How Do We Teach Kids About Money

When do we teach kids about money? Is there a right age to do it? Do we have to give them an allowance? Can children learn about managing finances without an allowance? How do we make sure our kids grow up to be financially responsible?

How Do We Teach Kids About Money?

All parents want their children to grow up to be independent and able to make wise life decisions. So it is understandable that teaching kids about money is high on many parents’ list of priorities. 

Where it may get tricky is figuring out how to do it or what exactly to teach children about money at different ages. 

In the US, many parents choose to give their kids an allowance, hoping this will teach them about managing money. Yet only a small percentage of teenagers and young adults actually learn anything about money simply by receiving an allowance.

And that is because the most important piece is missing: talking with kids about money and actually teaching them how to manage it. 

Related: Should We Pay Kids for Doing Chores?

In this blog post, I will list a few things we can do to help our children learn about money. And remember, if you choose to give your child an allowance, that’s fine. But make sure you spend the time to have many conversations about how to manage it. 

What Is a Good Age for Kids to Learn About Money?

I like to think of everything that makes up our world as accessible and available. There are no taboo subjects.

For that reason, talking about money should happen anytime it naturally comes up, regardless of the child’s age. 

So my recommendation is to start early. 

Here’s an example: Casually talk about it when you’re out doing shopping trips with your child. As soon as your child begins to learn numbers, ask them to look at the price tag and read the price for you.

When we ask for children’s help and we involve them in what we’re doing, they feel important, needed, valuable, and capable.

Ramona Asztalos

Here are some ideas for starting to teach kids about money:

Introduce coins first

Every money lesson should be tailored to the child’s developmental level and ability.

Coins are fun and easy to learn and play with. Also, they give a better tactile experience. 

TIP

Since my kids were 3 or 4, I started giving them the change I got at the store if I happened to pay cash. Read below to find out how they played with those coins to learn lots of money skills. 

Encourage money play

Ever since my kids were about 3, I got them a toy cash register and play money and they played store, ice cream shop, or restaurant. I’ll link below to some of the toys and play money that we have. I really like the play money from Learning Resources because it looks very similar to real money and it’s the kind teachers use in the classroom as well. 

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How Do I Teach My Kid to Count Money?

Whenever we teach kids a skill, we have to wonder what sub-skills are involved. The way to think of it is like this: any tower is built of many little blocks. We want to start by teaching the blocks.

So, when we want to teach kids to count money, we have to figure out what smaller skills are needed. Here are some examples of skills that kids need to develop to help them with money:

Sorting

The first skill that kids need is sorting. They naturally do this from a young age. So you can just encourage them to sort their toys by color, by shape, and by size. There are lots of sorts that they can do.

Later on, they will need to know how to sort the coins by value so they can count them more easily.

Counting

Then, kids need to know to count numbers by 1s. If they can count numbers, they can count pennies.

Then, they need to know to count by 10s (it’s easier to count by 10s than 5s, so I would teach them 10s first). Then they can count dimes.

After that, they can learn to count by 5s. And that helps them to count nickels.

And with quarters it’s easier. They just memorize 25, 50, 75, 100. And then we tell them that 100 cents make a dollar. 

Of course, by now they should know the names of each coin. 

Operations

Other skills that are needed in counting money are addition and subtraction. Again, we don’t have to do it with money. They can add and subtract anything. These skills are transferable, meaning if they can add blocks or crayons, they can add money. 

I hope this makes sense and it helps to give you more ease and flexibility when it comes to teaching kids to count money. And you see how everything that kids do, from a very young age, helps to build the skills needed for counting and then managing money.

Games to teach about money

We have the game Money Bags. It is so much fun! My kids learned to count money and find equivalent amounts in one afternoon before my daughter entered 1st grade. 

Even though the game is for kids over the age of 7, I think any child who is interested can learn to play it. My 5-year-old learned to play it successfully and had fun with it.

It’s a really fun game. You can see it below.

Money Bags Board Game

How Do I Teach My Kid to Be Money Conscious?

When we teach kids about money, we also want to make sure that they understand the difference between planned purchases versus impulse purchases. And we want them to understand that we don’t spend an infinite amount of money on things, but rather we plan and keep track.

It’s important to realize that spending is a relative concept. I would teach kids two things about spending:

One is that spending habits differ from one family to another. They may see kids at school whose parents spend more on clothes and toys, and children need to know all families have different rules and that’s ok.

Another thing to consider is that spending may be determined by the occasion. Sometimes you may be willing to buy that $80 Lego set, but other times not. Be honest, and tell your child, “You know what, that looks like a really nice game, and I know you’d love to play with it, but we can’t afford it right now.” And your child will probably not like your answer. That is a great time to do two things:

1. Validate their feelings

Kids are sure to have some sadness and disappointment that they can’t get a toy they want. And that’s ok. Don’t be discouraged. It’s an opportunity for your child to strengthen their disappointment muscles 😉.

2. Decide if you want to offer an alternative

If it’s something that I think I would be willing to buy for them for a special occasion, I tell my kids, “Let’s put it on your birthday or Christmas wish list.” Then we either share that list with friends and family so they know what the kids would like, or we buy them something from their list when it’s their birthday. And other times we pool money together to buy a more expensive item from that list and we make sure to tell the kids how we did it. 

Related: 16 Ways to Teach Children to Be Kind

How Can My Child Learn to Manage Money?

