Children and money: How parents can improve kids’ financial literacy

Bill Engel in Wealth Management 11 April, 2017

piggy bank graduateApril is Financial Literacy Month, and while important year-round, we want to highlight the significance of building a foundation for financial education. Young adults may not know how to set themselves up for success and can get into trouble before they even know they are being financially irresponsible. Parents can help by making financial education a priority for their family. Below are top tips for parents to consider passing to their children through the years.

Elementary school

The first thing to do with young kids is to teach them about the concept of physical money.

  • Identify coins and dollars to help kids develop familiarity with money and its value.
  • Show children that you exchange money for goods and services and demonstrate the process of how money works. For example, if you take the family out to get ice cream, give your child the money and let them pay to understand that the money is gone.
  • Introduce saving through a piggy bank and discuss why it’s important to save for a specific item, like a toy they want to buy. This is an exercise in discipline and understanding money’s worth.

Middle school

As middle schoolers, kids can learn about earning money and have more responsibility for paying for things they want or want to do.

  • Parents may decide to assign chores and let kids earn money for the work they do. Kids may also get a first job outside the house like babysitting or mowing a lawn. This teaches responsibility and the significance of income.
  • Give children some responsibility of earning and paying for things. This allows them to decide how badly they want something and if it’s worth spending their hard-earned money.
  • Introduce a savings account, let them speak with the bank teller, and show them how the process works.

Late middle to high school

As kids enter their teenage years, teach them about more complex financial topics from basic banking concepts to investing, debt and equity.

  • At this stage, kids should know the difference between a debit card, a credit card, a savings account and a checking account. You can teach them how to write a check to get familiar with basic banking concepts.
  • Introduce the concept of investing and how you can get money to work harder for you. Money in the bank is earning interest because you’re lending it to the bank. Investing through ownership or equity of a company brings on a different risk and potential return.
  • Take advantage of online resources like a virtual stock market. Kids can start with a fictitious amount of money and do some trading without the true downside.
  • Open a real investing account with a small amount of money in it and have them pick a few companies they know and like to follow. It’s not the best way to invest, fundamentally, but can teach kids about following the companies they own.


College is preparation for being an adult, financially and otherwise. Kids are off on their own and have much more responsibility away from home.

  • Give students the responsibility to budget with a fixed amount of money to live on each month. Knowing how to budget before working and earning income can help when entering the workforce.
  • Help them understand the value of building a credit history, borrowing money and paying it back. A credit card with a small credit limit may be a good way to start.

If parents are unfamiliar with some financial items, there are numerous online resources to improve financial literacy while teaching their kids. Financial literacy isn’t always taught in school but is knowledge you need for your entire life. This month, take the time to talk to your kids about money and prioritize financial literacy for your family’s financial wellbeing.

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