Financial Lessons to Teach Children at Every Age

There are plenty of financial skills children can learn and practice before they enter the world as young adults. To set your children up for financial success, let’s explore the lessons you can start sharing as early as three years old.

3- to 5-year-olds

This young age range presents a great opportunity to begin teaching long-term decision-making skills. Here are some examples of what that could look like at home.

The importance of waiting: Before going into the store, have a brief conversation with your child around what you’re shopping for. Later, when your child has inevitably fallen in love with something they want, you can remind them of the plan and suggest taking a picture or adding it to a “wish-list” for the future. This helps children learn that it’s okay to want something and still wait for it, and to have the patience to make thoughtful choices as they grow.

Planning and choosing activities: When your kids want to do several fun activities, help them practice choosing. When your kids ask to go out to dinner and see a movie, let them know they can choose one of the two. Giving them simple choices helps them feel included in planning while teaching them that we can’t always do everything. It also builds decision-making and problem-solving skills.

Basic money identification: Start with the basics and identify the bills and coins we use as currency. Show your children what you can buy with certain amounts. This can be as simple as sharing about how many dollars something costs when you’re paying for it, such as a snack or a toy. It’s important to keep things visual and tangible. Using physical money can be a helpful tool for gaining understanding.

6- to 9-year-olds

In this age group, children are often ready to take a more active role in learning about money. They can begin practicing earning money, saving money for specific things, as well as shopping limitations. Let’s look at some ways you can share financial education with this age group.

Think out loud: While we don’t want to share all the stress adults can face, letting your kids be involved in observing a large purchase you’re planning for or making a grocery list can be a great way for them to be exposed to real-life money management. I’ve always been a big believer that parenting is leading by example, and this is an excellent way to do just that. Children are sponges and often mimic the behaviors of trusted adults. While they can have many influences around money, research shows the most impactful are parents, guardians, grandparents, or whoever is their primary caregiver.

Open a bank account: Some parents open a savings account for children at birth, but if your child doesn’t have one yet by third or fifth grade, it can be a great starting point. At these ages, they can help check their bank statement with you and watch their money grow in their account.

Beginning to budget: When money is earned from allowance or given for a birthday or holiday, you can set an expectation that some goes into savings and some can go towards spending. Think of it as a simplified version of the 50/30/20 rule, where 20% goes to savings, 30% can be used for fun, and 50% can be used to save for something they want. The earlier we start building these kinds of habits, the more likely we’ll revert to it later in life.

10- to 12-year-olds

This is a great time to start sharing information out loud about balancing your budget, savings goals, and planning in advance. If you don’t want to share personal information for any reason, you can read digestible financial books together or have conversations around average costs for households like yours.

Goal Setting: When I teach around the state in high schools and colleges, the most common theme I hear about is the struggle of time management or setting goals. I like to say it’s just like making time to go to the gym for our health: we must build a system into our lives and be consistent with it. Reminding your kids to plan and set goals for themselves financially introduces time management into their lives in a very tangible way.

Credit and borrowing money: This is a prime age to introduce the basic concept of credit and borrowing money. Explaining the basics of credit is important as they grow older and start to use credit cards. To frame this topic in a relatable way, it can be helpful to compare our credit reports and scores to school report cards. The difference is, of course, that report cards eventually go away, but your credit score and report stick with you for life.

Teenagers and young adults

By this age, your kids could be securing their first part-time jobs and earning money of their own. While it’s important to remember that they’ll have to learn from their own mistakes, we can set some expectations for how they spend and save while we still have some influence in their lives.

Bank account options: This is a great time to have conversations around the purpose of a checking account, what a savings account is for, what a money market account is, and so on. If your child doesn’t already know, it’s helpful to explain how they can earn interest by letting money sit in savings. Basic account structures and the options available to them are all helpful information to know as they begin earning their own money.

Checking balances before spending: When they get their first checking account, advise that they always check their online bank balance before swiping a debit card. This simple habit-forming ritual can save a lot of mistakes and overdraft fees down the road. If they stick with it, they’ll have better spending awareness as they become more independent as adults.

Taxes and other “real life” financial education: While some school districts do offer personal finance classes in high school, there can be a “real life” element missing from textbook teachings. Have a chat with your child about taxes and how they work. Sharing other real life financial realities, such as what you pay to have electricity, cell phone bills, grocery bills, car insurance, etc., is a great way to show how much life can really cost.

Creating a budget: You can help your child create their own budget so when they have more bills down the road, they will have a strong foundation of how to manage money with a system to track their expenses. Emphasize that budgets are lifelong commitments and allow us to be much more aware and successful in reaching financial goals.

Encouraging healthy money habits: There can be a lot of habits formed at this age. Remind your child that they are the only person who can control how successful they are with money over time and we can do things differently to change our financial situation. Suggest making food from scratch at home, planning out a grocery list every week or two, or buying in bulk.

Fraud protection: While we don’t want to create an undue amount of fear around fraud and finances, it’s important in this stage to be aware of ID theft, fraud, and protecting passwords and our personal information. Encourage proactive protection: memorizing social security numbers, never sharing PIN numbers on our cards, shredding documents we get in the mail, and other general fraud protection.

Final Thoughts

At every age level, there are plenty of opportunities to teach your child digestible and relatable lessons about money. Starting with the basics at an early age can have an immense impact on their future understanding and relationship with finances. We all want our child to grow up to become a fiscally responsible adult with a healthy relationship with money, and that all starts in these developing years where we as parents can help facilitate responsible money practices.