Children should understand what money is, how it works, and how to earn more of it.

The first step in teaching your kids about money is becoming more open about it.

You need to be an example for your child, and to do that, you need to be willing to talk about money. Now you don’t necessarily have to break down your mortgage payment each month, but having kids understand the basics of exchanging money for a new toy is a great start for fostering healthy money habits.

The Importance of Teaching Kids About Money

Did you know the majority of schools are no longer teaching money management? Long gone are the days of learning how to balance a checkbook, avoid credit card debt, write a check, and pay bills. Parents now have to teach their kids about money, and knowing where to start can be a bit tough. But we must do so and do it early. Honestly, it’s never too early to talk about money with our kids. We need to talk about and show them how money works, how to save, how to manage money and teach them other good habits with their finances. This will help them have a healthier relationship with their personal finances and have a more stable future.

Explaining Money to Kids

Teaching kids about money is actually pretty easy — no matter their age. You may not know where to start, so we’re breaking down some basic money strategies your kids can be learning right now. Under each age group, we have also included an age-appropriate game or activity that you can do with your child to increase their financial literacy and understanding.

How to Teach Kids About Money

2-3 Years Old

When your toddler is still pretty young, you can spend this time introducing them to money. You may be thinking that this is too complex for a toddler to grasp, but there are simple things that you can do to get the conversation started.

4-6 Years Old

Have them start helping at the grocery store. Teach them to read price labels, hand the cash to the cashier to purchase your items, and swipe your credit card. Use this time to teach them how to pay for something. Explain what you’re doing and why you’re doing it so they can start to get an idea of payment.

7-9 Years Old

They are now at the age when they can understand how bank accounts work. Make a trip to the bank and have your child open a savings account. You will have to sign for it, but have them go through the process. Teach them how to deposit the money from their piggy bank into their savings account by filling out a deposit slip.

10-12 Years Old

A lot of times, kids believe they just have to have a shiny new toy or game. However, when they reach age 10, it’s good to teach them how to spend their money on what they want. They can learn how to weigh the pros and cons of impulse shopping and save for something bigger later down the road.

13-15 Years Old

Teach them how to create a budget for themselves. More than likely, they don’t necessarily need a budget right now, but they will shortly—especially as they’re learning to drive. You can easily create a simple budget of what they could earn by following the chores and calculating their savings each week.

Also, show them your family budget. Teach them what it looks like and how you manage to make sure to buy their favorite snacks each week, their new shoes, and so on. Make it a learning experience to teach them what a real budget looks like.

Now is also a good time to teach your child how to balance a checkbook, reconcile their spending from the bank statement, and write a check. These skills are no longer taught in most schools and are vital to being an adult. You can print off blank check templates online and have your child practice writing checks then balancing their checkbook. You should also begin to teach your teen the basics of credit cards.

Games & Activities for Teaching Kids About Money:

2-3 Years Old:

Layout a penny, nickel, dime, quarter, and a dollar bill. Let them play with them, but you will have to keep a close eye on them to prevent any swallowing! Teach them their names and talk about money.

4-6 Years Old:

Play grocery store at home where you pretend to shop and have to exchange money for imaginary items. Create a price for each item and use only pennies. Now your little one will have to read the price label, tell you how much the item costs, and count the money.

Now is also a great age to introduce weekly chores. However, instead of a weekly allowance, they have a chore list, and each chore is worth a specific amount of money. Once they complete a chore, they mark it on their list. At the end of the week, they help you add up how much money they’ve earned. Of course, these jobs need to be age-appropriate, but they can always be changed or added to. They can then add their earnings in their piggy bank to learn delayed gratification and how to save money.

7-9 Years Old:

Using your chores from earlier, now you can have your little one actually divide their weekly earnings into three categories: save 10%, give 10%, and spend the rest. Each month go to the local bank with them to deposit their money from their weekly savings.

10-12 Years Old:

You can sit down and create a goal for them — if they earn X dollars each week. Save it, and after so many weeks, they can afford a new toy or something they want. Create a savings jar (apart from their savings account) to illustrate how close they are to reaching their goal. They will visually see their hard work paying off and learn how to control the tempting impulse buy.

13-15 Years Old:

A great way to teach the idea of a budget, checkbook, and managing their money is to play house. Give them a starting pretend budget of $5,000 and an empty checkbook and register. Then they have to fill their house from an online store or catalog. They have to purchase furniture for the entire home, clothes, food, and a car. This simple game will teach them how to manage their money to have enough to go around and take care of all their tasks.

Teaching children about money does not have to be complicated or stressful. Simply start introducing money to your little ones from an early age. As they grow, then you can go more in-depth with what money is and how it works. The world of money management is much different today than 20 years ago, 10 years ago, and even five years ago. Technology has made managing your finances completely different, and that’s okay. We have to teach our children the basics so they can be productive and independent later on in life.