How to Teach Your Kids About Money from an Early Age

November 3, 2021

Let’s be honest – talking about money with our kids can feel awkward. But it’s one of the most important conversations we can have, and starting early can dramatically shape their future financial well-being. It's not about making them rich; it's about equipping them with the knowledge and habits they’ll need to make smart financial decisions throughout their lives.

So, where do you start? It’s surprising how much you can teach a child before they even understand the concept of a dollar. Here's a breakdown of approaches that work, broken down by age group:

Toddlers & Preschoolers (Ages 3-5): Focus: Understanding Value

Introduce the concept of “money”: Use real coins and bills to show them what they are. Let them handle them – it’s all about familiarization.
Connect actions to rewards: “If you help me set the table, you’ll get a dollar to put in your piggy bank.” This begins to link effort with reward.
Simple choices: "Do you want an apple or a banana?" – it’s a tiny exercise in making a decision with limited options.

Elementary School Kids (Ages 6-11): Focus: Allowance & Saving

Introduce an allowance: Even a small amount can be incredibly effective. Don't tie it entirely to chores – some portion should be earned.
Piggy Bank or Jar System: Encourage saving! Help them divide their allowance into three categories: Save, Spend, and Donate.
Play Store: Use toys or small items to create a ‘store’ where they can use their money. This reinforces the idea of exchange.
Start Simple Budgeting: With guidance, they can decide how much to save for a particular toy they want.

Middle School & High School (Ages 12+): Focus: More Complex Concepts

Open Conversations About Needs vs. Wants: Discuss the difference between things they need and things they want.
Bank Accounts: Consider opening a custodial account for them – a great way to teach about interest and long-term savings.
Discuss Advertising: Help them critically analyze advertisements and understand how companies try to influence spending.
Introduce More Sophisticated Budgeting: Encourage them to track their spending and create a realistic budget for larger purchases (like a phone or a bike).
Talk about Debt: (Appropriately, of course!) Explain the concept of borrowing money and the importance of paying it back.

Key Takeaway:

Teaching your kids about money is an ongoing process. Be a role model yourself – demonstrate responsible spending habits. Most importantly, create a positive and open environment where they feel comfortable asking questions and learning. Starting early establishes a strong foundation for a lifetime of financial security and smart decision-making.