Simply put, financial literacy means knowing how to make smart money decisions. It could be the key to a healthy financial future—and you can never start too early. Financial literacy for kids means exposing them to financial concepts to give them the opportunity to practice, learn, and make mistakes without any long-term consequences.
It’s relatively easy to incorporate financial literacy activities into your everyday life and adapt them to your child’s age and stage. Below are fun ways to get started teaching kids about money, organized by age group.
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1. Ages 5-7
When teaching kids at this age about money, you should keep things simple and stick to tactile, concrete concepts. For example, counting and exchanging money while playing at home.
You can also introduce the concept of buying things with the money you earn. Try showing your child how to save a small amount for a cause they care about and spend the rest on a small toy.
In your day-to-day, let your children see you use real cash so they can better understand what things cost.
2. Ages 8-12
At this age you can begin to introduce an allowance to help teach budgeting for kids. Creating a budget might sound boring to kids until they learn how it could help them save for things they really want. A small allowance given for doing chores around the house can be a good way to teach kids about money, responsibility, and accountability.
As they earn their allowance, show your child how to track their incoming money with an app. Or use a notebook where they can record how they spend it. Encourage them to set small savings goals.
While you work on your own family budget, show your kids how the bills fit into it. You can let them help you identify some of your “wants,” such as dining out. For example, if you have $100 designated for that category, they could choose to go out for ice cream every week or have one sushi dinner.
3. Ages 13-17
This age is a great time to begin preparing your teen for more financial independence. Beyond increasing their allowance for additional household chores, your teen might look for a part-time job to boost their cash flow.
With this additional cash and new independence, you’ll want to introduce your teen to a more complex budgeting formula like the 50/30/20 rule or a "spend/save/donate" approach. Help them determine their needs versus their wants. Most kids grasp the need to pay for shelter, food, clothing, and other tangible items. But they might not be aware of the need to pay for things like insurance, internet, and cell phone plans.
You should also begin teaching them how to use basic banking tools at this point. You could give your teenager a pre-loaded debit card so they can get used to using plastic or help them open a checking account and discuss how debit cards are different from credit cards. Add older teens as authorized users on your credit card account and discuss when and how it can be used.
With parental oversight, teens can also begin to use financial apps and additional banking functions. Explain to them what a credit score is and how savings accounts can accrue interest over time.
Money isn’t a game, but teaching financial literacy to kids through fun activities can make the experience memorable and engaging. The great news is that it’s never too early or too late to learn.
If you need to brush up on your own financial literacy education, read our article on budgeting.
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