How to Teach Kids About Money Before High School

Here's how to raise kids who enter high school with a solid financial foundation.

Raising our children to be money savvy is a critical part of parenting. Schools, unfortunately, do not necessarily provide enough education on this front. There are few lessons taught in most K-12 schools about the value of a dollar, the importance of saving, how to curb impulse buying, and how to establish (and live by) a monthly budget. As parents, these are some of the most important lessons we should be imparting.

But when should you start delivering these financial how-tos? Experts say the education can start as early as three years old, at which point kids are able to grasp basic money concepts. And by the time your children reach high school, they should be well on their way to financial literacy.

Need a little help getting started? Not to mention planning the steps of that financial education? Here are some of the expert-recommended ways to provide meaningful money lessons for growing children in advance of high school.

Begin in preschool with lessons about delayed gratification.

One of the earliest—yet most important—lessons you can teach your children is the concept of delayed gratification. It's an idea that also conveys messages about planning ahead and, in turn, the value of self-control, says consumer finance expert Tanya Peterson, vice president with Freedom Financial Network.

"The best example here is the marshmallow test, a study that was conducted in the 1960s with research still going on today," Peterson tells Parents. "Four-year-old children sat by themselves in a room with a marshmallow. They could eat it then, or if they waited until the researcher returned, they could have two marshmallows instead of just one. Results show that kids who resisted—displaying the most self-control—were the most successful later in life."

What this says about financial responsibility is that being able to say "no"—and understand the benefits of delayed gratification—can help build long-term savings and other markers of financial success.

But how to apply this lesson so early in life? For preschool-aged children, it might involve helping them learn that they can wait for what they want, and can live with being told "no," says Peterson.

For example, instead of being bought a toy whenever they ask for it, "perhaps they can select a toy for their birthday or some other special day in the future," Peterson explains.

Explain foundational money concepts at a young age.

It's not unusual for parents to avoid talking about finances with young children, either because they feel the topic may still be too advanced, or out of fear of having to talk about the state of their own financial situation.

"While parents or guardians may not want to scare or frustrate their child with hard truths and difficult concepts, it is imperative to give children a foundational understanding of money, so that they can be financially literate as adults," Erin Ellis, an accredited financial counselor at Philadelphia Federal Credit Union (PFCU).

An image of money.
Getty Images.

Children can start comprehending the basic idea of money at as young as three years old, and parents can aid that understanding by introducing some simple financial lessons into everyday life, adds Ellis. These might include:

  • How money allows you to pay for things
  • Describing the different types of money and how each type has its own value
  • Providing examples of items that you can buy with each coin or bill
  • Sharing that your job gives you money in exchange for your skills or service
  • If you keep most of your money in a bank or credit union, explain how you keep money safe
  • Explaining why it is always important to save

Involve kids in family bill paying and budget management.

Yet another way to begin exposing growing children to money fundamentals is to sit down with them and go over the monthly household bills, says Sandy Yong, author of The Money Master.

"When you pay your monthly bills, you can show your kids how much it costs to run a household," Yong tells Parents. This lesson can include reviewing payments for heating, electricity, water, streaming services, subscriptions, internet, and cell phone bills.

"You can even work together to find ways to reduce your electricity and heating bills, and turn it into a fun game for the whole family to participate in," continues Yong. If any household expenses come down as part of the game, you might even use the savings to reward the family.

"Once your child understands basic arithmetic, they have the basic skills they need to understand how your family manages their money," adds Melanie Hanson, editor of EDI Refinance. "By going through your income and expenses together, you can give them a clear sense of the value of money beyond the prices of things that kids might want, and help them to understand the costs associated with everything you do."

Look for everyday moments to continue the money conversations.

Engaging your child in bill paying or family budget routines should really just be the start of the conversation.

Studies published over the past 10 years, including in the Journal of Family and Economic Issues, show that when parents and kids actively discuss money at home, kids are more likely to have positive financial outcomes starting in early adulthood. Regular conversations are a big piece of financial socialization, says Jennifer Seitz, an educational content lead at Greenlight and a certified financial education instructor.

"Show your kids all the practical ways in which money is intertwined in life," Seitz tells Parents.

For example, this might include asking your child when you're checking out at a store if they know what kind of bank card you are using.

