When my children were just toddlers, I made a commitment to raise them to be economically independent and empowered to make their own financial decisions. I wanted them to become financially secure and self-reliant. In order to do this, I focused on prioritizing their financial education, as financial literacy for kids is a taught skill.
Money knowledge is valuable, so let's talk about why teaching kids financial literacy is important, and how to do it effectively!
Why teaching kids financial literacy is important
Kids grow up quickly, and soon, they'll be responsible for many financial decisions. But a lot of young adults and college students don't know much about money.
It's essential that they begin to learn important financial concepts, like how to save and budget, when they're young. It will give them many years of practice before their choices impact their future in a significant way.
If kids are allowed to learn with money in these early stages, they'll be much better equipped to make good choices later on.
Kids' financial literacy basics
Before you learn how to teach financial literacy for children, what are the most important money management skills they need to know? Teach these basic financial skills first. It's a good idea for kids to learn about:
Earning an income
Knowing what to do with money once you have it is important. But teaching kids about earning money is an essential step. They need to understand how to earn, starting with small kid-friendly jobs, such as mowing lawns or babysitting, and then moving into regular jobs as teens.
Once kids get some money, they need to know how to organize it. Budgeting will help your kids understand financial goals, math skills, expenses, and financial responsibilities. It creates an understanding that money should be used to take care of their expenses, as well as used for fun.
Saving is a big part of personal finance, and learning this early on can only help. There are plenty of ways to teach savings, starting with helping your kids to set aside some money each time they earn. When they're very young, a piggy bank may work, but a savings account will be appropriate as they get older.
Good money overall habits
Teach your children good financial habits. It includes making wise spending decisions, goal-setting, and opening a bank account. Knowing how much money they have and having a plan for it will help them create good habits early.
7 impactful ways to teach financial literacy for kids
Speaking of good money habits, here are 7 impactful ways to teach financial literacy for kids. It will in turn help your young children become financially savvy adults:
1. Teach your kids independence and responsibility through chores
Household tasks played an important role in teaching my kids independence and responsibility even though completing chores wasn’t linked to their allowance.
My kids were responsible for making their bed, keeping their bedroom clean, setting the dinner table, and putting their laundry away at the end of the night. Chores teach kids what it is to work hard and the value that comes from it. Doing household tasks helps your kids understand what it takes to make money.
While they often grumbled about the work, they later shared their thanks for giving them the skills necessary to live on their own.
2. Open a saving account for your child and take them through the process
What better way to help kids financial literacy than to have them manage their own money? I gave my kids an allowance starting at age five. I committed to paying it weekly through college as long as they invested half of it into their personal savings accounts.
By showing your children how you open their accounts, how to make deposits, and how to track their savings, you can impart valuable financial literacy for kids.
Parents can make a household rule that savings stay untouched until it affords its owner a valuable opportunity. Savings includes money from allowance and other income including gifts. In turn, your kids will one day be amazed at the doors that their savings will open for them.
3. Educate your children about finance concepts
Every day at the Women’s Business Development Council, I witness the women empowerment that education offers. Simply put, knowledge is power, and it will give your children the opportunity to make choices and follow dreams. So show your kids that learning about money is an important part of them having a successful future.
Put education at the top of your parenting priorities by setting expectations and celebrating educational success. Children learn by example and observation.
Set up a college savings account as soon as possible, as this is part of financial literacy for children. Research scholarships and take advantage of low-cost after-school enrichment and tutoring programs. And involve your children in the process, as it will allow them to build their financial confidence.
4. Leverage fun resources to impart financial literacy for kids
Create weekly money dates or have weekly standing money conversations. You can even have them pursue some great business ideas for kids!
The whole idea is to make talking about and dealing with money a comfortable experience for your children. Need ideas? Check out our free course on teaching your kids healthy money habits. And here are some financial literacy games for kids.
Financial literacy activities for elementary students
There are plenty of interesting ways to teach financial literacy for children. It doesn't have to be boring! Try these financial literacy games for kids, as well as other activities.
There are many options for teaching elementary-aged kids about money. Check out these suggestions.
