It may be rude to talk about money at a dinner party, but it's a necessary conversation to have with your kids. After all, they learn how to spend, save, donate and think about money from you. Financial literacy for kids can impact their whole life and how they look at managing money once they become adults.
Experts say teaching kids about money can start as early as 3. In fact, a study on habits in children at the University of Cambridge reported that by age 7, children have developed basic concepts surrounding money. But even if you have older kids and haven't started the financial talk, it's not too late to add these lessons to everyday life.
Keep in mind that just because this task is important, that doesn't mean money management for kids has to be daunting. It can even be fun with the help of games, books, piggy banks and a little imagination.
Pick a Place To Keep Money
The easiest way to teach kids about money starts at home is by getting some sort of piggy bank. This can be an actual pig-shaped bank, or any bank with a cute character depicted on it. Once procured, have your little one shove in that birthday money grandma sent and those coins they found on the sidewalk. For older kids a system of clear banks earmarked as savings, spend and share are key. Kids can add each monetary gift or earned dollar inside, deciding where it should go. And once your kids hit 8, an actual bank account that is monitored by an adult is key. Once the place to keep money is set, you can start working with how to handle it.
Money at Home
Money management for kids can start by doing chores and getting an allowance at home. On the chore front, pick tasks appropriate for each age. If your little one is just starting to help, usually around the age of 3 and 4, have them do things like clean doorknobs, pick up sticks in the yard, use a pint-sized broom or dust pan to sweep up their bedroom and wipe tables. The next stage, up to around age 6, includes using a Dustbuster to vacuum corners or stairs, clearing the dinner table, carrying laundry and putting away clothes. Once your child is over 7 or 8, it's time to incorporate chores such as dishes, full sweeping and vacuuming, raking leaves and more.
The amount of money paid for these chores and allowances depends on the family. But before payment is made, talk to your child about money management. Ask them what they want to spend funds on and what their goals are. For little kids use an analogy such as, "Would you rather have a bite of cake now, or the whole cake later? Saving money is like waiting to get the whole cake, it might take time, but you get more of what you want in the end."
Websites and Apps
Visit these websites and apps to help with easy planning and explaining financial literacy for kids.
- The Mint for Kids
- Young Americans Center for Financial Education
- Financial Educators Council
- Sammy Rabbit
- Money As You Grow
- Rooster Money
Offer Real Experiences
Allow kids to spend their money and manage it themselves by shopping, choosing goals and setting their own limits. Let them shop for a friend’s birthday present or the next Father’s Day gift. While shopping, show the difference between a $5 stuffed and ones that cost $30, and explain why one pair of jeans cost $25 and the other is $150.
It's okay if they make mistakes and use that $20 from Christmas to buy junk. The next time they ask for an expensive toy you can explain that they chose to use their money all at once for stuff they didn't really want or need, and next time they should consider saving it. It's much better to learn from monetary mistakes at 10 than at 30.
Yes, we live in the age of credit cards, but financial literacy for kids needs to include tangible funds so they can truly understand the value of a buck. That's where cold hard cash comes in. Not only is it something your child can hold, physically store and touch, but it's finite. Handing a kid $50 to spend on clothes means they can only spend that amount and will have to look at prices, sales, figure out tax and make real decisions based on all that. A credit card may be easier, but needing to make financial choices and not being able to spend infinitely helps kids learn about money in the long run.
Books are always a great way for kids to visualize what you're teaching them. There are a lot of options out there about money, and these are some favorites.
- A Smart Girl’s Guide to Money by American Girl (Grades 5 - 9)
- Ultimate Kids Money Book by Neale Godfrey (Grades 3-6)
- Money Madness by David Adler (Kindergarten thorough Grade 3)
- If You Made a Million by David Schwartz (Grades 1-5)
- Growing Money: A Complete Investing Guide for Kids by Gail Karlitz and Debbie Honig (Grades 4-8)
- Rock, Brock, and the Savings Shock by Barry Gott (Grades 3-5)
Add a Charity
Teaching kids about money may also include the donating aspect. Discuss what subject your child feels strongly about and find an organization to support. Do they love animals? There are shelters and critter wellness funds to donate to. Maybe they want to help other children, or start donating to their local school or library. There are so many ways to give and by doing so, you're showing your kids not only another money management skill, but how to have empathy too.
Another way to make finances a family affair is by adding some educational money games to the next game night. Or, throw in a dose of pretend play for very little kids.
- Learning Resources Buy It Right Shopping Game (Ages 5 and up)
- The classic board game Pay Day (Ages 8 - 12)
- Learning Resources Money Bags (Ages 7 and up)
- Thrive Time (12 and up)
- The Stock Exchange Game (Ages 10 and up)
- Learning Resources Pretend & Play Calculator Cash Register (Ages 3 and up)
- Melissa & Doug Star Diner Restaurant Play Set (Ages 3 - 6)
From games to real-life experiences, money can be something that's not just useful, but enjoyable to work with too. After all, there will be enough time to stress about finances when they are adults, so make money management for kids something they can learn.
Remember, as financial planner Beth Kobliner says in an article for PBS, "You’re the parent. You set the rules. And the rules will determine how your kid values money in the future."