September 1, 2022

How to Teach Your Kids Financial Literacy

Dropping coins in a piggy bank and receiving some birthday loot is often how kids first connect with money. While this is a good start, there are many proactive ways you can help kids at any age develop financial literacy.

Financial literacy is defined as possessing the knowledge and skills to make informed and effective decisions about money and financial goals.

Why is this important? The financial habits kids learn will impact them throughout their lives. One of the most significant concerns Americans have is running out of money in retirement. SRI research found that people who have greater financial knowledge are more likely to save for retirement – regardless of age or household income.*

Here are a few easy tips to help your kids become financially responsible:

Preschool and Early Elementary

The University of Cambridge found that several basic finance behaviors are developed by age seven, so start teaching your kids early. See the money grow as you fill up a clear jar instead of a concealed piggy bank. In today’s cashless society, it is hard for kids to grasp the value of money or that things cost money. Whenever possible, let your kids see you pay with cash. Even better, let them dump out the jar, count the $5 needed for their purchase, and hand the money over to the cashier.

Another great experiential activity is a lemonade stand or bake sale. These small pop-up businesses are chock-full of opportunities to learn everything from finance to marketing to entrepreneurship.

Elementary and Middle School

Even when you are not paying with cash, show your kids your receipts to enforce the concept that money is being spent and explain where that money is coming from to pay for the purchase. Encourage kids to wait a day before purchasing anything over $15. This short-term delayed gratification will help kids plan for longer-term goals later in life, such as a boat, house, or retirement fund.

There are certain tasks or chores kids are expected to do as contributing members of the family, but consider giving a “bonus” when kids go above and beyond. Instead of calling it an allowance, think of it as a commission. Then as kids get older, encourage them to negotiate raises for additional jobs they take on around the house. This builds crucial professional skills.

Playing games is often a fun way to learn. PayDay is a fun board game simulation of real life where players have to manage expenses and try to stretch their money to the end of the month. This transfers into real life, helping kids learn what they are willing to pay for. For example, if a parent has to clean the room instead of the child, they won’t get their weekly commission.  It is like hiring the parent for the service, just like adults may hire a plumber. Another example is explaining to your child, “If you buy this video game, you won’t be able to afford these new shoes.” And then take it one step further and help them think about how they could work, save, and invest to afford both the video game and the shoes in the future.  

53% of kids, ages 8-14, say that they wish their parents taught them more about money.

High School

Help your teenager open a bank account and use an app to track finances. This will prepare them for managing more complex accounts as they get older. There are several apps to choose from, including RoosterMoney, Step, Current, EveryDollar, and Greenlight. FamZoo is an app that allows parents to schedule allowances/chores, funnel money into savings, giving, and spending, provide prepaid debit cards, create IOUs, and teach kids about compound interest. Another classic resource book about compound interest is The Richest Man in Babylon. The earlier a teen can get started investing, the better.

Teens often have an active social life filled with needs for gas, clothes, food, entertainment, and more. Help them to find a job or even become an entrepreneur. It is also good to encourage your teen to save for college. Look for options other than student loans, such as a college savings account, applying for scholarships, considering a community or in-state university, and working part-time while in school. Teenagers will be more engaged with their education when they have skin in the game.

Contentment is vital for financial literacy, but contentment starts in the heart. We are bombarded with images of our friends, family, and celebrities sharing their highlight reels, and we get caught in a comparison trap. It is important to remind your kids to stop and think about where they want to spend their time and hard-earned money. Maybe their car isn’t the newest, but it is reliable and leaves money left in their savings to pursue other interests or goals.


In addition to giving your time and talent, increasing your financial literacy increases the money you have available to share with others in your community, across the country, or around the world. Even from an early age, children should experience the feeling of making a difference.

Personal finance is all about decisions. Model the behaviors you want your children to adopt. Spend less than you earn. Talk often and consistently about how you are saving, spending, and giving. Nurture your children’s curiosity, and they will grow to be financially savvy adults.


At BetterLife, we believe knowledge is power. Are you interested in expanding your knowledge even more? Click here to learn all about a budget-friendly protection plan for your loved ones.