basics of money management. Teaching them to count, add and subtract can be done through real-life scenarios like helping to pay for items during shopping trips.

Encourage them to work out how much money they have and the difference between what they have and what they need, reinforcing foundational math and money skills. Children aged 4 and 5 are particularly receptive to learning monetary concepts through guided activities. Discussing prices, basic budgeting and saving for desired items helps them understand the value of money and the importance of planning.

These early lessons not only make learning about money engaging for kids but also lay the groundwork for essential saving and spending habits that will benefit them in the future.

Ages 6 through 8: The basics of money management

At this stage of development, children often begin receiving allowances to manage their own expenses, such as lunches or small personal items, giving them their first taste of financial independence.

This is an excellent opportunity to teach kids the basics of money management, including saving and budgeting. Encourage them to set aside a portion of their allowance in a savings account, fostering financial discipline and teaching the value of delayed gratification. As their savings grow, you can introduce the concept of interest and how it contributes to building wealth, opening the door to discussions about investments.

Helping children set financial goals and allocate their funds wisely empowers them to make smarter decisions and develop sound money habits. By learning about money in this practical way, kids can gain a strong foundation for financial independence and stability in the future.

Ages 9 through 12: Developing financial responsibility

Pre-teens are at an ideal age to deepen their understanding of financial concepts and take on more significant responsibilities, such as making important purchases.

This is the perfect time to introduce kids to the basics of money management, including budgeting, recurring bills and a simple overview of taxes. Teaching them how to handle expenses and navigate recurring financial commitments helps shape their perspective on personal finance.

Additionally, lessons on loans and credit provide a tangible understanding of borrowing, including the responsibilities that come with repayment. Encouraging entrepreneurial ventures, such as starting a small business, offers practical experience in financial management, marketing, and customer service, while fostering critical thinking and problem-solving skills.

These activities and discussions equip pre-teens with the knowledge and habits needed to build a strong foundation for responsible money management and future financial independence.

Ages 13 through 18: Mastering budgeting and financial independence

The teenage years mark a critical time for teaching advanced financial concepts, as these lessons will shape their transition into adulthood.

Focus on key areas like building credit, understanding student loans and preparing for major financial decisions. Establishing a solid credit history is essential for securing funding for future purchases such as homes, cars, or starting a business.

Guiding teens through the FAFSA application process is invaluable for those considering college, helping them understand financial aid and loans. For teens with jobs, teaching them how to file taxes provides practical, real-world experience. Set a strong example by demonstrating good financial habits and involving them in these processes.

By equipping teenagers with these essential tools and strategies, you can set them on a path to financial literacy and independence, ensuring a solid foundation for their future.

Conclusion: Empowering kids to build a strong financial future

Financial literacy education is a lifelong investment in your child's growth and future success. By starting early and reinforcing lessons throughout their formative years, children can develop a solid understanding of essential financial principles. This foundation empowers them to make informed decisions, practice responsible money management and ultimately achieve financial independence. Teaching kids the basics of budgeting, saving, investing, and spending responsibly equips them with the skills they need to navigate their financial futures with confidence and stability.

Although we make it easy for you to start a Family Banking account online, this is also a good opportunity to actually take them into a branch and meet a banker in person. Your kids can see for themselves what goes on at their bank, get to know the people who work there and understand that their financial questions are always welcome. Simply set up an appointment at your local Associated Bank for a time that fits with your schedules.