7 Effective Ways to Teach Kids about Money

Let’s talk about something really important: teaching kids about money.

Financial literacy is one of the most important life skills a person can have. A study by T. Rowe Price 2021 found that kids who were taught financial education were more likely to be financially responsible adults. This can help them later in life in managing finances, from student loans to saving for a house or retirement.

Now, we know that money talk can sometimes feel daunting, but it doesn’t have to be!

There are easy, practical ways to effectively teach your kids about the value of a dollar, money management, and more. And you can start as early as possible; according to a 2013 study by the University of Cambridge, children can grasp basic money concepts as early as age 7 years!

Here’s our guide to helping your kids learn about money management.

1. Start with simple activities

When teaching financial literacy to kids, it’s important to start with simple concepts. Even preschoolers can grasp basic ideas about money.

Here are some fun activities that you can do with your kids:

• Play “store”: A fun way to role play is to set up a little store at home where they can buy and sell items like toys, books, and snacks. Put a price tag for each item and use play money to make it more realistic.
• Piggy banks: Give them a piggy bank to help them learn about saving. Encourage them to put coins in it regularly, whether it’s from allowance, gifts, or others.

Everyday activities are also perfect opportunities for teaching moments:

• Grocery shopping: Involve your kids in grocery shopping. Give them a small budget to buy something they like. This helps them understand that money is finite and choices have to be made.
• Counting change: When you pay with cash, let them help count the change. It’s a great way to practice math skills too!

2. Set up allowance

Introducing an allowance is a practical way to teach kids about saving money.

Give them a reasonable allowance and set clear expectations about what it covers. Some parents prefer a fixed amount, while others tie it to house chores. The latter is especially useful if you want to teach kids that money is earned through work.

3. Use technology and apps

Kids love tech, so why not use it to teach them about money?

• Online banking: Some banks offer kids’ accounts that parents can monitor. It’s a hands-on way for kids to learn about banking.
• Money apps: There are plenty of kid-friendly websites and apps that make learning about money fun.
  
  One particular site that we recommend is Mortgage Calculator, which offers dozens of money games for kids, including stocks and cryptocurrency. The game Stocks is a simple game that teaches kids on how to buy low, sell high. Bitcoin Merge is one of our favorite games, featuring major tokens like Bitcoin, Etherium, Tether, and more. It’s a fun way to familiarize your kids to cryptocurrencies.

4. Educational games and books

There are plenty of games and books designed to teach kids about money.

• Board Games: Games like Monopoly, The Game of Life, and Payday are fun ways to introduce financial concepts.
• Books: Look for children’s books about money, like “Money Ninja” by Mary Nhin or “Alexander, Who Used to Be Rich Last Sunday” by Judith Viorst.

5. Real-life experiences

Give your kids real-life experiences to handle money.

• Bank visits: Take them to the bank to open their own savings account. It makes saving money more tangible.
• Small business: Encourage entrepreneurial activities like lemonade stands or selling crafts. It’s a hands-on way to learn about earning, costs, and profits.
  
  Once your children are in high school, they are old enough to get a job outside of school. Have a discussion with your family and decide whether this should be across the school year or during summer breaks.

6. Be a good financial role model

Aside from learning about financial concepts and having hands-on activities, kids also learn by watching their parents. Parents with healthy habits influence their kids to have healthy money management skills too.

Here are some ways on how to be a good model for your kids:

• Discuss money openly: In some families, money talk is still taboo. But according to Robert Kiyozaki’s book “Rich Dad, Poor Dad,” poor and middle-class families avoid discussing money at the dinner table which then put their kids behind others, whereas wealthy families discuss money and business with their kids.
  
  Talk about your own financial decisions in an age-appropriate way. Share your saving goals, and how you budget.
• Live within your means: Avoid impulse buys and demonstrate the importance of thinking before buying. Explain why you might wait for a sale or compare prices. Also, make sure your spending aligns with your income — this teaches the importance of budgeting and prioritizing over wants.

7. Teach important money concepts

Teach kids about essential concepts such as saving, saving, and giving.

• Saving: Encourage them to save a portion of their money for bigger goals
• Spending: Allow them to make spending choices. Explain needs versus wants. It helps them learn decision making and the consequences of their choices.
• Giving: Teach them the importance of helping others by giving a part of their money. This can be a gift to someone, or as a donation to a charity or local shelter.

As your kids grow up, it’s also important to teach them more advanced concepts, including: budgeting, savings and investments, credit cards, loans, and taxes.

Teaching kids about money is a gift that lasts a lifetime. It’s a long game, so make sure to be consistent and patient. Remember, the goal is to make learning about money fun and engaging. By starting early, you’re setting up a good foundation for your kids that will help them enjoy a financially savvy future.