7 Tips for Teaching Kids About Financial Literacy

Working for over a decade as a financial planner here in St. Louis has always opened my eyes to the importance of financial literacy, but this topic was taken to new heights when I had my first child. With my son approaching his fourth birthday this spring, I know firsthand the significance of introducing a set of money-related values as soon as possible. Building financial literacy early forms the foundation for long-term success and happiness.

In this article, I’ll share seven practical tips for kids of all ages. These tips aim to initiate conversations about money and encourage children to make thoughtful decisions about their spending habits. Join me as we explore these strategies to empower kids with financial awareness.

1. Start early and embrace teachable moments

Early conversations about money matter. Just like we remind kids to eat vegetables and brush their teeth, teaching finances sets the stage for valuable life skills. Starting young helps kids develop good money habits, understand money’s value, and learn essential concepts like needs versus wants. Even sharing your own financial decisions can spark valuable discussions.

Though young kids may not be facing big money choices yet, they will eventually. Giving them the right financial tools and mindset will help them prepare for expenses like paying for college, purchasing a home, managing credit cards responsibly, and steering clear of debt.

Kids are never too young to talk about money. The earlier you start, the more natural those conversations will be when they grow up.

2. Set good examples

Modeling responsible financial behavior can be one of the most effective ways to teach children about money.

• Use cash 
  Cash provides visual lessons for children on financial boundaries, illustrating that money is finite and once spent, it’s gone for good.
• Price compare 
  When you take your kids to the grocery store next time, show them the different price choices for specific items, teach them how to use coupons, and stress the significance of prioritizing needs over wants.
• Use practical examples 
  When you pay bills, for example, explain how they’re paid and why they’re necessary.
• Budget together 
  Include your children in family budgeting by setting goals for saving and spending.
  Showing your kids how you achieve your goals through budgeting, saving, and investing will give them confidence that they can do the same.

3. Take advantage of teachable moments with “money talks”

Money is an essential tool that everyone relies on, and when used wisely, it can bring joy, satisfaction, and lasting memories. Since it’s involved in most aspects of life, it’s important not to treat it as a mysterious concept.

When you’re driving in a car or on a walk, try asking basic questions like:

• What is money and where have you seen it before?
• What is money used for?
• How can we earn it?
• What would you like to buy if you had money?
• How do we decide if something is expensive or inexpensive?

If money conversations rarely happen, welcome the everyday ‘money moments.’ Share with your kids how you find great prices while shopping and use coupons to save more. Teach that money saved can be used for something enjoyable down the road. Encourage them to use terms like ‘earn,’ ‘save,’ ‘spend,’ ‘want,’ and ‘need.’

Make “money talks’ part of daily chats– discuss the perks, challenges, and obstacles. And most importantly, discuss these topics when kids show interest; it’ll pave the way for smoother conversation when concepts become more complex.

4. Use effective language

Our kids observe and mimic our behavior, even when we aren’t actively teaching them about money. Be mindful of how you discuss money with them and be aware of the emotions behind your words. Ways in which we talk about money shape perspectives that extend far beyond that moment.

Instead of saying “We can’t afford that”, try, “That’s not how we choose to spend our money. We want to save up for something we’ll truly appreciate later.” Teaching our kids to understand that money goes away is important and that thoughtful money decisions can lead to desired outcomes. 

Although money discussions can be challenging, the words we say can influence our children’s attitudes toward money in the future.

5. Discuss ways to earn money and save towards a goal

Many parents aren’t sure of how to approach children about the topic of money– simply choosing to avoid the topic altogether. Nevertheless, teaching financial literacy doesn’t have to be intimidating—it can be enjoyable too!

Together, brainstorm creative ways to earn money to put towards a goal.

• Do chores or odd jobs around the neighborhood
• Run a lemonade stand in the summer or a hot cocoa stand in the winter
• Make and sell crafts
• Host a garage sale
• Recycle aluminum cans, glass bottles, or plastic for cash
• Have a car wash

Encouraging your child to start a small business allows them to learn about money, manage it, and discover the rewards of problem-solving, hard work, and communication.

6. Help them budget with money jars

We’ve all had the classic pink piggy bank growing up and though it was fun to fill, you rarely saw how much you were saving.

Instead of a piggy bank, give your child a clear jar. This way, they can see their money grow when they add to it, or shrink if they choose to buy something. When they go to the store to purchase a toy, have them bring their jar and then help them pull money to give to the cashier.

For older children, give them three clear jars, each representing a different fund: spending, saving, and giving. With your help, your child can divide their money into the designated jars. By learning to budget their money, children can actively plan for their current and future wants.

Exposing kids to coins and dollar bills and teaching through visuals will enhance their understanding of money and its value.

7. Discuss needs versus wants

Needs are things that people require to survive– food, water, clothing, and shelter. Wants are nice to have but not absolutely necessary– toys, expensive shoes, designer clothes, and the latest technology.

One of the greatest gifts you can give your child is the ability to distinguish the difference. Every activity, from grocery shopping to watching a movie or grabbing a drink at a café, involves spending money, and once it’s spent, it’s gone.

Point out the effort required to earn money and how quickly it can disappear if you’re not careful. Encourage them to determine if a purchase is truly necessary or an impulsive buy that might lead to regret later on.

In conclusion

As parents, our objective is to nurture independent children who can thrive on their own. Offering them tools to manage finances is crucial. No matter your child’s age, it’s never too late to lay the groundwork for their future financial independence.

Toberman Becker Wealth is a fee-only, independent fiduciary firm based out of St. Louis. Whether starting to invest for retirement in your 50s or actively planning for retirement in your 60s, we help people nearing a transition build a resilient retirement plan. We operate in the best interests of our clients, always, and our top priority is to help you live comfortably now, without sacrificing your financial future later.

If you’re looking for more ideas to improve your children’s financial literacy or have some strategies you’d like to share, feel free to give us a call.