How to Raise Moneywise Kids

Parents naturally want to prepare their children with the knowledge and skills needed to navigate adulthood. A critical aspect of this journey is teaching your kids how to properly manage their finances and become moneywise.

This is where the concept of financial literacy comes in. Financial literacy refers to understanding key concepts such as budgeting, savings, investing, borrowing, debt management, and how all decisions made in these areas affect your financial wellness and overall well-being.  

But how and when do you teach important financial concepts and the less tangible skills, habits, behaviors, and mindsets that contribute to good financial health? While every child is different, here are some good guidelines to follow.

Ages 3-5

Begin to introduce children to money. This is a great time to start using savings jars or piggy banks to encourage them to watch their savings grow over time. You can also begin to talk about the idea of money as a medium of exchange for something they want. For example, using the savings accumulated in their piggy banks to purchase a small item.

Ages 6-8

You may begin to teach them the value of money and how it is earned through work. You may also begin to teach them to differentiate between needs, which are absolute life essentials, and wants, which would be things such as toys and treats. You can even start talking about the basics of budgeting skills by encouraging them to separate money into different jars such as saving, spending, or sharing.

Ages 9-11

Now is a good time to further enhance their understanding of money and how it is earned by promoting activities where they can earn their own money. This could include assigning chores, offering rewards for good grades, or even having small business activities such as lemonade stands. Help them to set their first savings goals and teach them how to save for specific items or experiences they want to purchase on their own. You can also have them help you comparison shop, especially when it’s for purchases for them, such as back to school shopping.

Ages 12-14

Introduce the idea of budgeting and have them actively participate in hands-on activities such as shopping while sticking to a budget. Again, school supply shopping season is a great time to implement this. You can set a budget with them and help them comparison shop and stay within budget. If they don’t already have a bank account, it‘s a great time to get them one. Have them learn how to deposit and withdraw money and teach them the difference between savings and checking accounts. Depending on their age, they may also be able to open their first checking account, earning interest and how it helps your money to grow in savings accounts.

Ages 15-18

As they start thinking about life and career paths after high school, consider introducing them to concepts such as retirement and investing. If they have any type of part-time or summer job, take the opportunity to review their paycheck with them, explaining things such as taxes and deductions. This is also a great time to teach them about the fundamentals of credit, including responsible credit card usage. With your teens transitioning into adulthood, discuss the importance of setting financial goals such as saving for a car or first housing expenses, and establishing short-term goals such as creating an emergency savings fund.  

The key to teaching financial wellness and literacy to the next generation is to start early and teach often, finding as many real-world scenarios and examples as possible, and expanding upon knowledge and concepts as they grow. This consistency from pre-K to senior year allows your kids to build a solid foundation which will enable them to enter adulthood with a stronger understanding of key financial wellness and literacy concepts.