Early Financial Literacy for Kids

Although parents often don’t like thinking about it, one of the main goals in raising children is teaching them to be independent, so that they can, one day, be successful and thrive in the world without their caregivers. A major aspect of being a successful, independent adult is learning how to manage money responsibly. When parents begin introducing concepts about financial literacy for kids, children grow up in an environment that naturally fosters responsible money management, imparting skills that children will use for life. 

Why Early Financial Literacy Is Important for Kids

Early financial literacy for kids is well worth your time and effort. In addition to fostering future independence, teaching children financial literacy also helps them develop healthy long-term money habits, which help prevent them from future money problems (and all of the stress, anxiety, and insecurity that can go along with money problems). 

Early financial literacy for kids helps to prevent future debt, as children begin to understand the concept of earning money, its true value, and what it represents (time and energy spent working hard to earn it). This helps prevent reckless spending, with children thinking more carefully about what the $20 they want to spend on video game credits is actually worth. As a result, they develop better spending habits that are more likely to support future financial stability. 

Financial literacy builds confidence and helps children understand how money works, empowering them to make smarter financial decisions. 

What Concepts to Teach by Age Group

Financial literacy touches on a lot of concepts: money and math, earning, saving, spending, giving, budgeting, and investing. It’s important to teach children the concepts that are age and developmentally appropriate to ensure they don’t get overwhelmed by overly complex ideas before they’ve developed a strong foundation of the basics. 

Ages Three to Five

Preschool children can begin learning foundational concepts like coin recognition, counting, paying bills, and understanding that money is earned by working. They can also practice delayed gratification to learn to wait for the things they want while distinguishing between wants (essential items) and needs (desires). 

Ages Six to 10

When children have reached “the age of knowledge,” they can begin applying the concepts they already know. They can learn money management with a piggy bank for saving and learning basic addition and subtraction for tracking their balance. They can learn to set money-saving goals and how to comparison shop (prices and quality) to find the best values. Additionally, this is a good time to introduce the concept of financial giving, as children are strengthening their empathy muscles. 

Ages 11 to 13

During the tweens, children can refine their knowledge with more complex concepts, such as budgeting (keeping track of their savings goals and spending) and banking (learning to use a savings and/or checking account). With a bank account, they can also learn about compounding interest to understand how a savings account grows over time. This can better help them understand the value of holding onto their money and the opportunity cost of choosing to spend it. During middle school, children might also become more interested in causes and choose to set aside some of their money for something about which they care deeply. Parents should help guide these decisions. 

Ages 14 to 18

Through the teen years, children can gradually become increasingly independent. Perhaps, they will get a summer job that will help them learn the power and potential of a regular paycheck (in addition to the realities of tax and social security deductions). During these years, children can be introduced to the concept of credit scores, credit cards, loans, and debt management, as well as responsible borrowing. They may even begin investing (or learning about investing) in savings, compound interest accounts, or stocks. 

Young Adults

Children should enter young adulthood with a strong grasp on personal financial management, such as budgeting, wealth building, and managing financial risk. They should understand guidelines like the 50/30/20 (needs, wants, savings) rule and the importance of things like an emergency savings fund and insurance to safeguard assets. 

Recognizing Everyday Teaching Moments

Money and financial management concepts are baked into our everyday lives, so there are plenty of teaching moments you can use. 

  • Everyday Shopping and Spending
    • Compare items and prices at the grocery store.
    • Let your toddler count your change.
    • Implement a 24-hour or 30-day waiting rule when a child wants something.
    • Explain the difference between paying with cash or card.
    • Play a “needs vs. wants” scavenger hunt.
  • Banking and Budgeting
    • Open a custodial account for your child to teach them about saving and interest tracking. 
    • Give your child a pre-loaded debit card to teach them money tracking and management. 
    • Involve your child in paying bills, explaining what they mean and how they are paid.
    • Use an allowance to teach your child about earning, budgeting, saving, and spending. 
  • Long-Term Planning
    • Discuss savings goals for larger items and teach delayed gratification.
    • Introduce the concept of working to earn money. 
    • Talk with your children about choosing a charity to make a donation and teach generosity. 

Fun Financial Literacy Tools and Apps for Kids

When in doubt, turn to children’s books about money or the countless financial literacy resources for kids that are available online from trustworthy sources, such as:

Investing in Your Child’s Health

In addition to teaching your child about financial literacy, it’s also important that they understand the importance of investing in their health and wellness with regular wellness visits, preventative care, a good diet, exercise, and an overall well-balanced life. To learn more about the importance of wellness care for your child, we welcome you to contact Children’s Wellness Center and request an appointment for your child today.

Scroll to Top