Parents know very well that money doesn’t grow on trees.
But kids? They need to be reminded. A lot.
Michelle Schroeder-Gardner
Most want the best of everything — toys, shoes, clothing, phones — and, more often than not, Mom and Dad are expected to foot the bill. It’s an endless cycle that could lead to spoiled children and penniless parents. Thankfully, financial experts have come up with some creative ways to teach kids as young as 3 about the value of a dollar.
By combining financial wisdom with other important life lessons through childhood, chances are high that sons and daughters will be ready to make their own ends meet once they’re out on their own.
“It’s important to learn about money before adulthood so that your child isn’t forced to learn everything at once,” says Michelle Schroeder-Gardner, who makes a six-figure income from her financial lifestyle blog “Making Sense of Cents.” “Instead, they can learn about money early and build good habits for when they are older. This will be easier to do throughout childhood instead of trying to teach them everything when they are in their late teens.”
Preschoolers
Children younger than 5 are smarter than you think.
This is the age when they like to mirror their parents, and it’s also when playing is encouraged, which is a good way to sneak in some lessons about money. A study conducted by the University of Cambridge has shown that by age 7, children have already formed money habits. But how are you supposed to explain finance to little ones?
Schroeder-Gardner says to do what toddlers do best — play. Set up an imaginary store and use coins to “buy” items. After store time is over, talk about the differences between the quarters, nickels, dimes and pennies, such as the size and the names. Trace each coin, color the shapes and then have your child match each coin with each shape.
Even her 1-year-old daughter pays attention to money and knows when it’s time to pay for something, Schroeder-Gardner, 34, adds.
“She will grab for my purse when we are checking out at the grocery store,” she says, adding, “I like to talk about what I’m doing with her because babies learn that way.”
This age is a great time to start building knowledge of money because it is when most children begin learning how to count. This age is also when they learn by listening and watching others, which means the more you talk about money, the more they’ll learn.
Talk to them, as Schroeder-Gardner says above, and remind them daily that you need money to buy things, and you earn money by working. Tie it in with the different types of jobs they may be familiar with, like a teacher, police officer or restaurant server.
Also remind them that many fun things are free, such as playing with friends, using the playground and taking a walk. And don’t forget to identify items they like that cost money as well, like ice cream and, of course, toys.
Elementary Age
Kelli R. Kiemle
Grade school is usually when kids begin to understand how money works, which makes it an optimal time to start giving an allowance in exchange for household chores.
Money at this age should be put into a clear, glass jar instead of a piggy bank, suggests the staff at ramseysolutions.com, a website and company created by financial guru and radio personality Dave Ramsey. Being able to actually see the coins and dollars and watch the pile grow over time can entice children to save even more.
This is also a good age to start teaching kids that there are different ways to make money, just as Kelli Kiemle did with her family. In a piece written for the financial website, kiplinger.com, Kiemle, who works for the wealth advisory firm Halbert Hargrove, explained that her family saved recycled items to exchange for cash at her local recycling center. Her children received a cut of the profit if they helped collect and sort everything. They even put some of their earnings toward the gasoline their parents needed to drive to the center. The rest was put into savings.
This not only teaches the importance of earning money, but it also lets kids experience delayed gratification. And in today’s digital world that provides everything immediately, it can be beneficial to show children that there are, in fact, many things worth waiting for.
Early Teens
The adolescent years should be the time when teens learn the critical skill of budgeting.
Sam Anderson, a 53-year-old father of two adult children in Orlando, already knew more about money at this age then many adults. His father insisted he practice doing taxes by age 9, which helped him excel in math and life skills.
As he grew older, he realized more and more just how valuable it was to learn about finance.
“It relates to the first contract you read, when you go to buy your first car or get a loan on a house,” says Anderson, who works as an A220 Captain for JetBlue.
But you don’t have to teach your teen how to do taxes, like Anderson’s father did, to have an impact.
Even grocery shopping together can help relate the importance of money. Schroeder-Gardner suggests making a budget beforehand and giving your teen the responsibility of buying everything on the list while staying within budget.
It might sound simple, but turning shopping trips like this one into a habit will prepare them for much larger budgets further down the road.
“You can start by making small changes now that can have a huge impact on your future,” Schroeder-Gardner says. “This can help you become more independent, and it will allow you to do what you want after you graduate, like go on vacations around the world and more.”
Late Teens
Nicolas Santiago
Nicolas Santiago, a senior at the University of South Florida in Tampa, spent his high school years working as a server at a local restaurant. Most of his paycheck went into a savings account for college. But he also started a side gig of his own, buying sneakers that he had a hunch would sell out quickly, and then selling them for a profit. He once sold a pair of $220 shoes for $800.
Besides side hustles like this one, there are other ways for teens to make money, and that includes investing. Financial experts recommend parents open investment accounts for their teens and encourage them to learn about the stock market, just as Santiago did.
When he was in high school, he found finance apps that let him trade as little as $5 at a time.
“I barely had any money, but I would buy partial shares to learn,” says the 19-year-old, who is now studying finance at USF.
Santiago’s passion for numbers is what fueled him to learn about banking.
But not every teen is like Santiago.
The state of Florida realized that some students have no interest in finance, which means many were graduating without ever understanding basic skills, like how to budget, save and invest.
So, in 2022, Gov. Ron DeSantis signed a bill making a financial literacy course mandatory for all high schoolers beginning in 2023. The class teaches students how to open a bank account and file taxes, and it even touches on understanding insurance policies.
And apparently, high schoolers throughout the United States are in dire need of classes like this one.
A 2021 study conducted by Greenlight Financial Technology Inc., a company that offers debit cards and special apps that help teach children proper spending habits, showed that three out of four teens did not feel confident about finance, 49% of those surveyed had never even made a budget and 32% didn’t even know the difference between a credit card and a debit card.
Florida is now one of 17 states that require a financial literacy class for graduation, so they can help young adults feel confident when it comes to money management.
There are additional ways to educate teens from home, as well.
Ramsey Solutions experts suggest that once a teen has a bank account, parents should help create long-term savings goals for things like cars, college or their first apartment.
This is also the age where many teens land their first job, which means they’ll have a paycheck to decipher. The Consumer Financial Protection Bureau suggests it’s a good time for parents to discuss the details of a pay stub, such as the difference between gross pay and net pay and what taxes pay for. If they don’t yet have a job, you could use your own pay stub instead.
And if you are a young parent wondering how to teach finances to your child and you don’t mind heeding advice from a seasoned father, Anderson has some words of wisdom to share.
“We provided so much when it came to purchasing toys and things,” Anderson says. “If I were to go back in time, I would have provided less for them and made them work harder.”
