Financial education can be defined as establishing a working knowledge of how money, credit, and debt work and should be managed in order to make responsible financial decisions. The goal for improving the financial know-how for your kids leads to managing money more responsibly and making informed decisions for their future.
Money is a taboo topic for many people. Over 60% don’t talk about it at all with friends, partners, or even family. But they should! It only makes sense that the best financial education begins at home—and that it begins early. Below are some suggested strategies for providing financial knowledge for your children and teens.
Teaching preschoolers and kindergartners about money.
Generally, once a child is old enough to count, they are ready to start learning about money. Here are some straightforward ways to demonstrate the value of money and how to use it.
- Use a clear jar for saving coins and dollar bills. Literally watching their money grow is powerful and even fun. Make a big deal out of it as their savings jar fills up, and celebrate once it reaches the top!
- Set an example with your own attitude. Money habits in children are formed between the ages of 6-12, so even very young children will notice when parents are calm and in control when spending. If it’s viewed as a source of conflict, they learn that money management can be difficult and stressful.
- Show them that things cost money. Let them experience how money works. For example, they might take some money from their jar, go to the store, and hand it to the cashier in exchange for their purchase.
Teaching elementary and middle school students about money.
Elementary school children and tweens are prime candidates for hands-on experiences with money. By this age, they usually have a base understanding of how money works and what it’s used for – living, spending, and saving.
- Show them that spending on one thing means not spending on another. If they buy that video game, they won’t have money to buy stylish sneakers – have them compare the cost of one item they want to another. It’s all about weighing decisions and understanding outcomes.
- An allowance is a payment for services rendered. They must accept that money given for regularly doing chores around the house is payment, not simply generosity. And no advances! Saving up their allowance teaches the rewards of patience.
Helping teens build a solid financial foundation.
Among the most valuable lessons that parents can teach their children is how to handle money, and there’s probably no more crucial time than during the teenage years. They are on the cusp of adulthood, crave independence, and are capable of understanding the importance of financial responsibility. If they are earning their own money from part-time jobs, babysitting, or allowances, they are ready to start learning how to make smart decisions about money.
Start with the basics.
Opening a savings account as soon as possible and driving home the importance of making regular deposits—even as little as 10% of any money they receive—is the simplest and most effective way to ground a sense of financial stability. Celebrating progress when certain milestones are met—when they’ve saved their first $100, perhaps—builds a real sense of satisfaction from handling money properly.
Whether saving for a car, video game, or college, teens are fully capable of understanding budgeting and the importance of tracking how much money comes in and how much goes out. There are easy-to-use budgeting apps and readily available spreadsheets that make managing money understandable and easy to track when it comes to what they can afford now, and the reward of meeting a larger goal down the road.
Support independence.
It may be tempting to step in and manage the process, but teens learn best when they have ownership of their decisions. Let them set their own financial priorities, make plans for how to achieve them, and even make the occasional mistake. There is a valuable lesson to be learned in realizing that it may take longer than expected to save for that one thing, and even in experiencing the consequences of misspending. These are precious learning opportunities—especially if they happen in a supportive, non-punitive environment.
Parents should offer guidance along the way, of course. Teens can understand the benefits of high-yield savings accounts and the basics of credit and loans. Older teens can certainly appreciate the realities of college costs, student loans, and how to use a credit card responsibly. Remember, 18-year-olds are legally able to obtain their own credit cards, but few are probably ready for that responsibility without first having the benefit of parental guidance. Helping them understand the true cost of debt before they’re legal adults gives them a big advantage when they actually are.
Prepare for real-world challenges.
Setting goals is one thing, but the discipline to meet them is another. Teens can be taught to anticipate unexpected expenses, the temptation of impulse spending, and that progress can be slow. Knowing this—and how to respond when these instances occur—will prepare them for the real-life ups and downs of managing money.
Teaching teens about money isn’t just about helping them save for short-term goals. It’s about giving them the tools they need to build financial literacy that will enable them to avoid debt, plan ahead, and make sound decisions.
Financial education begins early and at home.
Early learning through simple, and even fun, habits creates a healthy attitude towards money, and parents who demonstrate that healthy attitude are just as crucial. Learning the trade-offs involved in spending decisions and saving for the future becomes an easily understood tangible instead of a confusing tangle.
Parents who talk openly about money, model healthy habits, and encourage hands-on experience set their kids up for a lifetime of financial wellness. And the best part? These lessons don’t require formal classes or professional expertise. All they need is consistency, patience, and a willingness to talk about money as a regular and normal part of family conversation.
