Finance for Kids: Early Money Lessons

Updated: Mar 18, 2019

In this series on teaching financial lessons for kids and young adults, we’ve already touched on helping your teenager develop good spending and saving habits, encouraging flexibility in young people, and a number of lessons for young adults on how they can start their lives out on the right financial foot. Today I’d like to rewind a bit and discuss lessons you can teach young children, so they can begin thinking about money in a healthy and productive way from as early as three years old. No matter what you may think, your children are watching you and absorbing information from you very early on, so it pays to be conscious of what you’re teaching them—especially when it comes to money! Here are some lessons that are appropriate (and beneficial) for young children and the best ages to teach them. Keep in mind that every child is different, so these age ranges should be read only as guidelines and not as rules.


Ages 3-5: Waiting

In the toddler to early childhood phase, kids are impulsive. When you bring them to a store, they’re probably going to want almost everything they see, and they have no concept of why they shouldn’t have it. Instead of continually saying ‘no’, which teaches a negative mindset toward money, show them how money grows and can be spent if they just exercise a little self-control. I like the idea of giving a child of this age three jars (or envelopes, or boxes, etc.). One is marked savings, one spending, and one giving. Each time your child receives money, have them put money into each jar. A good rule of thumb is to put at least 10% into the saving jar first (to teach the concept of paying yourself first), at least 10% into the giving jar next (to encourage generosity) and the rest in the spending jar for rewards.


Ages 6-10: Choice

Studies have shown that kids are able to make pretty reliable distinctions between good and bad choices around the age of 8. That makes this a perfect time to start giving them some say in decisions that are made about money. Consider taking them to the grocery store with you and giving them some of the budget. Not only will they learn that money is not limitless, but they will also have to deal with the ramifications of their choices throughout the week if, for example, they decide to blow the budget on a bag of candy and find they’re hungry for a healthy snack when mid-week rolls around.


Ages 6-10: Participation

Participation is a lot like choice, and kids of the same age usually respond to this lesson. Including your children in financial activities and decisions and explaining to them why some decisions are better than others is a perfect way to teach financial intelligence. When you make them a part of the process, you take out the ‘lecture’ quality and reduce the chances of your kids developing negative attitudes toward financial matters such as money shame.


Ages 8-12: Industry

Teaching your kids the value of work is a crucial step in helping them develop a good attitude toward money (and life). However, too many parents use work as a punishment. I’m guilty of making my kids do extra work whenever they violated a rule or mouthed off to me before I truly understood that doing so made my kids think that work was a bad thing. One of the things that opened my eyes was studying some of the habits of the Amish. These are obviously a very hard-working people and they have an amazing way of making work joyful and positive for their children. It’s so profound that they actually use not working as a punishment when their kids violate rules. When you include your kids in the money-earning process and impress upon them that work is something to be enjoyed, you’re setting them on the right path for success.


If you have young kids (or even if you’re just thinking about having kids), making a plan to teach them important lessons about money is one of the best things you can do for them.

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