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How to Teach Your Kids About Money

It’s never too early to teach your children self-sufficiency and appreciation for what they have, especially when it comes to finances. But where (and when) do you even start? To help you navigate the subject, we’ve put together these 7 tips to teach your kids about money.

woman teaching kid about money piggy bank

  1. Start young.
Many parents wonder when to teach their kids about money. Research shows that it’s never too early, as they’ll learn money habits, whether good or bad, before age 7. For preschoolers, begin by explaining the process of how you trade money for goods at the store. Teach them how to sort bills and coins and collect money in a clear jar. Experience is the best teacher, so include your kids as active participants at the checkout when you’re at the store.

  1. Explain where money comes from.
You know the expression that money doesn’t grow on trees; help your kids understand that you have to work for it. When teaching your kids about money, talk with them about your job and how you use the money you make to pay for their food, clothes and toys — and how it also pays for your house, utilities, your car and gas, etc. Encourage younger kids to participate in a school bake sale or lemonade stand to experience real transactions of working for pay.

  1. Help them understand opportunity costs.
Help kids understand trade-offs when deciding what to purchase. This might be as easy as saying, “If you purchase this shirt, you won’t have enough for the movie ticket.” You can also help them understand opportunity costs by encouraging them to think of purchases as time spent earning the money to make the purchase. For example, if a new video game console costs $500, it takes 50 hours to earn that at $10 an hour. Is it worth that time spent working to buy that item? Giving kids decisions like this will help them become more selective when it comes to spending money and more aware of the importance of saving. Kids will understand the concept of saving money very early on if given the opportunity to save for something special.

  1. Open their first savings account with them.
One of the most impactful things you can do is to teach your kids how to save with their own savings account. Many banks offer savings accounts just for kids with parental monitoring features and special rewards for managing the account well. This can provide them with hands-on experience in making deposits and withdrawals, earning interest, and budgeting for a purchase. They’ll come to appreciate the newfound responsibility and freedom.

  1. Make budgeting a big part of the conversation.
Help kids create a plan for how they are going to earn, save and spend money. Help them create savings and checking accounts, so they can learn to save money and balance everyday purchases with bigger ones. Introduce the 50/30/20 rule: 50% of income goes to needs, 30% goes to wants, and 20% goes into savings. Remember that every person is different and has different budgeting needs, but this might be a helpful place to start.

You might also include them in your credit card plan, so they learn the risks of debt and the importance of credit. Start talking to your older kids about major purchases like a first car, college or a spring break trip, and how they can budget to help pay for it.

  1. Help them appreciate what they have.
Kids and teens are exposed to an endless social media scroll of celebrities, friends and influencers. This can easily lead to them comparing themselves to the highlight reels of others and feeling that if only they had this makeup set, this car, or this streaming service, their lives would be better. We all fall victim to this comparison trap, but when teaching kids about money it’s important to instill contentment and thankfulness in young adults to save them from disappointment (and debt) later. Regularly check in with kids and teens about things in their life they’re thankful for and care about.

  1. Demonstrate the impact of giving.
Donating money and time are great ways to both help young adults appreciate what they have and realize the real impact they have on their communities. Volunteerism and donating are lifelong, fulfilling habits that start at a young age. If you donate money to your favorite organization, bring your kids in on the experience. Talk with them about where your money goes and how it helps your greater community. Ask them if they’d like to contribute some of their savings to an organization they believe in. Giving can also help your kids learn to appreciate what they have.

Looking for more ways to teach kids and teens about money? Encourage them to take a free, online finance course to help them get a deeper understanding of the intricacies of personal finances. You might even want to take the course with your child and discuss it afterward. You may also want to consider an incentive program such as paying cash for good grades. 

As a family-focused bank, we at First National Bank and Trust are committed to helping you and your family find financial well-being — and we know young, financially savvy children grow up to be more financially secure adults. We can help you and your family with a number of banking services. Find a branch near you, or contact us to learn more. For more information about financial milestones, read our Back to School Financial Checklist.