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Introducing Financial Concepts to Children at Different Ages: A Guide to Teaching Money Management Skills

Age-Appropriate Financial Concepts for Children

Teaching children about financial concepts from a young age is important for their future financial success. It’s essential to start early, as studies indicate that children who received more than 10 hours of financial education were more likely to save, spend less than they earn, and avoid overdrawn checking accounts. By introducing age-appropriate lessons and activities, parents can lay the foundation for a strong understanding of money management and the value of financial responsibility.

For young children, incorporating play and hands-on activities is an effective way to introduce financial concepts. Activities such as using a piggy bank, for instance, can help children understand the concept of saving money. A “Jobs I Do” chart can instill the idea that work results in financial rewards. Taking them grocery shopping can introduce them to the idea of budgeting, as they learn that money is finite and choices must be made about what to purchase.By engaging in these activities, children learn the basics of counting and exchanging money.

In addition to hands-on activities, age-appropriate online resources, games, and apps can also reinforce financial concepts and enhance math skills. These interactive tools make learning about money fun and engaging for children while helping them grasp essential concepts. For example, apps that simulate a virtual marketplace can help children learn about buying and selling, supply and demand, and the concept of fair trade.

As children grow older, it is important to introduce saving, budgeting, and goal-setting. Teach them the importance of saving money and setting goals for their savings. Consider giving them a small allowance and encouraging them to manage it wisely, teaching them the concept of budgeting. This hands-on experience will instill responsible money habits. For example, if a child wants to buy a toy, you can illustrate how setting aside a portion of their allowance each week can help them achieve their goal.

Furthermore, older children can learn about the power of interest. Explain how saving money can grow over time through interest and introduce them to the concept of earning interest on savings. This will encourage a long-term perspective on financial decisions and the benefits of saving and investing. A practical way to illustrate this concept is by showing them how a bank savings account works, and how their money earns interest over time.

Financial Milestones for Kids: An Age-by-Age Guide

Teaching financial concepts to children should be approached in a progressive manner, aligning with their developmental stages. As a parent, it’s essential to guide your child through each milestone and provide them with the necessary tools to understand and manage money effectively. Here is an age-by-age guide to the financial milestones for kids:

  • Age 3: Teach kids how to count to ten, introducing them to basic numerical concepts. You can do this through simple games or counting activities.
  • Age 4: Engage kids in number games and help them understand the concept of money. This can be done by using play money and teaching them how to exchange it for goods or services.
  • Age 5: Teach kids the value of delayed gratification and the importance of money. A simple way to do this is through a rewards system where they must wait to earn a reward after completing a task or behaving well.
  • Age 6: Introduce kids to the concept of allowances and how to manage them. Consider introducing a debit card for kids to teach responsible spending. This can be a prepaid card that they can use under parental supervision.
  • Age 7: Help kids understand the value of money and the connection between earning money and income. You can do this by explaining how people earn money through jobs and how it’s used to pay for daily necessities.
  • Age 8: Teach kids the difference between needs and wants, guiding them to make thoughtful purchasing decisions. For example, explain how essential items like food and clothing are needs, while toys and games are wants.
  • Age 9: Introduce kids to the power of savings and setting savings goals. Encourage them to save for specific items or experiences. You can make this more tangible by setting up a savings jar where they can physically see their savings grow.
  • Age 10: Teach kids about debt and credit, explaining the potential risks and benefits. Use real-life examples of how credit card debt can accumulate if not managed properly.
  • Age 11: Educate kids about advertising, online scams, and influencer marketing, helping them become savvy consumers. Discuss how advertisers use strategies to make their products appealing and why it’s important to make informed buying decisions.
  • Age 12: Teach kids about smart shopping and finding the best deals, emphasizing the importance of comparison shopping. For example, explain how comparing prices at different stores can help save money.
  • Age 13: Involve teens in discussions about the cost of living and household expenses. Encourage them to contribute to saving money around the house. You can do this by showing them utility bills and explaining how energy conservation can lead to savings.
  • Age 14: Introduce the concept of investing, possibly using a stock market simulator to help them understand how investments work. Discuss the idea of risk and reward in investing and the importance of diversifying investments.
  • Age 15: Explain the differences between debit cards, credit cards, store cards, and Buy Now Pay Later (BNPL) options. Teach them about responsible borrowing and the potential consequences of debt. Discuss the importance of paying bills on time to avoid late fees and maintain a good credit score.
  • Age 16: Discuss earning power and the world of work with teenagers. Teach them about the importance of career choices and financial independence. Discuss the concept of salary, taxes, and benefits to give them a realistic view of employment.
  • Age 17: Explain credit reports and the importance of checking them for accuracy. Teach them about building and maintaining a good credit history. Discuss the role of credit bureaus, the components of a credit score, and how it affects their ability to secure loans or credit cards.
  • Age 18: Discuss student loans and the different types available. Help them understand the implications of student loan debt and the importance of responsible borrowing. Discuss the importance of researching scholarships, grants, and work-study options to minimize the need for loans.

