Children's Financial Literacy 101: How to Teach Your Kids About Money

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People are generally uncomfortable talking about money, especially with their families. But children’s financial literacy is critical. These lessons will help prepare your kids for adulthood and living on their own, especially since schools rarely teach these valuable skills. 

Parents need to talk to their children about the basics of personal finance early and often. Here’s why and how to do so.

For many, money is a dirty word—but it shouldn’t be.

Americans dislike talking about money. There are many social taboos about sharing information about what you earn and what you spend. Discussing how much you make each year or what you spent on a new car or home is seen as bad-mannered and tends to make others uncomfortable.

Money is an uncomfortable topic in many families, but as part of their children’s financial literacy, parents must set expectations about money and spending with their kids. It’s always healthier to be able to have frank, open discussions about financial matters. Financial literacy is an important lesson that parents must teach to enable financial independence.

Families tend to hide financial information and expectations from one another. According to one survey, nearly 40% of couples don’t know what their partners earn, and 86% of couples who have been married for five years or less start in debt. Research also shows that 30% of teenagers expect to rely on their parents for financial assistance well into their 30s.

Parents also are reluctant to talk to their children about money. In a T. Rowe Price study, 47% of the parents surveyed said they miss opportunities to talk to their children about money, and one-quarter responded that they are very or extremely reluctant to discuss finances with their kids. Of the children surveyed, 53% said they wish their parents had taught them more about money and personal finance.

As part of your children’s financial literacy, work to shape their attitudes about money. Teach them that money is a tool, not an end in itself. Help them understand that money can’t buy happiness. Show them how to manage their money so they are in control, which will help alleviate money-related anxiety.

Teach your kids financial literacy. Download How to Teach Kids About Money: An  Age-by-Age Guide. >>

Teach good monetary habits.

Start your children’s financial literacy education early. Many parents wait until their kids are in high school to start teaching them about saving and credit. But you can start teaching your kids the basics of money as early as age 3, and there are some basic lessons that you should teach your children as early as possible:

How to Save

Teaching your kids the value of saving can start with an allowance and a piggy bank or a savings account. This will demonstrate how setting aside savings will help them get the things they want. It also will allow you to teach the basics of compound interest. 

How to Earn Money

Teaching kids how to earn money also can start early. Rather than just giving them an allowance, pay them to do chores around the house. You can give them a set of responsibilities for their allowance. You can also create a list of chores and provide an amount of money for each, such as emptying the trash, doing the dishes, washing the car, mowing the lawn, and so forth. Show them how to get odd jobs or part-time work outside the home.  

Smart Spending

In addition to teaching them how to earn, you also should teach them smart spending. Take your kids to the grocery store and show them how to do comparison shopping. Teach them delayed gratification, such as saving for something they want rather than impulse buying. For more expensive items, such as a new video game or a new bike, give them an incentive to save for what they want by offering to split the cost.

The Value of Giving 

Part of your children’s financial education should include charitable giving. Discuss charities or organizations they want to support and how to support them.

Good Financial Behavior

One of the best ways to teach your children good financial behavior is by showing them. Model good behavior and show your kids how you manage the household budget, pay bills, save for retirement, and so on.

Visit your credit union.

Your local credit union can help. Many credit unions offer programs that promote financial literacy, both through the credit union and through local schools. They also special youth accounts to help teach kids how to save and manage their money.

Since today’s children are digital natives, you can use online banking tools to show them how to manage their money. Show them how to make deposits remotely and how to use digital payment tools, such as Venmo and PayPal, as well as services that are linked to their account.

As your kids get older, the lessons can be more sophisticated. Get them an ATM card and show them how it relates to their bank account. Teach them about credit cards, either by giving them a starter card with a manageable credit limit or by adding them as an authorized user to your credit cards.

You can also start to show them more sophisticated savings strategies such as how to save with certificates of deposit, set up an individual retirement account, or how to start investing. Working with your kids to establish a college fund is a good way to promote financial literacy while promoting a sense of fiscal responsibility,

The financial lessons will change as your kids get older, but it’s important to start conversations about money early. Look for opportunities to discuss personal finances so your kids can see how money works in the real world. To help you get started, try our online starter kit, “Family Conversations about Money.”

Youth Accounts: Age-by-Age Guide



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