As parents, many of us find the concept of personal finance intimidating. Do you remember how scared you were when you started finance classes at school or university? (I’m raising my hand too!) Many people were like you, and I can assure you that they managed to learn how to navigate it. And so can you! Personal finance isn’t an exclusive topic reserved for experts; it’s a fundamental skill that every adult should master. Whether you lacked money management education yourself or you’re unsure how to teach kids about money in general, we’re here to help. This age-by-age guide to teaching kids about money provides the clear roadmap and confidence you need to raise a money-smart child—without the intimidation.
Some Useful Definitions First
Let’s start with some definitions that you, as a parent, should know:
- Personal finance involves the management of an individual’s or a family’s money. This includes tasks such as budgeting, saving and spending, while considering financial risks and planning for future life events.
- Money management: The process of budgeting, saving, investing, and spending money.
- Financial literacy: Having the knowledge and skills necessary to manage financial resources effectively.
- Financial well-being: A condition in which people can fully meet their financial obligations, feel secure in their financial future, and have the resources to make choices that allow enjoyment of life.
To put it simply, these are all things related to the way you manage your money.
Why Do We Need to Teach Kids About Money?
Personal Finance and Money Management are too abstract and might not make sense for a kid. However, to teach kids about money, parents can instill these concepts in their children from an early age, by starting with the basics and gradually introducing more complex money concepts. This can be part of everyday life activities that the kid is already familiar with.
As a parent, you should aim at teaching your kid these key elements:
- The value of money
- Budgeting
- Saving
- Spending wisely
- The difference between needs and wants
- Investing
The purpose is to make the learning effective by making the teachings fun and engaging for the kids. And, more importantly, the teaching should be age appropriate to the kid.
Age-by-Age Guide to Teaching Kids About Money
Activities to Teach Kids About Money (Ages 3 To 6)
At this age, the concept of money is still totally new. Introduce your kid to coins and bank notes (you can use fake ones). You can start by showing them what money looks like and how to use it.
At this age, the child is also able to understand the difference between wants and needs. Explain how certain things like food and a home are essential, while others like toys are not.
If you think that your kid is ready, you can introduce them to the concept of saving. To do this, start with a piggy bank and encourage them to put money in it to save for something special.
Also, reward them for simple age appropriate tasks. For example, you can incentivize the completion of simple chores like putting away toys, setting the table or brushing teeth by giving the child a small amount of money that he/she can add to their piggy bank. You can use our free printable chore chart.
In addition, you can play games that involve money and making decisions. For example, Monopoly Junior can be played as soon as the age of five.
Fun Ways to Teach Kids About Money (Ages 7 to 12)
At this age you can introduce the concept of budgeting. The kid can learn to divide his/her allowance between spending, saving, and giving.
Parents can reinforce the concept of working to earn money as a tween. The child is able to do a bigger variety of chores and save money for bigger goals.
Saving for bigger goals will take longer to achieve (check our article on how to create a vision board with your kids). This teaches children patience and delayed gratification.
At this age, kids are also able to compare prices and make better informed spending decisions, while staying within a budget and using the opportunity cost formula. You can try these hands on budgeting activities like throwing a Halloween party on a budget or this back-to-school budgeting activity .
You can introduce your child to banking by giving him/her a prepaid card controlled by you. This will teach them financial literacy for all, tracking expenses, and managing money in general.
Discuss the importance of being generous. Giving to a charity or helping a person in need should be part of the kid’s financial education.
Adolescence Money Lessons (Teens Aged 13 to 18)
Teenagers tend to be more independent and can take more responsibility. They are able to manage their budget and make financial decisions. They are also able to understand more complex concepts like interest, debt and credit cards, and can be exposed to more complex problem based learning examples.
It is also at this age that they start thinking seriously about the job they want to do, with all the financial implications that this involves, especially the potential earning power of their future career.
Entrepreneurship can also be encouraged at this stage. If your kid has a small business idea, you can help them develop it and launch it. Even something as simple as starting a lemonade stand can teach valuable business and financial skills in a fun, hands-on way.
You can encourage saving and investing for the future at this age. Explain about compound interest and having a solid financial foundation. Teens should also be taught about bad financial decisions and their consequences, and how to avoid them.
Why You Need an Age-by-Age Guide to Teaching Kids About Money
Financial literacy starts at home and can be introduced from a very young age. If you haven’t started yet, or have only done a little, it’s not too late. Start with simple concepts and gradually build your child’s knowledge. Here is our guide for late starters to teach kids about money. You’ll be surprised at how quickly they can catch up—especially when you explore what rich people teach their kids and begin applying those lessons at home.
📚 Further Reading
Julia Gardus – UXL Money: Making Sense of Economics and Personal Finance
What Is Personal Finance, and Why Is It Important?
35 Gifts Your Children Will Never Forget by Joshua Becker
