How to Teach your Younger Children about Money

Aug 5

Whether your children are six or sixteen, it might be time to start teaching them about money. Studies show that the earlier you teach your kids financial literacy, the better they are likely to be at managing their own finances in the future.

Obviously, kids aren’t experienced enough to fully understand complex financial topics. But with these tips, you can help your kids start to understand important financial topics for their future.

Make it age appropriate

Children are able to comprehend differently depending on their age. So, it may not be helpful to teach your ten and fifteen your old children in the same way. Instead, make whatever you are teaching geared toward each child’s age and development.

For example, if you’re talking about budgeting with a teenager you could sit down with them and put together a real budget. If you’re having the same conversation with a six year old, you probably want to stick to the basics of why budgeting is important and the difference between income and expenses.

Cover the basics

There is so much to cover when it comes to financial literacy, but before you dive too deep, you should probably start with the basics. This can include:

● Money - Where does it come from? Why is it important?

● Saving - How can saving help you plan for the future?

● Budgeting - What is a budget? How can you create a budget?

● Investing - What is investing? What are the different ways to invest?

Don’t be afraid to talk about debt

Young Americans have found it difficult to manage their debt. In fact, an average of 7% of student loans are in default at any given time 1. One of the best ways to help your children with debt is to teach them how debt works before they go off on their own. You can explain why someone might need to take out debt, explain how compound interest works, or show them a real world example of taking out a loan and making payments. This can all help your children manage their own debt later in life.

Consider a hands-on approach

Here is one method you can use to teach your children how to learn about multiple financial topics at the same time:

Ask your child to set a goal of something they want to buy, like a new bike
Pay them for completing certain chores or jobs around the house
Sit down and help them budget how many jobs they will need to complete to reach their goal
When they receive money, show them how they are saving toward their goal
When they reach the goal, take them to make their purchase with their hard-earned money

This teaching strategy can not only help your children understand saving toward a goal, but also the relationship between work and earning money.

Make it fun!

Money and finances can feel intimidating, even to adults. So, if you want your children to feel engaged and learn as much as possible, do your best to make their learning fun and interactive. This could include using real money or even Monopoly money to teach certain points. Or, let them come with you to the store to experience real world financial experiences.

Money apps like Greenlight (2) allow parents to monitor spending, automate allowance, and set savings goals. A paid plan offers a customizable debt card to help kids learn about payments and spending.

Creating fun, engaging experiences for your children can help them get a better grasp on money and help them on their path toward a strong financial future.

Want to learn more and discuss your personal approach to family education? Reach out to us directly with any questions or comments, or to schedule a one-on-one meeting. We’re here to guide you on your journey to financial security.

Source notes:
1 https://educationdata.org/student-loan-default-rate

2 https://greenlight.com/ (For example. Not an endorcement)

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Ezra Firkins