Resources and Tools for Teaching Financial Concepts to Children

As parents navigate the journey of teaching financial concepts to their children, numerous resources and tools are available to assist:

One such resource is GoHenry, which provides a prepaid debit card designed for kids. It offers interactive games, quizzes, and Money Missions to develop money skills. The Money Missions, for example, are tasks that children can complete to earn rewards, thereby teaching them the concept of earning income. Parents can track their child’s progress through the GoHenry parent app.

Additionally, age-appropriate online resources, games, and apps can be utilized to reinforce financial concepts. Websites such as Kids Financial Education offer advice tailored to specific age groups. Games and apps that simulate real-world economic scenarios can help children understand the dynamics of earning, saving, spending, and investing in a fun and interactive way.

Talking About Money in an Informative, Positive Way

When discussing money with children, it is important to approach the topic in an informative and positive manner. Money conversations should be open and honest, providing children with a realistic understanding of finances. Start by meeting children where they are and tailor the conversation to their age and understanding. For example, preschoolers can start with understanding the concept of trade (exchanging money for goods), while teenagers can delve into more complex topics like investing and credit.

Discuss the six principles of finance: spend, save, paydown, protect, invest, and wellness. These principles provide a comprehensive framework for financial literacy and cover the key aspects of money management. For instance, the ‘spend’ principle can be illustrated through discussions about budgeting and making wise spending decisions, while the ‘invest’ principle can be explained by discussing how money can grow through investments.

Transparency is key when teaching children about money. Be open about family finances, showing them good money habits and including them in saving and spending decisions. This can be done by involving children in household budgeting or planning for a family holiday. By seeing how their parents handle money, children can learn from real-life examples.

Incorporating Decision-Making Skills and Real-World Application

Incorporating decision-making into the process of teaching financial concepts to children can be highly beneficial. This approach not only helps children understand financial concepts but also equips them with the skills to apply these concepts in real-world situations. For instance, let your children calculate the total cost of items in your shopping cart or allow them to pay the bill at a restaurant. These experiences can reinforce the lessons taught at home and provide valuable insights into the practical aspects of money management.

Teach children about the concept of interest by showing them how their savings can grow over time. You could open a savings account for your child and show them how the balance increases over time due to interest. This will demonstrate the benefits of saving and investing, encouraging them to make smart financial decisions.

Allow children to learn from their mistakes and understand the consequences of their financial decisions. For example, if a child spends their entire allowance right away, they might not have enough money left for something they want later. This can be a powerful lesson in budgeting and delayed gratification.

Involving Kids in Family Finance Decisions

Involving children in significant family finance decisions can provide valuable learning opportunities. This can help children understand the decision-making process and the factors that influence financial decisions. Discuss major financial decisions with them, such as buying a new car or planning a vacation. This involvement will help children understand the factors to consider when making financial choices, such as cost, value, and affordability.

Transparency is crucial when involving children in family finance discussions. Show them how financial decisions are made, such as budgeting for household expenses and saving for future goals. This hands-on experience will give them a practical understanding of financial management. Involving them in discussions about insurance and other significant financial matters can also be highly educational. This will give them a broader perspective on financial planning, preparing them for their financial future.


Teaching children about financial concepts from a young age is crucial for their future financial success. By introducing age-appropriate lessons and activities, parents can help children develop a strong foundation in money management. By encouraging open and positive conversations about money, incorporating fun games and activities, and setting a good example, parents can make financial education enjoyable and meaningful for their children. It’s essential to remember that financial literacy for kids is about both understanding how finances work and managing emotions around money. By instilling these values and skills in children, parents are setting them up for a secure financial future.

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Estate Planning Attorney Eric Ridley