6 Fantastic Ways You Can Start Teaching Kids About Money

Leaving a legacy for our kids is something every parent would love to do. However, with the increasing cost of living, topped with the Russia-Ukraine ongoing conflicts, it can be frightening to think of the rate of inflation.

While you work hard to create that legacy to help tide your kids through the future economic woes, you start to wonder if your kids will be able to continue growing that pot of gold.

The good news is it is never too young to start teaching our kids financial literacy.

*In this guest post, freelance writer and mom blogger Juliana shares 6 fantastic tips to help get you started.

What is financial literacy? 

According to an article from Investopedia, “Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.” – Jason Fernando.

In simpler words, it means knowing how to manage your money.

Why is it important to start teaching kids about money? 

Many adults enter adulthood without knowing the importance of saving for a rainy day.

Some adults are not aware of the amount of money in their bank account, the number of bills they are paying monthly, or their daily expenses. In no time, they find themselves in the red zone at the end of every month.

When you start teaching kids about money early, you will help equip them with lifelong skills and knowledge. It also increases their confidence in handling money matters and their ability to make clearer decisions towards investments in the future.

Check it Out! Here’s a great post to help you build your rainy day fund even when you’re on a tight budget.

How to start teaching kids about money 

When teaching kids about money, you can expose them as early as the toddler stage. Toddlers always watch and mimic our actions. So try bringing out a piggy bank and dropping in a coin every day. You’ll be surprised when one day your tiny tot picks up a coin and drops it into the piggy bank too!

Fun fact: Once that piggy bank starts filling up, it can also be used as a musical instrument for building your toddler’s motor skills. One stone killing two birds, atta girl!

Here are more great tips you can use when teaching kids about money.

#1 Have three piggy banks

What are the three?

Saving. Spending. Giving.

Encouraging your kid to split their money can help them make decisions about their money matters. For instance, when they receive their allowance, birthday money, red packets from Chinese New Year, etc. It also gives you a chance to share with them about money management, understanding priorities, and deciding when the appropriate situation is to use the right piggy bank.

Alright, so saving and spending makes sense. But why is giving part of it?

Because it builds compassion.

Money is not all about oneself. It is about taking and giving. Let your child pick a church, charity, animal shelter, or anyone they would like to help. Your little kiddo will not only feel good to be able to help the less fortunate, but it also encourages them to want to have more money to help them a little more.

Do keep in mind that the decision your child makes should be up to him. You can explain and guide him, but be patient and accept his choices. His decision may (most of the time) not sit well with you, but your goal is to let him learn and explore.

#2 Use life examples 

One of my favorite ways to teach my boys about money is during grocery shopping.

Whether you are shopping online, at the mall, or at the supermarket, everywhere is an excellent opportunity to teach them life examples.

“3 apples cost $2 vs. 1 apple for 80 cents. Which one do you think will save us more money?”

Engage your young child’s thoughts through these examples. If they choose a different answer from you, understand her train of thoughts before explaining why the group of three apples makes a better choice.

 #3 Show opportunity cost

Older kids can understand logical reasoning. So here is another method you can use for them when teaching kids about money.

For example, “If you buy this video game, you will not have enough to buy those sneakers.”

It’s like we always say, ‘life is all about choices and decisions,’ right? So your kid will need to weigh his decisions and understand the outcomes.

#4 Give them a bank account

This might be more appropriate for teenagers. However, you can also role-play with your little one by introducing what a bank account is and its usage.

To your teenager, this is an upgrade from a piggybank, and that can be a big deal for them. It makes them feel more grown-up, hence an increased responsibility to grow the account. 

Perhaps they will even come home telling you that they need a summer job one day!

**Online banks offer the best savings interest rates compared to branch banks. CIT Bank pays more than 10X the national average, plus no ATM fees, and you can deposit checks remotely. So take a look and see if it is a good option for your family’s needs.**

#5 Teach them about debit cards and credit cards 

Introducing the different concepts of cards and loans to your teenager is a good preparation for when they are at the legal age to apply for one.

Explain to them the dangers, the benefits, and the limits of each. It is also a good opportunity to decide together and plan an initial amount on the most appropriate card for beginners.

#6 Explain the dangers of taking loans 

Loans can be helpful. But they can also result in one being heavily in debt if you do not plan well.

For instance, personal loans, car loans, housing loans, renovation loans, and credit card loans. The list is endless and enticing – especially when you need money.

So, explain the meaning of interest rates. And show them the different rates offered by various banks since the charts are now easily accessible on the internet. 

You can even do a simple calculation with compounding interest rates on a loan amount. Then ask your teenager for their thoughts and emotions if they end up owing a large sum of money to the bank.

It is also important to let them know the risks involved if they are unable to pay off the loan and how it will affect their lifestyle.

What happens if you did not learn the habit of saving as a young child?

Everyone starts from somewhere, right?

If you are having difficulty developing a habit of saving money or making investment decisions, it does not mean that you are not fit to start teaching kids about money.

Start reading books that are related to money matters. You can also read together with your child and do the activities that are suggested in there together. Not only will you be learning along with your child, but it can be a good bonding time too.

**Looking for some kid-friendly personal finance books? Here are a few great choices filled with engaging, interactive fun for teaching kids about money.

You might even want to have a mini competition to see who saves the most money at the end of an agreed timeframe. Then, go for a treat or even a short holiday! Because every small reward provides good motivation when learning a new skill.

Juliana is the creative brain and a freelance writer behind Modern Mom Life SG. She offers ghostwriting, copywriting, and blogging services. She works closely with B2B and B2C businesses, bringing content to life through her writings. When she is not writing for her clients, she is always looking out for good food and spending quality time with her three boys and pets. Being a mom to three boys and three pets is nowhere near a peaceful and quiet lifestyle, but that is her style of fun in life.