The Best Ways to Teach a Child About Personal Finance

Now that I have a kid, one question I get almost monthly is, “How are you going to teach him about money?” I get asked all the time.

But for all the asking, right now the answer is, “We’re not really sure yet.” We have some ideas, mostly about what we don’t want to do, but he’s just over 2 years old. Thankfully, we still have some time to figure it out, though I’ve been deep in research mode already.

Below is a roundup of articles full of incredibly helpful information. I’ve been using these to percolate on a few ideas and set up the game plan for how we’re going to teach our kids about money.

The Giving, Saving, Spending Approach

Sometimes it can be difficult to know how to teach younger kids about complicated topics in a way they’ll understand. NBC News has created a guide that’ll help you know how to teach young kids about complicated finance matters. 

One in four kids never gets money lessons from their parents. So starting young and making sure your children understand what you’re talking about is crucial. This guide covers things like explaining where money comes from and touches on giving, saving, and spending, and most importantly, demonstrates the relationship between working and making money. 

The more you repeatedly show your kids how money works, the better off they’ll be when they eventually leave the nest.  (If you're a single parent, here's my guide on how to make money as a single mom.)

How to Teach a Child About Personal Finance Gradually

Start introducing money between the ages of 3-5, then graduate to how people spend money after they turn 6. During the preteen years, you’ll want to cover financial consequences, including credit, debt, and interest. Then in the early teenage years, you’ll introduce what it means to build wealth. Right before they leave for college or start living on their own, you’ll want to help them understand good and bad credit, as well as how to do their taxes.

Teaching Kids About Money Based on Age and Cognition

The more engaging you can make your kids’ financial education, the more likely they’ll be to remember what you teach. That’s why Fee created this guide on engaging ways to start teaching your children about personal finance. 

Like several other resources on this list, Fee breaks down financial topics by age. They emphasize taking it slow, and making their lessons relevant to what they’re currently living, like waiting until they’re at least 11 before you start talking about long-term savings, since they likely won’t be able to conceptualize it until then.

Teaching Financial Literacy to Kids: 1 Lesson per Age Group

Forbes breaks down its financial guide to one lesson per age group. For each of those lessons, Forbes goes into detail on how to teach it, and why it’s important to share at that age. 

Of course, you don’t have to follow the examples set in this guide to a T. However, it’s useful to have them laid out in such a way that you can understand what’s being taught, and why it’s important to share just then.

How to Tackle the Allowance Conversation

Intuit recommends starting with physical currency when your kids are young. It’s something they can see, which means they don’t have to work their mind around abstract concepts while you’re trying to teach them about finance. 

After they reach their preteen years, you can start teaching about savings accounts and banks.

Intuit recommends tying allowance to chores. Doing this helps kids understand the relationship between working and earning, which will go on to serve them later in their life when they work as adults.

If All Else Fails, Just Teach These 3 Most Important Lessons

Finance can get complicated, but it doesn’t have to be. You can’t go wrong with starting with the basics. many recommend budgeting, saving, and borrowing. These core principles make up a huge amount of the financial world and will help round out their education. 

The TL:DR

I know what you’re thinking: that money management is already overwhelming for adults, how can we possibly make it easy for kids to learn? To me, after eight years of writing about money every day, here are the most important things to do — even if you never sit down and have a formal money conversation.

• Include your child in money decisions and talks in real time. Don’t make money the “thing you talk about behind closed doors” like when you have an argument or are talking about someone and don’t want them to hear.
• If you feel comfortable doing so, and can, help your kid establish credit by adding them to your cards when they are of age. 
• Even if you never teach your child about emergency funds, taxes, or retirement, make sure your child understands that in order to earn money, you must work for it and that money is a tool you use to pay for things. I firmly believe children should be given an allowance and when they get older, a bill they’re in charge of (like cell phone or car insurance.)
• Ready to think about saving for college? I like this college savings calculator from Life and My Finances as a great free resource.

Okay, that’s my two cents!