Only 23 percent of kids report talking to their parents about money on a regular basis. Have you made it a priority to focus on financial literacy for yours?
If you’re not teaching basic financial skills, now is the time to start. Listed below are 10 important money lessons for kids to learn from an early age.
10 Money Lessons for Kids
1. Practice Counting Money
This is one of the most basic money lessons every parent can teach their kids. When you teach them how to count money, you help them to understand its value in a more concrete way.
This practice also improves their math skills and can help them to feel more confident at school, too.
2. Start Saving Early
Beyond basic counting, another lesson to teach your children early is the importance of saving.
Consider giving your child a clear piggy bank or use a glass jar so they can see the money they’re putting away and watch it grow. An app like Savings Spree is another fun option that teaches kids the way that small daily choices can add up to more savings over time.
One way to motivate kids to save money is to work with them to set a goal. Perhaps there’s a toy they’ve been eyeing at the store, or maybe they want to contribute to a family outing.
Help your child set a goal that’s realistic and age appropriate. Remind them of that goal when they’re tempted to spend their money on something else.
3. Include Kids in Financial Decisions
Many parents treat money as a taboo subject. They don’t let their kids in on the financial decision-making process, which leads to the kids feeling detached from money or unsure of how it works.
Instead of keeping kids in the dark, include them in your decisions. For example, when you’re at the grocery store, explain to them why you’re choosing a particular brand or buying in bulk to save money.
4. Give Them Money to Spend at the Store
Speaking of the grocery store, consider giving kids their own money to spend when you go shopping, too. Give them a small amount and help them find items that fit their budget.
This helps solidify their understanding of money and allows them to practice in real-world situations. It also gives you a chance to talk to them about sales tax.
5. Make It Fun
Learning money lessons doesn’t have to be a chore. These days, there are games and apps kids can use to improve their financial literacy in a fun and exciting way.
The following are some of the best options to introduce to your children:
- Peter Pigs Money Counter: An interactive game that teaches kids about counting and saving money
- Wise Pockets: Another kid-friendly, interactive money management game
- Financial Football: A game for older kids that requires them to answer questions related to financial literacy
- Stock Market Game: Another good option for older kids who want to learn the basics of investing. If your kids love playing games on the computer or tablet, encourage them to spend a little time each day on a game that encourages financial literacy before moving on to other games. That way, they can have fun and learn valuable skills all at once.
6. Introduce Interest
When your kids are around 11 or 12, start introducing them to the concept of interest. Teach them about compound interest and how the money they save can grow over time. Use this opportunity to talk to them about how their debts can also grow due to interest.
This website is a useful tool that helps kids see the way interest works. They can plug in different numbers to the compound interest calculator and see how their money will increase. They can also use other tools on the site to set savings goals and learn about investing.
7. Practice Prioritization
Even after you set a savings goal with your child, there’s a good chance they’ll see something else they want. It’s totally normal for this to happen.
Instead, use this as an opportunity to talk to them about prioritization and focusing on their goal. You can teach your kids the importance of long-term saving and help them to delay gratification so they can have the thing they want the most instead of dropping it for the thing they want right now.
8. Encourage Charitable Giving
Encourage kids to set aside a portion of their money for charitable giving. Let them know there are others who can benefit from their donations.
This will encourage your kids to be generous in the future. It also helps to teach empathy and compassion for people in different situations.
9. Talk About Credit Cards
It’s not uncommon for children, including teenagers, to not have a clear understanding of how credit cards work.
Talk to them about the importance of using credit cards in a wise way so they don’t end up getting hit with unexpected debts later.
But try not to make credit cards sound all bad. Instead, work with them to choose a credit card that has a low interest rate and low fees. Teach them to pay off their credit card balance each month and to avoid carrying balances.
10. Be Honest About Your Past Mistakes
When you teach money habits to kids, it can be tempting to gloss over mistakes you’ve made with your own finances in the past. Instead of pretending that you have a perfect track record, be honest about what you did wrong and tell your kids what you wish you’d done differently.
If you’re open, they’ll be able to learn from your past mistakes. They’ll also feel more comfortable coming to you if they make a mistake themselves.
Start Teaching These Money Lessons for Kids Today
There are lots of effective money lessons for kids you can start teaching today. The earlier you start encouraging financial literacy and good money habits, the better off your kids will be when they get older.
Do you want to learn more about money management (for yourself or your kids)? If so, we have plenty of helpful posts on our blog. Start by checking out this one on the basics of a credit score.