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Help Kids Understand Money

Jun 22, 2021 5 min read Kate Ashford

Key takeaways

  • Try to match your lesson with an upcoming life event.
  • Use simple, everyday situations as examples.
  • Talk about your own experiences.



It’s never too early to promote financial literacy for kids. Whether they take a class or learn directly from family and friends, it’s important to spend time teaching kids about money.

Effective financial literacy programs can introduce middle—and high-schoolers to a variety of concepts and help them understand the skills necessary to be financially successful adults. But unfortunately, not every school offers a financial literacy course.

“Teachers have a lot of responsibility to meet the requirements of basic curriculum,” says Susan Beacham, founder of Money Savvy Generation, a personal finance education company. “Even important supplemental curriculum needs to be weighed, and because there’s only so much time, money education sometimes falls to the bottom of the list.”

If your schools don’t have such a program—or if you’d like to take an active role in your child’s money education—here are a few strategies from financial educators that can pay off at home.


Keep lessons relevant

Financial educators understand that people are most receptive to messages when they apply to them at that point in time. “If I want to talk about more than 10 different ways that a college student can repay their loans, doing that freshman year would probably not be useful,” says John Pelletier, director of the Center for Financial Literacy at Champlain College. “If I sit down with the same group of students and it’s senior year, they’re going to soak it up like a sponge.”

Of course, sometimes people need to think very far ahead—for retirement, for example—but when introducing concepts to kids, you’ll gain the most traction if you match them to an upcoming life event. For example, your nearly 16-year-old daughter might be ready to learn about car insurance because she will soon be eligible to get her license.


Use everyday situations

Whenever possible, money educators try to re-create real-world situations in the classroom, such as having kids buy groceries for their families or even taking a field trip to a bank. At home, you’re in the best position to take advantage of real-time opportunities.

“When you’re in an experience, whatever it might be, try to use that opportunity to impart a lesson,” Pelletier says. For instance, if your child says he wants to buy a new video game, use that as a way to teach him about saving for something over time.

When you go to the ATM, take your child with you and explain different types of accounts and how interest rates work. When you buy something with a credit card, explain that you’ll have to pay the money back at the end of the month.

The more you can narrate everyday life as it happens, the more your child will learn in a real-world setting.


Give them hands-on experience

“I know one high school educator who teaches a personal finance class that, every year, uses the tax form and does his taxes,” Pelletier says. “He goes through it, and they’re like, ‘Wow, that’s all you have after you pay your taxes?’ So it’s incredibly impactful.”

Beacham once took 63 second-graders to a McDonald’s shareholder meeting. “It was absolutely fantastic, because we prepared those kids, and it was a way of explaining investing to them,” she says.

By the age of five or six, most kids are ready to handle an allowance and, if you make them responsible for purchasing nonessentials ranging from gum to the latest PlayStation game, they’ll glean the lessons of saving, spending and budgeting while the stakes are still low.

Let smaller children pay for things with their own money. Have older children organize and run a bake sale, which requires budgeting for expenses and setting prices for goods that will cover costs. Have high schoolers create and manage a mock post-college budget.

“Those kinds of things in the curriculum are exhausting to pull off, but most effective,” Beacham says.

The more your children can try their hands at things—and make mistakes—the better prepared they’ll be later.


Stay concrete

It may seem old-school to teach kids about checkbooks and how to balance them, but financial education programs are still doing it. Why? Because abstract concepts are harder for the younger set to grasp—and you have to start somewhere.

“In the early elementary grades and sometimes in middle school, we’re still talking about checkbooks, not because we think a child is going to use a checkbook, but because it’s a way to add and subtract and tie that to money,” Beacham says. “This is a cumulative lesson. You start with very concrete things like checkbooks and balancing and writing things down and keeping track, and those lessons evolve all the way to Bitcoin.”

The same goes for physical currency: You may not handle cash much in your adult life, but to start kids off with money learning, actual cash and coins are easier to work with than digital totals.


Talk about it

Many parents are reluctant to talk about their own finances, particularly if they’ve made mistakes, or they don’t feel they have a good handle on the situation. But research shows that kids look to their parents first to understand how personal finance works, and you may be the best source available when teaching kids about money.

For example, you might talk to your children about how you got into credit card debt when you were younger, what you did to climb out of it and what lessons you learned along the way. Or you might explain how some late payments affected your credit score, and what you did to help repair it.

If students aren’t learning these things in schools and parents aren’t talking about it, Pelletier says, “how are kids not going to make the same societal mistakes in the next generation?”


Help save for college

The cost of higher education increases every year, and every bit saved counts. Make a plan with your children to save a portion of the money they receive for birthdays, holidays and other special occasions for their college education.

One option is a 529 account, which allows for tax-deferred investments and tax-free withdrawals for qualified education expenses. Your kids can learn about the power of compounded investing as they watch their savings grow over the years, making them feel more comfortable about affording college in the future.


Show them the power of saving

Invest your money today and you can do way more with it tomorrow. Drive that point home by letting your kids play around with an online compound interest calculator.

At investor.gov, they can see how much money they would make if they save $10, $20 or $50 each month. Your children might be shocked to discover that if they save just $200 a month from age 18 to age 68 earning 5% interest, they would wind up with $502,435. A whopping $382,435 would be from interest.


Mark time

Sow the seeds of delayed gratification by giving toddlers and preschoolers their own calendars and noting special occasions that are coming up: birthdays or family events, outings to a concert or the zoo. If you don’t have anything scheduled, plan something for several weeks away. Regularly talk about the event with your child (who’s going, what they’ll see) and mark off each square on the calendar until the big day arrives.

This simple practice will not only reassure young children that those far-away events are, in fact, going to happen, but also it will (eventually) boost their patience quotient and teach them that anticipating an activity or an item can make it more enjoyable.


Give young kids concrete chances to experience the benefits of delayed gratification—and to develop a sense of mastery over their own behavior—by offering opportunities for them to practice self-control. You might tell your preschooler you have time to go to the park for 20 minutes now, or for 45 minutes after dinner, for instance. Even if he opts for immediate gratification at first, over time he’ll realize patience has more of a payoff.


What you can do next

One of the overarching themes of successful financial education is that lecture alone doesn’t work. The subject matter must be relevant and—when possible—include practical experience. The more you can expose your kids to money education in a real-life way, the better off they’ll be down the road.

If you’re interested in getting a financial literacy class added to your school’s curriculum, there are various paths to doing so—and most of them require gathering some support.

“I think one parent going in alone is probably not a recipe for success,” Pelletier says. You can start with your school’s principal or the math or computer literacy teacher. You can gather a group and present your case to your local board of education. You may even be able to work with your local parent teacher association.

Alternatively, you can lobby your political representatives to see if they’ll support a bill mandating financial education as a graduation requirement. “Even if the bill doesn’t pass, what you’re really trying to create is momentum,” Pelletier says. “And that is important.”


Kate Ashford is a freelance journalist who writes about personal finance, work and consumer trends. She has written for BBC, Forbes, LearnVest, Money, Real Simple and Parents, among others.


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