Children carry early memories with them throughout their life. Therefore, it is essential to teach them about money from a young age. Keep lessons simple and relevant. Real life examples help children internalize how money works. For example, if you use your credit card to buy your child a toy, show them the bill when it comes, to help them understand that nothing is free. Let there be no confusion in their minds that a plastic card can buy them toys!
Here are simple concepts to help kids build a healthy relationship with money:
- What is a want versus a need? Good financial decisions start when children learn the difference between necessities (clothes, food, computer for school) and things that are nice to have (toys, books, electronics).
- Teach kids about opportunity costs. Investing your money in one area costs you an opportunity in another. You can conduct this lesson in the grocery store. Give children a budget of $10 and ask them to decide how they will spend their money. For example, do they want to buy their favorite fruit or ice cream?
- BLS Career Page for Students: By exploring careers and watching videos about different jobs, students can learn how their efforts translate to money and how it impacts their everyday lives.
- How credit works. This is a big one. If you showed children the impact of using credit cards, you might save them from learning this lesson the hard way. If you use your credit card to make a purchase, explain to them that you are only buying time and will eventually have to pay the credit card company. Not all credit is bad and teaching kids how it works gives them the knowledge they need to make smart decisions.
- BizKid$ highlights young entrepreneurs and inspires children to run their own businesses one day. The site includes links to a series on finance that has games, info, and other tools to learn about money.
- How money grows. With companies such as Stockpile, you can help children make investments in $5 increments.
- How money works. You can explain the family budget to children. This gives them a realistic view of what it takes to fund a household.
Showing Kids the Ins and Outs of Banking
Few things will impact your children more when they grow up than their personal bank accounts. Learning how to manage money starts with understanding where to keep it and how to make it grow.
There are several ways that Border Bank can help you teach your kids about banking. From explaining how your checking account works to opening savings accounts for kids’ wants and needs, you can involve children in monthly accounting tasks that impact their lives.
Tips for turning your banking accounts into financial literacy lessons:
- Open a savings account for kids. Open a savings account and take your child with you to the bank to make a small deposit every week. Then, show them how to check the balance online. Use the account to teach your children about earning interest or saving for large purchases.
- Teach your children how checking accounts work. Use your Border Bank checking account to develop age-appropriate lessons for your kids. For example, you can show children how the balance goes up when you make a deposit or down when you pay a bill.
- Business checking accounts. If you own your own business, teach your kids a little bit about how finances work in a commercial setting.
Contact Border Bank today for information on how to set up savings and checking accounts for kids and how to manage your banking online.
“Financial education is more valuable than money.” ― Mac Duke
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FAQs
When they're little
- Introduce the value of money.
- Emphasize saving.
- Introduce them to investing.
- Encourage a summer job.
- Introduce them to credit.
- Consider a Roth IRA.
- Help them set a budget.
- Encourage them to stay invested.
It helps them develop healthy money habits at a young age.
A child who understands basic financial literacy is less likely to make decisions that can lead to massive debt or a poor credit score as a young adult.
Why is it important to teach children about money? ›
Talking comfortably about finances is an important part of helping kids develop a healthy relationship with money. Including them in conversations and actively demonstrating how to be financially responsible early on will help them cope with challenges like setting limits, planning a budget, and resisting impulse buys.
How to explain how money works to kids? ›
Teach your kids from a young age about the value of money and how money is earned from work. You can show them that they can earn money in a variety of ways. Set chores and tasks for them and offer them an allowance for the work or create specific jobs that allow them to earn more money.
How to teach a 10 year old about money? ›
My point being: It's never too early to start teaching your kids about money, and this age is no exception.
- Use a clear jar for their savings. ...
- Set an example with your own money habits. ...
- Show them stuff costs money. ...
- Show them how opportunity cost works. ...
- Give commissions, not allowances. ...
- Avoid impulse buys.
Children learn best through practical examples. Involve them in age-appropriate discussions about family finances, like planning a budget for a family vacation or comparing prices while shopping. Real-life scenarios help children understand the value of money and the importance of making wise financial choices.
Why is financial literacy not taught in schools? ›
High schools might avoid teaching personal finance due to several reasons, including the perceived lack of relevance to students' current lives, the gap between financial literacy and financial responsibility, and the practical constraints of traditional teaching methods.
What is the downside of financial literacy? ›
The study found that financial literacy decreases preference for the present, suggesting a positive effect on decision-making and saving behavior. The negative effects of financial literacy include taking too many risks, overborrowing, and holding naive financial attitudes.
What are the 5 key components of financial literacy? ›
The U.S. FLEC highlights five principles as the building blocks of financial literacy, known as the MyMoney Five.
- EARN.
- SPEND.
- SAVE & INVEST.
- BORROW.
- PROTECT.
Wunder said six is the age where kids start being able to grasp some money concepts. “This is the age children are starting to understand math at school and are able to comprehend the consequences of 'if it's gone, it's gone' and setting aside money for things they really want,” he said.
Children often see adults exchange coins and bills when they buy things. As children grow and start to make choices, they learn that people, things, and money have value. These concepts form the foundation for understanding the importance of spending, sharing, and saving.
Do children understand the value of money? ›
The sooner you start, the better
According to a Cambridge University study, most children can grasp the value of money by the age of 7. It sounds early, but by seven, kids start to think logically, understand reasoning and are capable of more complex thoughts.
What is money in simple words for kids? ›
Money is a mode of payment accepted by both sellers and buyers for goods and services. Money is what we give in return when we buy stuff like food, clothes, house, groceries, etc. We give money in return for purchasing anything. This is a simple trade or exchange.
What are some facts about money for kids? ›
Money is made in factories called mints! The U.S dollar is the most commonly used currency in the world! The first Credit-Card like payment method appeared in 1950 when the “Diners Club” issued its first charge card. Before money existed, people used other systems to pay for goods, like bartering.
How to make learning about money fun? ›
Quick list of our fun activities to teach your child about money
- Grocery store field trip.
- Meal planning and cooking.
- Play online money games.
- Play financial board games.
- Pretend spending spree.
- Online pretend house hunting.
- Bartering practice.
- Goods/services game.
Key steps to attaining financial literacy include learning how to create a budget, track spending, pay off debt, and plan for retirement.
When should kids learn about financial literacy? ›
Wunder said six is the age where kids start being able to grasp some money concepts. “This is the age children are starting to understand math at school and are able to comprehend the consequences of 'if it's gone, it's gone' and setting aside money for things they really want,” he said.
What is financial literacy for elementary students? ›
At this age, financial education often focuses on basic concepts such as understanding the value of money, distinguishing between wants and needs, and beginning to grasp saving and spending. Games, stories, and interactive activities can be effective teaching methods for these foundational concepts.
How to teach kids to count money? ›
Create a chart that has 100 squares, labeling each square in sequence with the numbers one through 100. Give your child a handful of different coins and tell them to place each one on the square representing the total value, having them begin with the highest-value coin and working their way down.