"If it's a debit card, you can explain how the card is taking money directly from your bank account. Or if it's a credit card, point out that the balance you owe on a credit card must be paid each month or interest will be owed," continues Seitz. The point here is that "neither of them are magic money cards, which my kids were disappointed to learn at a young age," explains Seitz.

Used allowance to teach smart money decisions.

Giving children an allowance is one of the most popular methods parents use to teach kids money lessons. Often, the message is: Do chores around the house, and earn an allowance in return.

But developmental psychologist and certified family life educator Kate Monahan, Ph.D. says that's not the best way to maximize the educational opportunity associated with allowance when your children become teenagers. Instead, she suggests, allowance should be a weekly financial gift to your teenage children.

"Providing your child an allowance for chores is trying to build an association between work and money. That's not your goal here," Monahan, author of How To Be A Relaxed Mom: The 3 Secrets To Avoid Modern Mom Stress And Raise Great Kids, tells Parents. "The point of an allowance is to teach your child about making smart money decisions. Not to get them to do their chores."

A common response to the surprising perspective Monahan offers is that in the real world, most of us have to work to earn money, so why should kids just get money handed to them?

Monhan's response to this objection: "This is using a business lens to think about money, where labor means money. You need to put on a parent lens, where money means a chance to teach your child," she explains.

There's nothing wrong with your child doing extra chores to earn additional money, Monahan continues. Perhaps they go above and beyond on some chores periodically to earn a few extra dollars. But let them drive that choice and idea, explains Monahan.

The positive effects of receiving an allowance on a person's financial capability are amplified if that allowance is paired with parental instruction about finances. The most financially competent college students report that parents explicitly talked with them about finances from a young age, Monahan continues.

"Talking directly about credit cards, budgeting, debts, loans, and savings are what helps children develop values. And paired with opportunity to practice these skills through an allowance, kids can develop good financial capabilities," says Monahan. "Interestingly, learning through example by watching parents, without having a direct conversation, doesn't seem to impact how a child understands finances. Explicit teaching about money leads to children being more knowledgeable about the impact of their financial choices."

Make saving money a priority

As children start to grow older and perhaps begin earning a paycheck from a part-time job, or even from that household allowance, there's the temptation to spend the money on everything from after-school activities to the latest gadgets and activities trending on your child's social media feeds. But learning how to save wisely is a crucial step to building good financial habits.

"You can encourage this habit early on by teaching your child to set aside a portion of their allowance for future use," Poulomi Damany, general manager of Credit Karma money and tax, tells Parents. "It's even more important to stress the benefits of saving with your teenager, who may have income of their own to manage."

To really underscore the importance of saving, have your children establish savings goals. Are they in, or entering, high school? Maybe they are working toward getting their driver's license, or perhaps they will be attending their first school dance soon. These milestones often come with some sort of financial pressure, whether it's buying a car or splurging on their dream prom dress.

"Encouraging them to save up for these types of purchases will teach them the value of money, and the tangible benefits that come from saving money," says Damany.

Help them create their own budget

After covering the basics of saving money and setting goals for their savings, the next step is to teach children how to craft their own budget.

"A budget can often seem daunting, but it can act as a north star as they save for their financial milestones," continues Damany, who adds that if a budget sounds too daunting for your child, reframe the discussion in terms of making a plan for their money so they they're spending it wisely.

"They can keep it basic, just writing down any money they have coming in from jobs around town or the house, as well as any expected expenses, like gas or entertainment," explains Damany.

Increase your child's confidence by increasing access to financial tools

As your children grow older and approach high school, their financial knowledge and savvy should also be increasing. But a recent survey conducted by Capital One found that a mere 15 percent of 13- to 18-year-olds feel very confident in how they handle money. Just like playing a sport or learning an instrument, letting kids practice and learn about money decisions can help increase their confidence and skills, saysPeter Boyer, senior vice president of retail bank marketing, analytics, & product strategy of Capital One.

"Whereas in the past, kids would keep their allowance in a piggy bank, now products like [kid-specific checking accounts] let kids as young as eight access the tools of modern banking," Boyer tells Parents.

Capital One is among several financial institutions that offer a teen checking account or debit card. Additional options are offered by Chase, Step, and Greenlight.

"When we give kids the means to practice good saving and spending habits, establish short and long-term goals, and even designate their money as 'spendable' or to 'set aside,' we build more financially confident kids who grow up to be financially savvy adults," says Boyer.

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