Teach Your Kids How Money Works EARLY!

One of the most valuable life skills you can teach your children is how money works. Financial literacy isn't typically part of school curriculums, so it's up to us to ensure our kids grow up understanding how to manage money wisely. Imagine if we knew what we knew about money now, but at the age of 12. We go through school to prepare us for the work force yet we aren't taught, in those same schools, how to steward and manage the income we get from working wisely. Here are a few practical ways to help your children grasp the basics of money management, setting them up for a financially healthy future. Let's be real, they may or may not be wealthy by 21-years-old, however our job is to mentor and prepare them.

Start with the Basics: Earning, Saving, and Spending

1. Introduce the Concept of Earning
Explain to your children that money doesn't simply appear; it must be earned. For younger kids, role-playing games like "store" or "bank" can help them understand the idea of exchange. For older children, consider giving them small jobs around the house or an allowance tied to chores.

2. Teach the Importance of Saving
Give your kids a piggy bank or a clear jar so they can see their savings grow. Explain the difference between short-term savings (like for a toy) and long-term savings (like for a bigger purchase or future needs). For teenagers, you can introduce more advanced savings tools like a basic savings account.

3. Discuss Spending Wisely
Help your children understand that spending is about making choices. Walk them through your decision-making process when you’re shopping. For example, show them how to compare prices, use coupons, or wait for sales.

Set Goals and Plan

Goal-setting is a crucial financial skill. Teach your children how to set realistic goals for their money. For younger kids, it could be saving up for a favorite toy, while older kids might aim for something like funding part of a trip or purchasing gadgets. Use this as an opportunity to discuss priorities and delayed gratification.

Make It Fun and Interactive

Games and activities can make learning about money engaging. Consider board games like Monopoly or apps designed to teach financial literacy. Let your children participate in real-world money activities, such as planning a family outing within a budget or calculating costs for groceries.

Introduce Budgeting

Budgeting doesn’t have to be complex. Show your kids how to divide their money into categories like spending, saving, and giving. You can use the "50/30/20 rule" as a simple guideline: 50% for needs, 30% for wants, and 20% for savings or charity.

Teach About Credit and Debt

As kids get older, please please...and I say again PLEASE introduce the concepts of credit and debt. Explain how credit cards work and the importance of paying off balances to avoid interest. Use examples to illustrate how borrowing money can be helpful or harmful depending on how it’s managed. Again, think about how your life would look if you knew these things before you made any mistakes.

Be a Role Model

Our children learn a lot by observing us. Show them healthy financial habits, like budgeting, saving, and avoiding impulsive purchases. Talk openly about money—your successes and even mistakes — to make it a normal and approachable topic.

Encourage Generosity

Part of understanding money is learning how to use it to help others. Encourage your children to set aside a portion of their allowance or earnings for giving. Discuss the importance of helping those in need and how it can be as fulfilling as spending money on themselves.

Keep the Conversation Going

Teaching our children about money isn’t a one-time lesson—it’s an ongoing conversation. As they grow, their financial needs and understanding will evolve. Keep building on their knowledge, introducing more complex topics like investments, taxes, and financial planning as they mature.

By teaching our children about money early, we're giving them a gift that will serve them throughout their lives. Financial literacy is a cornerstone of independence and security, and with guidance, our kids can develop a healthy relationship with money that will benefit them for years to come.

In the comments, share some ways that you might teach your kids about money. Others in the community may benefit from your insight.