Teaching kids how to manage their money is one of the most important lessons parents can impart. And it’s never too early to start. In fact, many experts agree that children as young as three can start building fundamental financial lessons. And by the age of seven, they can form lifelong money habits, according to a study conducted by the University of Cambridge.
But children develop at different rates, so it’s up to you to decide when your little one is ready. To help you get started, we rounded up nine tips you can use to teach your kids about money — whether they’re “threenagers” or on their way to adulthood.
1. Introduce bartering or play pretend store — Ages 3 to 4
Even before your tot enters kindergarten, you can familiarize them with the concept of bartering: exchanging goods or services for something of comparable value. Try this with toys at first, then consider getting a grocery store playset that lets you and your little one roleplay as a cashier and customer. These playsets typically include a shopping basket, plastic produce and a child-sized cash register you can use to teach how financial transactions work.
As your kid gets a bit older, they may even hone their bartering skills with friends by trading baseball cards, Pokémon cards or other children’s collectibles (remember Pogs?!). As an added bonus, this can also sharpen their social skills. (I’ve never been more popular than when I snagged Ken Griffey Jr.’s rookie card back in third grade!)
2. Teach them about bills and coins — Ages 3 to 7
Once your little one is old enough to understand numbers and their value — and to know not to put money in their mouth! — it’s time to teach them about cold hard cash.
“Children should be taught to recognize currency and specific denominations as soon as they’re able to understand basic counting,” says Mark Daoust, CEO of the business marketplace Quiet Light. “If you teach a child what a quarter is and that there are four of them in a dollar, by the time they start school, they’ll have a basic knowledge not only of money, but of addition, subtraction, multiplication and division.”
On your next trip to Target, give your child $1 and tell them they can pick out a toy to buy. This is the perfect opportunity to drive home the true value of money — and why they can’t afford that Batmobile Lego set they claim they can’t live without.
3. Start using savings jars — Ages 3 to 7
After your kid finally understands the value of money, get them in the habit of saving any cash they earn, get as an allowance or receive as gifts.
Opt for three separate savings jars or piggy banks for:
This will let your child watch their money grow and teach them to keep their savings and spending money separate.
Although some financial experts recommend kids put more money in their spending jar than their savings jar, we suggest maintaining more in the savings jar or a balance between the two to underscore the importance of saving for the future.
Ashley Patrick from The Money Mindset Podcast agrees.
“I recommend kids 3 to 5 years old put 10% in the give jar, 45% in the save jar and 45% in the spend jar. As they get older, you can adjust percentages based on your child,” Patrick tells Finder.
Once your kid has grasped the concept of glass jars, you can open a kids’ savings account to teach them about interest. (My dad did this for me, and I’m forever grateful!)
4. Debit cards for kids — Ages 5 and up
Once you’re sure your kid has a firm grasp on the fundamentals of money management, consider signing them up for a kids’ debit card. These cards generally fall into one of two categories:
- Prepaid debit cards for kids
- Debit cards linked to a checking account for kids
Many kid-centric prepaid cards include monthly fees and mobile apps that let parents assign chores and pay allowances, whereas kids’ checking accounts are free but have less parental oversight. Some kids’ checking accounts also include financial literacy features, but you’ll be more likely to find interactive quizzes with prepaid debit cards.
If you want a kids’ debit card that offers the best of both worlds, look at Chase First Banking. It offers $0 monthly fees, store-specific spending controls, hands-on financial learning and allows parents to set up recurring allowances and assign chores (a dream come true!). But you’ll first need to have a Chase checking account to be eligible to open one for your kid.
5. Involve them in the purchasing process — Ages 5 to 8
One of the most effective ways to boost your kid’s financial literacy is to involve them in the purchasing process. Take your kid to the grocery store and give them a budget to buy a snack. Encourage them to compare products based on price rather than brand names or the artwork on boxes. (I’m looking at you, GoGurt!)
Another way to teach them is by vocalizing your own spending decisions. For example, if you’re buying a bag of salad, you may opt for one brand over another because it’s on sale or has a BOGO discount. Explaining this aloud can help your kid understand the rationale behind your purchasing decisions.
6. Gift-buying and budgeting — Ages 5 and up
If you pay your kid to do chores or give them a weekly allowance, the holidays are a perfect time to teach them about budgeting. Buying gifts on a budget requires your kid to think critically about how much they can spend on each person on their list. Help them calculate the total amount they want to put toward all gifts and how much they can afford to spend on each person.
Money-saving expert Andrea Woroch recommends speaking to your kids about budgeting on an ongoing basis.
“Involve your children in household budgeting talks, especially when it comes to things or experiences that involve them, such as saving for college, taking a vacation or back-to-school shopping,” she said.
7. Financial literacy workshop — Ages 5 to 17
Many banks and credit unions host free financial literacy workshops for kids in grade school and high school. These programs often include instructions, worksheets and other resources to help children wrap their young minds around basic banking concepts, such as fees, loans and interest. If your local bank or school doesn’t offer these programs, interactive online workshops can help your kid learn to be more mindful about their money.
8. Games — Ages 5 to 13
Popular board games like Monopoly Jr. and Payday involve play money and require careful financial planning to be the winner.
