Teaching Money: 10 Lessons for Kids

Regarding the fact financial issue matters in our lives so much, it’s surprising why schools don’t consider teaching money. It means that this responsibility lies on parents, and you don’t have to wait until your kid grows up and starts earning to start teaching money. Here are a few lessons your child can learn right now.

Why teaching money to your children?

Think that financial literacy and responsibility is something that comes naturally? Unfortunately, practice shows that some adults aren’t able to manage their funds in a right way, no matter how old they are.

“Look at the mortgage crisis and how many families lost their homes — 3.9 million foreclosures. Look at the amount of money — $1.1 trillion—we owe in student loan debt. The amount — $845 billion — we owe in credit card debt. It’s pretty clear that adults don’t know much about money. To help the next generation avoid the mistakes of their elders, and to live financially fit lives, they need to be taught the essentials about money”

These are the words of Beth Kobliner, member of the President’s Advisory Council on Financial Capability. He is the author of such famous works as Money as You Grow (there are many lessons for kids of different age) and Get a Financial Life.

According to the Financial Literacy assessment 2015 made by PISA (Programme for International Student Assessment), only 1 in 5 children in the USA have a basic level of financial literacy. Only 10% are ready to deal with complex financial issues and problems.

In fact, children can understand the basic financial concepts like spending and cash at the age of 3. According to the research performed at the University of Cambridge, children’s money habits are formed by 7.

Kids of parents who discuss financial topics with them are more likely to manage their money smartly. There are two lessons to learn: money is about responsibility and delayed reward.  So before your child starts earning his first bucks, you should be the one to influence financial behavior and be a consultant.

Let’s overview 10 lessons for teaching money and understanding the concept of it.

1. Introduce Such Concept As Money

First, you should explain what money is. Every person does something: a baker makes bread, a teacher gives lessons, a tailor makes clothes, a president rules his country. The results of their work are different, but everything matters: we all need food, education, and safety in our native country. What should a teacher do if he needs bread? How should a tailor act? The answer is simple: exchange (your kid will answer for you)! But how many loaves of bread does a lesson cost? How many clothes and lessons can a president get for a month of his work? There are many professions, and it’s complicated. That’s why people invented money – a unit of measurement.

Using money, you can buy something and pay people for their work. It exists in the form of coins and papers, and there’s electronic money, too (you can say it is stored on plastic cards).

This video gives a better understanding of what cash is:

2. Money Doesn’t Grow on Trees

Money doesn't grow on treesWhen children see ATMs giving out cash they don’t realize that these can be hard-earned bucks. In an addition to the previous lesson, you need to explain that money is given to a person for selling certain products, or providing services. To get paid, one needs a job, and parents get money for doing theirs.

Here, you can also mention the notions of poor and rich. Explain that one needs to work hard to become wealthy. Talk about the possibilities that money provides, and why people have different financial status.



3. Every Thing Has It Price

Instead of lengthy explanations, take your kid to the nearest shop and just say “This pack of cookies costs $4, dear”. Take a few bucks from your jar and hand them to the cashier. The visual approach will work better than a lecture.

4. Learn Counting

Mathematical skills are essential for counting money. Ideally, a kid needs to learn maths before you introduce money, but you can combine these lessons, too. All in all, counting coins is more interesting than sticks.

Related: Mathematical Colorings To Boost Counting Skills

5. Make a Piggy Bank/Jar

Money jar
Money jar is a great idea – it shows money accumulating

Although piggy banks look cute, a transparent jar is a better idea because it shows kids how the money is growing. A piggy bank should be a number one tool in your inventory for teaching money: it lets kids know that coins should be accumulated to afford to buy what they want. One of the biggest mistakes adults do is the absence of savings: it means they have to resolve to credits in case of unknown unknowns. Don’t let children repeat this mistake.







6. Turn It Into Game

Add fun to your education process! Games are your best helpers. You can try:Monopoly game

  • Board games (Monopoly, Moneywise Kids, Money Bags, Easy Money, Exact Change, and Careers)
  • Role-playing games
  • Store game
  • Online games (Piggy Bank, Money Word Games, Change Maker, Counting Coins and Money Flash Cards)

You can make up your own game and use both real and drawn money.



7. Teaching Money Means Serving As an Example

Kids are very observant and they learn the money concepts by watching and copying adults’ actions. Explain what you do to earn the money, why do you write a check, how you use an ATM card, etc. Do NOT make impulse purchases, especially when it comes to something expensive. If your kids are asking for some super-pricey toys, tell them you don’t have money, or…

8. ‘I Want’ vs ‘I Need’

…let them think for a day. Sometimes we spend boatloads of money on things that we don’t really need. It’s just the matter of our fancy. Kids will ask for spontaneous buys more often if you indulge their desires every time.  All in all, it’s your money that is spent!

Money management is about responsibility for your resources.

Explain your little one what is family budget and how it is distributed. Foods, water and electricity checks, transport, clothes – there’s so much you can’t live without! By the way, this is where a piggy bank comes in handy! Offer your kid to save money in a jar to buy the longed-for toy. You can give coins for helping, studying well and performing some tasks. A perfect method of teaching money!

Related article: How to make a child independent?

9. Make a Wish List

Make a wishlistJust like adults, children want a lot of different things. Teaching money is also about setting priorities. Sit down together and make a wish list. Let the kid think what she would do with her money. Now help to rank the wishes by importance, like “This video game is cool, but you can save money on a new bicycle and ride it when the summer starts”.



10. Show the Importance of Giving and Helping

As soon as your little one starts making money, offer helping someone financially. Choose a charity project or a church and make a contribution. This way, your kid will learn that giving influences both receiver and giver.

Different Age – Different Techniques for Teaching Money

You don’t have to explain coins to a 7-years-old child, just like toddlers don’t need to know about taxes. Let’s find out which activities would be appropriate for children of different age.

Age Activities
2-3 years
  • Coin identification
  • Playing store
4-5 years
  • Simple board games
  • Clipping coupons
  • Making first simple purchases
  • Using a piggy bank
6-8 years
  • Open a children bank account
  • Coin collection hobby
  • Advanced board games
9-12 years
  • Yard sale
  • Comparison shopping

Although toddlers don’t have to make purchases yet, it’s important to start teaching money right now – financial habits are formed in the childhood. Practice games and encourage saving money in piggy bank: these will be your kid’s first steps to financial literacy and understanding the significance of cash in our lives.

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