When it comes to managing money, children learn by watching and by doing. 

We’ve talked a lot about how we can talk to them and involve them in our decision-making process. 

But how can we let them do it for themselves? 

It’s ok to give kids an allowance. However, I would make it very clear to them why they’re getting that allowance. 

Also, be clear about what kind of skills you would like to teach and focus on them. Some of those may include teaching kids to set goals, save, borrow, and repay. 

An important lesson here would be to allow kids to make mistakes. Even if you can foresee a failing plan, allow your child some freedom to make a (safe) mistake. Then promptly follow up with a lesson. Talk about what the mistake led to and how it can be avoided in the future. 

Here’s a cute idea for a shopping game that you can play with your child.

How Do Kids Understand the Value of Money?

To put it simply, kids learn about the value of money by watching us and by practicing under our guidance. 

Something to keep in mind is that understanding the value of money is a very abstract concept and kids are likely not going to get it until they are older. 

When we teach kids about money, we have to be clear about the “learning objectives” we are setting. There are some that are easier to grasp, and others that our kids will take years to learn. 

The ones that we can expect to see quick results for are the more concrete skills, such as counting and making change. Understanding the value of money is an abstract and higher-order concept, so we should exercise patience when expecting our kids to understand it. 

With that being said, everything we do and teach our kids creates building blocks that will help them eventually understand the value of money. 

10 More Tips and Ideas for Teaching Kids About Money

1. Kids learn best through play

It may be exhausting, but play along and buy some wood pizza or that felt sandwich and pay with play money. Kids love to learn through play. 

2. Give kids real money

Kids also love real-life play, they love to copy their parents. I made a deal with my kids that, whenever I would shop with cash, if I got any coins in change, I would give them to them. And they’ve been collecting the coins in a plastic jar. For some reason, they love playing with real money. They sort them in columns, stack them, group them to make dollars, add them all up to see how much money they have, etc. I was surprised one day to hear my son counting and adding all his coins accurately.

The one thing I dislike about real money is that they stink, so I make sure my kids wash their hands thoroughly after playing with them. 

3. Follow their interest

When they show interest, teach them. Don’t say, “You’re too young for this, You can’t understand, I’ll tell you when you’re older.” The message is “you’re not capable, I don’t trust you can handle this.” At the same time, don’t insist that they play with money or that new game you got them. They are unlikely to learn much when the motivation isn’t there.  

4. Teach “wants” and “needs”

Have an ongoing conversation about things we want and things we need. This can start early on with simple conversations and should continue as kids get older, with more implications in making decisions. 

5. Let kids shop

There are multiple things you can do here. First, hand them an amount of money or let them bring their allowance. 

Then as you shop, if they want to get something, you can ask them, “Do we have enough money for that?” 

Or, at the cash register, “We have to pay $22.78. How do we round up so we can figure out how much to give?”

Then have your kid hand over the money either for the whole purchase or maybe just the thing that they got for themselves. When they’re handing over the money, kids see the amount they had at the beginning and how much they have left after paying. And they understand that an exchange must take place in order to take home an item.  

6. Talk about how you earn money

Explain to kids what you do for work and that your employer pays you for the work that you do as a reward. 

My kids and I had numerous discussions about how their dad makes money. Just so you can see how funny and literal kids are, I’ll tell you a quick story. We kept telling the kids that daddy has to go to work so he can make money.

After several months, my 5-year-old began discussing this topic again. He wanted a new toy and I told him we don’t have money for new toys at that time. He suggested I call his dad to tell him to make more money and to bring them home so we could buy the toy.

At that point, I realized that my son understood that his dad actually made money somehow with his hands. Then we talked again, in more clear terms about the type of work his dad was doing, who was paying him, and how. 

7. Explain how you manage money

Have discussions with your child about when and how you get paid. For some people, it may be every two weeks, for others once a month. Then explain to them how you put money aside to save, how some of it goes into a spending account, maybe. I believe kids are never too young to be introduced to such topics. 

When you go out shopping or do your shopping online, think out loud and share with your child your reasons for making some purchases and not others. Talk about value, quality, sales, coupons, and so on.

8. Cash or card

Another thing to explain to kids is the difference between cash and having money on a card. Because they can’t see the money, cards are very abstract. Similarly, it is difficult for kids to grasp that you have money, but it’s in a bank. They may wonder how the money gets into the bank and how come you can use it without touching it.

9. Money is private

Also, teach your child that money is private and they shouldn’t talk with other children or adults about how much their parents earn or how much money they spend. 

10. Teach about investments

When kids are a little older, you can talk to them about investments.

One idea is, if you’re saving money for college, share that with them. Also, every time you make a deposit in their account, let them know and check the account together to see how the amounts change.

Another idea is to buy some stocks for them. Do some research together to see which stock is best to buy, decide together which one to get, then follow it and talk about fluctuations. Of course, you would do this in very simple terms initially.

As kids get older, you can have them research more about this topic and share with you what they learn. 

Bottom Line

When we want to teach kids about money, consistency and perseverance are key.

Even if kids don’t understand everything, these will become concepts that they are at least familiar with. And by having ongoing conversations about them, our kids will understand them better and better every time. At the same time, we have the opportunity to correct misunderstandings and clarify any confusion. 

Remember, you are your child’s best teacher. You know them best and they are most open to learning from you.