(Eleven-minute read time)

Developing strong financial skills is important, and like anything in life, it requires practice. Introducing financial concepts to children in an age-appropriate way is key to helping them develop an understanding of the value of money, and the structure of our financial systems.

Don’t wait for them to pick up bad habits, or misconceptions – teaching children about money when they’re young is a great way to instill good habits from the very start and working with a blank slate is much easier than trying to unlearn bad habits. Introduce financial concepts early, so that those kids will one day grow into financially literate adults.

Determine Their Current Financial Understanding

To begin, try to determine you starting point. Money is a huge part of life, media, and relationships, and kids have an uncanny ability to absorb information from the world around them – albeit, not always with a completely accurate grasp of what they’ve seen or heard. 

In some way or another, your kids have developed some basic impression of what money is, and the role it plays in life. Use that impression as a basis for your conversations and lessons to follow, whether you’re reinforcing that impression or correcting it. 

Your Child’s Relationship with Money

Just like they’ve formed impressions of what money is, they’ve also absorbed information regarding how it works. This understanding will vary depending on their age and life experiences. Ask yourself, in what ways have they interacted with money in the past?

Kids often get money from the tooth fairy, or from Grandma on their birthday. Maybe they’ve been bartering and trading snacks with their friends at school or making silly bets with their friends on the playground. Determine how they view money and trade and take that into account as you set out to teach them strong financial habits.

Money & the Media

Don’t forget to consider the role that media plays, and how it might have skewed your children’s perspective on money. News media, for example, tends to take a very doom and gloom approach to money. If your children have listened to the news, they’ve probably heard talk about the high cost of living, stock market volatility, rising interest rates, and so on. While they won’t understand the complexities of those concepts, they will understand that money is associated with risk, fear, and negative feelings.

Conversely, the mood surrounding money is very different in the worlds of pop culture, social media, and the music industry. In those forms of media, money is very often associated with desirable, luxurious lifestyles and big spending. Again, your children may not understand the inner workings of money and transactions, but they will understand that money in this context is associated with recklessness and success.

Sit down and have a discussion with your children about the impressions they may have formed around money through their own external sources and have an open conversation about which aspects are true and which are incorrect.

Teach Them Continually

Introduce financial concepts to children gradually and allow them to slowly learn about money as they continue to learn about the world around them. Teach using lessons that are appropriate for their age, both in complexity and in the manner they’re delivered – it's important to keep these discussions engaging. 

Discussions around money will look differently with young children, preteens, and adolescents. Let’s take a look at steps that you can take within each group in more detail. 

Young Children

Once your children have begun school and are introduced to basic math, you can then introduce money games when you practice with them at home. Teach them to identify coins, and practice counting them together.

Getting your child a piggy bank is a helpful technique to help them understand the value of saving, and develop a sense of responsibility around handling money. You can even create a visual record of the money in the piggy bank, which will allow them to watch their money grow as they continue to save.

Include your children in the payment process when you go to the store together. Bring cash that you can use to pay, and guide allow your child to interact with the cashier and hand over the total. Kids often love the feeling of responsibility, and simple things like guiding them through a real-life payment process helps them to become comfortable and familiar with monetary transactions, and it gives them a starting point to begin to understand how much various household items cost.

Preteens

By the time children reach the preteen stage they may have begun to collect their own money, through an allowance or odd jobs. Encourage open discussions around money and guide them to allocate their funds properly and save up for purchases they really want.

Remember to keep these discussions around money contemporary, and relevant to your child’s reality. Avoid making the mistake of comparing financial concepts or the state of the economy to how things were don’t when you were their age, because the truth is, it’s a different world today. 

Consider making use of apps and other engaging technology to reinforce your lessons and add a modern touch. You can also use board games as a means to open up financial discussions if your children enjoy those games. Monopoly and Settlers of Catan are both fantastic conversation starters for all things money-related, not to mention fun bonding opportunities for the whole family.

The preteen stage is a good point to introduce children to banking institutions, too. Bring your kids to the bank and open an account in their name. Guide and support them as they interact with the teller and ensure that they understand the terms and conditions (to a reasonable degree). Encourage your children to make deposits on a regular basis, especially if they are saving up for an item they really want. Teach them how to review monthly statements and log the information in a financial app, and discuss which aspects are the most important, and why. This is a great opportunity to introduce the concept of building a financial history, and the power of a good credit score.

Adolescents

Once your children have reached adolescence, they’ve likely expressed more interest in earning money for themselves. Perhaps they’ve taken on babysitting gigs, paper routes, or part-time jobs. This is the first time in their lives that they’ve experienced actively working in exchange for money, and it’s the first time that financial concepts really become personal.

This is a good stage to introduce credit cards and teach them how to access and understand their statements, plus how and when to pay their bills. Make sure they understand how credit cards work conceptually, and the importance of using credit mindfully. A credit card is an exciting concept for a child this age – steer them away from common credit card mishaps, and make sure they understand the consequences of abusing a credit card. 

Once your child begins working and making an income, use that opportunity to discuss taxes and how they work. Teach them how to read their pay slips, and come tax season, take them through their tax return step-by-step.

Adolescence is also a good time to introduce budgeting. Teens are famous for wasting money on frivolous things, and chances are, yours are no exception. The important thing is that they learn how to account for certain spending, and how to keep things in check so that they can purchase the things they want in a responsible way. Here’s a quick guide to help as you teach your teen how to make a budget. 

Adopt an Open-Door Policy

Finances are tricky for people of any age, and let’s face it, kids are hard-headed. They’re all but guaranteed to make mistakes from time to time, and that’s okay. What’s important is that they learn from those mistakes and develop healthy overall relationship with money and spending.

As they continue to grow older, encourage them to pursue financial literacy courses in school or online. Make sure they understand that they can ask questions about money any time, and you’ll answer them to the best of your ability. If you don’t know the answer right away, you can find out together.

For more tips and tricks surrounding teaching kids about money, please book a call to discuss with us today. We’re happy to help you and your family on the path to financial literacy.

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