Financial Literacy from Toddler to Teen

Tips on Money Habits from Early Years to Adolescence

If you’re a parent, you know that there are so many things that we need to teach our children. From teaching them how to bathe, brush their teeth, comb their hair, tie their shoes, and so much more, it’s an endless journey full of major milestones. But one thing that can be easy to toss to the wayside is teaching kids about money management. And believe it or not, this education can start as soon as they’re old enough to walk!

The Importance of Financial Literacy for Kids 

Did you know that 62% of Americans are living paycheck to paycheck? Or, how about the average American has $59,580 in debt spread across mortgages, credit cards, and student loans? And while by no means are we suggesting this is bad, it does bring to light an important question: how do we stand as a country regarding financial literacy? And what are we doing to teach our kids about money and how to be financially secure as adults?

These are great questions. What many parents don’t realize, however, is that financial literacy needs to start when kids are young. When they’re little, their minds are able to grasp far more than we often give them credit for. Not only that, but kids are like sponges, soaking up information along the way to help them later in life.

Further, have you ever noticed how kids pick up your bad behaviors? Well, they pick up your good behaviors, too (even though you might not always see it right away). So, let’s look at some things that we can do as parents to help build financial literacy and good spending habits in our kids now so that they’ll be financially savvy later.

Learning About Money: Toddler to Preschool Years (Ages 1-5)

Can I really teach my toddler and preschooler about money? The answer is yes! Here's how you can start laying the groundwork for financial literacy in these early years:

Basic Concepts: Introducing Counting and Identifying Coins

  • Begin by introducing your child to the concept of counting. You can count toys, snacks, or even steps as you walk together.

  • Show them different coins and teach them their names and values. Use simple language like "This is a penny; it's worth one cent."

Hands-on Learning: Utilizing Play Money and Simple Savings Jars

  • Use play money to make learning about coins and their values fun and interactive. You can play pretend store or restaurant and practice "buying" items.

  • Introduce a simple savings jar where your child can deposit coins they receive or earn. Make it a colorful and exciting activity by letting them decorate the jar with stickers or markers.

Earning Opportunities: Simple Tasks and Rewards

  • Assign your child age-appropriate tasks around the house and offer small rewards for completing them. This could include putting away toys, helping set the table, or feeding a pet.

  • Praise your child for their efforts and accomplishments. Positive reinforcement, just as it sounds, helps reinforce positive behaviors and teaches the value of hard work.

Money Smarts: Elementary School Years (Ages 6-11)

As your child grows into the elementary school years, it's time to level up their money smarts! Here are some practical ways to continue building their financial literacy:

Establishing Chores for Earnings: Chores vs. Allowances

  • Now that your child is older, you can introduce the concept of earning money through chores. Explain the difference between chores, which are tasks they're expected to do as part of the family, and earning money for extra tasks.

  • This distinction teaches responsibility and the value of hard work, setting a strong foundation for their understanding of earning and spending money.

Budgeting Basics: Teaching Needs vs. Wants

  • Help your child understand the difference between needs (like food, shelter, and clothing) and wants (like toys or treats). Encourage them to prioritize their spending based on these categories.

  • Introduce the idea of budgeting by giving them a set amount of money for discretionary spending, such as allowance or money earned from chores. This teaches them to make choices and prioritize their wants.

Saving for Goals: Setting up a Savings Account for Big Purchases

  • Encourage your child to set savings goals for things they want to buy in the future. Whether it's a new toy or a special outing, help them create a plan to save up for it.

  • Take your child with you to the bank to open a savings account in their name. This hands-on experience teaches them about banking and the importance of saving for future goals.

Taking Financial Literacy to the Next Level: Middle School Years (Ages 12-14)

As your child enters the middle school years, it's time to take their financial literacy to the next level! Here are some key steps to help them understand more advanced concepts:

Introduction to Debit Cards: Managing Money Electronically

  • At this age, your child may start to become more independent with their spending. Introduce them to the concept of debit cards, which allow them to make purchases using money from a linked bank account.

  • It's important to note that minors under 18 are typically not permitted to open checking accounts in their name. However, young adults over 13 can often get a debit card with the help of an adult. These teen debit cards are usually connected to a joint bank account that both parents and teens can access.

Teaching Basics of Borrowing and Interest

  • Help your child understand the concept of borrowing money by allowing them to borrow from you for a purchase, such as a video game or clothing item.

  • Set up a repayment plan with your child, including a small amount of interest. This could be as simple as adding a few extra dollars to the amount they borrowed.

  • By experiencing borrowing and repaying with interest, your child learns about the responsibilities and costs of borrowing money. 

Setting Them on a Path for Financial Success: High School Years (Ages 15-18)

As your child progresses through the high school years, it's time to empower them with the tools they need for financial success. Here's how to set them on the right path:

Building a Budget

  • Teach your child how to create a budget by tracking income from their first job and allocating funds for expenses like entertainment, transportation, and savings.

Preparing for Their First Credit Card

  • Discuss the responsibilities and risks of credit cards, and guide them in choosing their first card when they turn 18. Emphasize the importance of paying bills on time and avoiding high interest rates.

Understanding Taxes and Income

  • Introduce your child to the concept of taxes and help them understand how to calculate and manage their tax obligations from their job earnings.

Planning for the Future

  • Encourage your child to save for college tuition by setting aside a portion of their monthly income.

Growing Financial Literacy

  • Involve your child in purchasing their first car and teach them about ongoing expenses like gas and insurance. Empower them to make responsible financial decisions and learn from the outcomes.

Building Financial Literacy Starts Today

We know that parents have a lot on their plate. But, building financial literacy in kids will pay off over time (pun intended)! We hope these tips can help you and your child become financially savvy for today and tomorrow, and all the years to come!

Here’s to smart spending and saving!

What many parents don’t realize, however, is that financial literacy needs to start when kids are young.

We know that parents have a lot on their plate. But, building financial literacy in kids will pay off over time!

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