6 Tips to Teaching your Young Children about Financial Literacy

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Money is kind of that giant invisible floating idea that hangs over kids heads when they ask for something but you can’t really afford it! How many times have you told your kids “No we can’t afford it!“? I prefer for my kids to not just hear  – “we can’t afford it”  – but give them a more practical realistic view of money and the various options one has when choosing to spend or save it.

Sometimes we truly can afford it but it’s just easier to say we can’t. Sometimes it’s more of a “we don’t want to afford it” or “we don’t buy everything we want” lesson than a “we can’t afford it” lesson! One thing that my mom was really good about teaching us as we were growing up was about money.

tips to teach kids money

My kids each received a piggy bank from us when they were first born. As we had random spare change laying around (or gifts of money for them) we put it in each of their piggy banks. Once they turned 3 or 4 we really introduced the concept of money, what it was used for, WHY we save it, and when it’s OK to spend it. My children (ages 6 and 4) each know that on their 5th birthday we will take their piggy bank that they’ve been saving and open up a savings account with it.

Every time they save $5 or more I will take them to the bank if they would like to deposit money into their accounts. It’s helpful (but of course not necessary) if your local bank has some sort of kid’s program in place to start out their financial exploration into savings. Here are some tips on how to introduce savings and money to your younger children.

Money Confident Kids Magazine & Financial Literacy Resources

  1.  Have a piggy bank AND a savings account! This offers your kids the ability to save their money both at home and to deposit it into the bank.
  2. Give them the chance to use their money! Teach your children to always save some money that they receive, but also allow them the opportunity if they want to spend it. My kids know automatically that some money always goes to savings. Always. Then I phrase my offer so that my kids know that they have the choice to spend some of their extra money AND that they also have the option to save all of the money. If they want to save up for a bigger item consider purchasing a cheap dollar store bank just for that particular item they are saving for in addition to their savings.
  3. Give them CASH. By this I mean do NOT pay for their items they’ve splurged on with your credit card and just take their cash. Chances are they are too young to fully grasp the concept of “virtual” banking and the full experience of using cash is the best! There will be a time later on for balancing accounts and working with credit/debit cards. My kids know they need to plan on a little extra money for taxes and they have their cash in hand when they go to buy something. (If your kids are younger you may want to cover the tax money for them until they are old enough to understand it.) I let them make the entire transaction themselves and only offer assistance if they are stuck in counting coins.
  4. Teach them to give their money away. Ok, that sounds a little more extreme when you say it that way, but buying things for other people or donating to those in need / charities is a fantastic thing to instill into a young child.
  5. Talk about marketing and advertisement. You don’t have to go into long detail about this but explain to kids that companies make money by US buying their products. Show them toy advertisements and grocery ads and explain that a lot of people WANT things when they SEE it. Make it relative to them! “If you see a toy in an ad that looks cool you want even if you don’t need it”!
  6. Let them shop at the grocery store. Teach your kids basic math by giving them a few dollars and a budget at the grocery store! (or Dollar Tree!) The Dollar Tree is a great place to start with the youngest of kids as they begin to understand basic math concepts. Move up to more complicated math by adding in produce, bottles of juice, bricks of cheese, etc.


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