“The Game of Life is great for first and second graders,” says Todd Christensen, an accredited financial counselor and the author of Everyday Money for Everyday People. “However, I recommend the ‘Extreme Reality’ edition of Life since other versions promote gambling and ridiculous income opportunities.”
In addition to classic board games, many modern video games include a financial dimension as well. For example, the wildly popular Nintendo Switch game Animal Crossing incorporates a savings account and a mortgage account that accrues interest when players don’t pay back their loans. Playing this game can teach your kid how interest works and the consequences of late payments.
9. Virtual bank accounts — Ages 5 to 14
Another way to kickstart your kid’s financial literacy is to have them play around with a virtual bank account. Apps like Bankaroo simulate the banking experience and teach kids how to manage money without using actual dollars. In some cases, kids can also input their existing balances to make the exercise even more real.
However, these apps require your kid to know how to read, so you might want to hold off on introducing them until they’ve graduated from kindergarten.
Is it too late to teach my teen about money?
Most experts believe it’s never too late to teach your child about money, even if it took you a bit longer to start the discussions. If your teen is planning on going to college, now is the perfect time to teach them how student loans, interest and repayments work.
“Teaching financial literacy in college is simply too late,” says Robert R. Johnson, professor of finance at Creighton University and co-author of Investment Banking for Dummies. “By that time, many students have sealed their long-term fate by incurring burdensome student loans.”
3 tactics to teach teens how to manage money
If you missed a few opportunities to teach your kids about money in the past, you can make up for the lost time by trying these tactics with your teens.
- Talk about finances and expenses. “Simply talk to your teens about finances and expenses,” says Kalicia Bateman, personal finance editor at Best Company. “They may not understand all the ins and outs of mortgage or credit card payments, but it’s important that they’re made aware of these types of expenses. Consider including them in family budgeting discussions that might traditionally be kept between parents. Allow them to see how you manage money and budget for large expenses, such as a vacation.”
- Open up a bank account. If your child is old enough, consider opening up a checking account like Chase First Banking. “Explain to them how a debit card works in connection to their checking account and teach them how to write a check, even though they’re rarely used these days. Have them monitor their account through the mobile app,” says Claudia Gonzalez, financial adviser from Kovar Wealth Management. “This way, they’re aware of how much money they have available to spend. It teaches them the basics of budgeting.”
- Add them to your credit card. Consider adding your teen as an authorized user on a credit card once they get a job. This way they start learning the responsibility of paying off their balance on time and in full. “If they prove to be responsible with its use, older teens may eventually get a low-limit credit card backed by their parents. Urge them to pay the balance off in full each month, and if it isn’t, consider terminating the card or placing it on a freeze until responsible credit behavior is established,” says John Longo, professor of finance at Rutgers University and the author of Buffett’s Tips: A Guide to Financial Literacy and Life.
6 ways kids’ debit cards teach financial literacy
Compared to checking accounts, a prepaid debit card can put your kid’s financial literacy on the fast track by teaching them lifelong financial management lessons, such as:
- Budgeting. When your child only has a fixed amount of funds on their debit card, they’ll need to be more mindful about what they buy and when.
- Savings. Prepaid debit cards teach your child the value of saving for things they truly want, rather than hastily buying impulse items. And if the card offers parent-paid interest, they’ll develop an understanding of how interest can help their money grow over time.
- Spending. Using a debit card to pay for purchases teaches your young one how to navigate financial transactions online or in person.
- Investing. When your kid uses a prepaid card to buy something that will gain value over time, they’ll become aware of their financial future.
- Giving. Your child can use their card to donate to charitable causes, teaching them the value of helping those in need.
- Chores and allowances. By adding a set amount of money to your kid’s debit card each week or month, they’ll be more prepared to use their paychecks wisely when they enter the workforce.
Financial literacy programs for kids in the US
There are a host of financial literacy programs available for children in the United States. These programs are designed to educate and engage your child in money-related topics such as saving and budgeting. In addition, each bank offers different rewards and incentives that may be worth considering when looking for a bank account to open for your child:
1. Hands on Banking program
- Best for: K–12
- Key features: This program provides free resources for teachers who are looking to add financial lessons to their curriculum. Lesson plans include topics on spending, saving and giving.
2. School Savings program
- Best for: K–12
- Key features:
- This program, approved by the U.S. Department of Education, allows kids to make savings deposits at school through Websaver and features an online savings register, an animated budgeting app and prizes for kids who save money throughout the year.
3. Fifth Third Bank Young Bankers Club
- Best for: Fifth graders
- Key features: This is a 5- or 10-week program taught inside the classroom. Kids learn how to make basic money calculations, create and use a budget, manage a bank account and navigate the stock market.
4. TD Bank WOW!Zone
- Best for: K-12
- Key features: This program provides financial literacy lesson plans to teachers.
- Kids 12 and under learn about the value of money by watching videos, taking quizzes and playing games.
- Kids 13 and up learn how to create a budget and develop lifelong saving habits.
- Young investors learn about the stock market through a virtual stock market game.
5. Teach Children to Save Day
- Best for: K–8
- Key features: This annual event is put on every April by bank volunteers who teach kids how to make basic money calculations, create and manage a budget and develop good money-saving habits.
More from MediaFeed:
23 fun ways to teach your kids about money
Featured Image Credit: macniak / istockphoto.