Old-fashioned board games: Games that you grew up with like Monopoly, Yahtzee, and Life can teach some solid financial practices. While your kids might have fun playing a game with you, you can use it as an opportunity to explain the basic concepts of investing and choosing what to spend money on.
Money board games are great financial literacy activities for elementary students. And some simpler board games will even help with financial literacy for kindergarten-aged kids.
Money Bags board game: The Money Bags game can teach some serious skills when it comes to money. It may help with math trouble, and it's a good way to learn about earning money using coins and cash.
Give it a try as a family to help your kids get more knowledge about income and cash. It's one of the best financial literacy activities for elementary students!
Let them help with the budget: This isn't one of the financial literacy games for kids, but it is an important activity. While budgeting may not sound like a ton of fun upfront, your kids will likely appreciate the inclusion in something as important as the monthly budget.
They don't need to make sure the bills are paid or make serious decisions about the money. But showing them how the budget works and involving them is a fun activity that can help them get real-world experience.
Financial literacy for kindergarten kids
Kindergarten is a good time to begin learning basic money principles. Try these activities.
Saving up: Show your kids the power of saving up their money for something they really want. Help them decide on a toy or game that they want to buy, and then aid them in saving up their money, reminding them that they can eventually purchase the item.
When they are able to buy it, they'll realize how much saving money can help them. They'll have positive associations with saving money, encouraging this as a skill later. It's a fantastic way to teach financial literacy for kindergarten kids.
U.S. Mint games: Teach financial literacy for kindergarten with computer games. The U.S. Mint has a bunch of interactive games to teach children about money.
Your kids can play memory and counting games. They might need your help, but it's a fun activity to do together! And financial literacy games for kids can really help them learn the basics of money.
5. Teach your children the power of investing
Starting early will help them reap the benefits of compounding, appreciation, dividends, and more on their investments.
The best way to learn something is often by experience, so invest a small amount of money for your children. $100 is a good place to start. Then show them how their money grows and explain what will happen if they continue to add to it and keep investing.
As they get older, let them add to this amount from their own savings. Then they'll see how much money they can make!
One of the best investing and financial literacy activities for elementary students starts by giving your kids some tokens or coins. Give them a small amount and explain that when they invest, they get more tokens over time. Illustrate this by adding to their amount, to explain compound interest.
As they get older, you can also explain the ups and downs of investing by taking away some coins and then adding more. You can be creative with it; the main point is to show them how investing works using something tangible.
6. Challenge gender stereotypes
When it comes to financial literacy for kids, it's important that we don't allow them to fall into unsavory stereotypes. Girls may sometimes be encouraged to practice nurturing capabilities rather than earning potential. And there is still a problem with women making less money for various reasons.
However, who said girls don't have incredible earning potential? Help girls pursue their ambitions and be unabashed about their desire to make money.
Teach them to be in control and effect change by pursuing causes and goals they believe in. Whether that's class president or joining the science club, help them to see what they're capable of.
Teaching them this will help them understand that they can care for others with their own wealth. They can use it to invest in their families, communities, and causes they support.
7. Leverage your village to raise financially savvy children
The last strategy is for you. Raising children is hard work and should not be done alone. Create a reliable support system to help you achieve the goals you have for teaching your children.
A support system should include mentors and other successful people in your life that can impart wise life teachings and financial literacy for children.
My village was a lovingly cobbled-together mix of savvy female friends who shared their professional acumen (to help me start a business to support my family and others).
They offered parenting advice and gave me access to their nannies and babysitters to care for my kids while I worked. My children benefited from their support and perspectives as much as I did.
Economic self-sufficiency is one of the most important and perpetuating lessons you can teach your children. With education and know-how, broader perspectives, and the support of others, your children will be able to explore their dreams. They'll get to know their world, and help to forge change that will empower and inspire others to do the same.
Financial literacy for kids is important!
My children's financial savviness and their childhood savings accounts eventually grew to offer opportunities they could not have otherwise afforded. For instance, the ability to study abroad, go on extensive international travel and have a year of income while holding out for a dream job in a new city.
Their confidence empowers them to make good choices because their personal savings served as a source of independence. Don't underestimate the change that financial literacy for kids can have in the world.