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Teaching Financial Literacy To Kids

One of the most important life skills we can teach our kids is how to be financially literate.
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One of the most important life skills we can teach our kids is how to be financially literate. Too many parents are either scared, working through their own financial difficulties, or think kids don't need to be burdened with financial matters. I think we owe it to our children to start teaching them how to conceptualize, save, manage, and spend their money, as soon as possible.


We have younger kids so we haven't started giving a regular allowance, but we're about to start. For now, they have Tooth Fairy money, grandma money, and birthday money. Not a bad income stream, if you ask me.

Bank Accounts

As soon as each of my kids were born we set up bank accounts for them. They learn early that they deposit a portion of their birthday money into their bank accounts to save for a rainy day.

Let Them Pay

As soon as they can, I allow my kids to pay for items with small bills so that they can understand that money can be broken down into parts, subtracting for the value of the purchased item. We are exchanging money for an item that we can use.

Cash and Cards

One of my kids loves to hit the green enter button after I punch in the PIN to pay for an item with my debit card. He's learning that the money lives at the bank, and the store gets paid from our account when we provide our signatures. We've had conversations about how whether it's cash or card, it all comes from our account where I've saved money.

Cupcake Stand

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Another child wanted to sell cupcakes that he and I made to earn some extra money. It was great for him to learn that his labor equaled income. He learned another lesson when I subtracted the cost of the cupcake ingredients from his haul.

Explain How Work Works

One of my children used to complain that I was always working, or going to work. He was probably 5 before he understood that when I work, I get paid a certain amount of money, which goes to paying for our house, the lights, the food, and gas for the car. If someone in our family didn't work, we wouldn't have a way to pay for food or electricity. It's an ongoing conversation that demonstrates how we manage our household.

I Don't Want to Spend Money on That Now

I've heard some people worry that when they discuss financial things with their kids that they'll over step the line, causing the child, in turn, to worry about financial insecurity. I don't want my kids to worry that we don't have enough money, or the health of our finances, but I have no problem telling them that I don't want to spend money on that thing now.

It's a subtle change from "We can't afford food if we buy you a new remote control car" to "We aren't going to spend money on a remote control car now" but it's a change that can help your child: we choose to spend deliberately instead of capriciously, or desperately. Memorize it: I'm choosing not to spend money on that now.

Let Them Make a Mistake

Did you ever make a financial mistake as a kid? I remember saving up money to buy a special toy, only to be disappointed by the toy and left without a dime to my name. It was a valuable lesson that my parents allowed me to learn. My mother tried to talk me out of buying the toy, but I really wanted it. My parents drove me to the store and let me buy the toy. I quickly learned that spending money on something that you want won't necessarily bring you happiness forever.

What are some of the ways that you teach financial literacy for kids in your house? Do you have tips and ideas that have worked for your family?

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