How to Raise Money-Smart Kids

When it comes to financial literacy, young adults are increasingly less knowledgeable: Even the most basic financial matters are a mystery to them. According to the Jump$tart Coalition, high school seniors are able to correctly answer less then 50% of questions on personal finance concepts, and this percentage is declining each year.

Who is responsible for this lack of education on money matters? As it stands today, there are almost no K-12 schools that offer financial literacy classes. Our kids clearly aren’t going to learn about finances in the classroom. Instead, their financial education needs to start at home, with Mom and Dad as teachers.

It is never too early to teach your kids the value of money. Getting an early start is ideal, because by the time they are teenagers they are undoubtedly spending money and may have already formed bad financial habits. Instead of just spending money, teens should be saving and planning for their future. According to a study from Inceptia, writing down financial goals as a teenager and learning to stick to a budget early on in life leads to financial confidence and increased financial know-how during college.

The key is to teach kids to be responsible by giving them the feeling of ownership over their money.

You can teach kids the value of money as young as 5 or 6 years old through allowances. At that age they are already starting to understand money and its significance. Games involving a pretend cash register or store can also help young children learn the value of a dollar.

It is important to start teaching your kids when they are young so you can be there with them every step of the way. If your child’s first time budgeting and paying bills coincides with his or her first time living away from home or during college, chances are you are going to get a distressed phone call one day about a major financial mistake. You can help keep this from happening by letting them know when they are young that you are there to educate and provide financial and moral support.   

As your kids get older, here are some key lessons to establish their financial literacy:

Young Children:

  • Set up an allowance.
  • Teach them to always save 10% of their allowance or other money they receive from gifts, chores, etc.


  • Encourage them to make some extra money through babysitting, cleaning, taking care of a neighbor’s pet, etc.
  • Teach them the difference between wants and needs by having them save up for and buy their wants like movie tickets, clothes, and other material items.


  • Encourage them to make money with a part-time job and/or summer job.
  • Help them open their first checking and savings account so they can start putting money away.
  • Open a credit card account and let them use it (while managing their spending very closely!). Meanwhile, help them understand the importance of paying the card off each billing cycle and teach them about interest rates. **Don’t give them full control of a credit card when they are this young because it can be too tempting for a teen to spend money that isn’t already theirs.
  • Help them create a budget and set goals for items they want, like a new phone or a perhaps even a car.
  • Show them some of your monthly bills and explain what happens if you don’t pay on time. You should also start transferring some of their bills to them once they are making money to teach them how to budget for expenses.
  • Make them an active part of filing for their taxes so they start to understand the ins and outs of the system.

Throughout all stages of your child’s life, the most important thing when it come to financial literacy is communication. Don’t make money a mystery. Have them engaged in the household finances and help them understand the daily, monthly, and yearly incoming and outgoing of money. If you start early, you’ll prepare your children for financial success throughout their teenage years and young adult life.

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