Remember what entering the adult world felt like? Suddenly having to manage all your finances yourself?
For me (many I know), it was like navigating a forest without a map. And I couldn’t help but wonder why no one taught me anything.
Do we want this situation for our kids? If we don’t teach them this crucial life skill, who will?
So, how to go about it?
It’s never too early to teach your kids about money. In fact, the sooner they start learning the basics, the better off they’ll be down the road.
But what are the best ways to teach kids about money? And what age is appropriate for each lesson? Keep reading for an age-by-age guide to teaching kids about money.
An Age-by-age Guide To Teaching Kids About Money
Age 2 – 3 years
This age is a good time to lay the foundation.
But isn’t 3 years too young?
If you are thinking of teaching them to count and understand currency value, then yes, 2 or 3 years is too young.
However, this is a wonderful age to introduce the concept of money as a mode of exchange.
Kids this age love playing pretend games like a doctor, cooking, etc. Use this and make them the shopkeeper. Or give them some play money and let them be the customer.
You can also use this opportunity to talk about wants vs. needs. For example, when they ask for a toy, you can say, “That’s a want. Do you have enough money to buy it?”
This will help them understand that money is something you use to purchase things and that not everything can be bought.
Age 4 – 5 years
At this age, kids understand numbers a little better. This is an excellent time to teach them about counting money and understanding currency value.
You can do this by using real money or play money. Start with smaller denominations and work your way up.
You can also use this opportunity to teach them about saving money.
For example, you can set up a piggy bank or a savings account for them. Explain that this is for long-term savings and not for buying things they want right away.
Age 6 – 8 years
Time to teach them about budgeting and setting financial goals.
A good way to do this is to give them an allowance and have them track where they are spending it.
This will help them understand that there is a limited amount of money available, and they need to be mindful of what they spend it on.
Start taking them along for grocery shopping trips and explain how you are budgeting for food and other necessities. Introduce them to coupons and sales so they can see how you are saving money.
Age 9 – 12 years
At this age, kids are ready to pick up more complex concepts. This is a good time to teach them about investing and compound interest.
For example, you can put their allowance in a savings account and help them track the interest they are earning over time.
You can encourage currency collecting as a hobby at this age. It helps them understand how different countries use different currencies and the value of money.
Start sending them to buy things for themselves, like buying snacks or stationary. This way, they can practice using money, getting change back correctly, and start understanding the value of things they are using.
Recommended reading: 10 Money Lessons to Teach Your Child Before They Turn 10
Age 13 – 15 years
At this age, kids are becoming more independent and can grasp more complicated concepts like credit, investment, and so on.
You can start giving them a credit card with a low limit and help them track their expenses.
This will teach them how to use credit responsibly and understand the implications of not paying their credit card bill on time.
You can also start teaching them about investing in stocks and mutual funds. Help them understand the risks and rewards associated with investing.
Encourage them to get a part-time job at this age.
This will help them understand the value of money and how hard people have to work to earn it.
You can also ask them to do tasks for you in exchange for money if you’re not comfortable with them working elsewhere.
Introduce them to charity. This will help them understand that there are less fortunate people and that they should be grateful for what they have.
Age 16 – 18 years
They are young adults now!
Get them involved in home finance and other financial decisions you are making.
For example, if you’re buying a new car, sit down with them and explain getting a loan, negotiating the price, and so on.
If they are getting a job, help them understand the importance of saving for retirement. This is a good time to introduce them to a pension, insurance, etc.
Finally, teach them about the importance of good credit. This will be important for them when they apply for loans, credit cards, etc.
This is also the time when they will be graduating. You can involve them in paying fees for their university or applying for a loan for the same as well.
Recommended reading: 5 Critical Life Skills for Kids
Things to Remember When Teaching Kids About Money
- Teaching kids about money is an ongoing process. It’s important to be patient and take your time. Start with the basics and gradually introduce more complex concepts as they grow older.
- It’s also important to lead by example. If you’re not good with money, your kids are likely to follow in your footsteps. So, make sure you’re practicing what you preach!
- Reason with your kid for spending money. Don’t say a direct ‘no’ when they ask for things. Instead, ask them questions like why they need it, if there is a more economical option or an alternative, and so on.
- Let them know how hard you work to earn money. This will help them understand the value of money and how to spend it wisely.
- Share how you learnt your money lessons, including your mistakes. This will help them understand that it’s okay to make mistakes as long as you learn from them.
- Encourage them to ask questions and engage in healthy conversations about money. This will help them understand that it’s not a taboo topic and that they can come to you with questions they have.
- And finally, don’t forget to have some fun along the way. Money doesn’t have to be a dry, boring topic. There are plenty of games, activities, and resources out there to make learning about money fun for kids of all ages.
So there you have it! A guide to teaching kids about money, age by age.
What are you waiting for? Start teaching your kids about money today!
