Financial Literacy: What to Teach Younger Children

Financial literacy is an important part of raising children to be successful and independent.

However, good money habits don’t just develop spontaneously.

Children need to have instruction in financial literacy from the time they are small.  It is possible for you to teach younger children about money, building a solid financial foundation for them in the years that follow.

Teaching Toddlers

Even though it seems precipitate to teach a two or three year old about money, you can still lay a foundation for good financial lessons.  You can ease your toddler into the concept of money with the help of rewards systems. You can provide stickers for good behavior, and when they earn a certain number of stickers, they can redeem them for rewards.

A similar system can help your toddler become used to the idea of earning something that can, in turn, be exchanged for something else.

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Preschool and Elementary School-Age Children

financial literacy children

It’s important to start teaching your children financial literacy from early on.

As your child ages, he or she will naturally begin asking questions about money, and talking about how they can buy things on their own.

Children of four and five are often old enough to begin receiving an allowance.  They can grasp concepts related to physical money, so using cash is a great way to introduce them to the idea.

When your child receives an allowance (whether you pay them for chores, or just give them a set amount of money each week), help him or her divide it up into savings, charitable giving/church donations, and spending money.

That way, they can start managing money, and developing good habits.

There are some strategies that can be used to help elementary-age children stay focused on earning money, and properly managing it.

Here are some ideas that you can use to help your children learn financial literacy, and encourage them to save:

  • Create charts: Create goal charts that encourage your children to save up for goals.  You can cut out a picture from a magazine, and color in squares or add stickers to the chart, to help your child see progress toward the goal, depending on how many weeks it will take to save up.
  • Different jars or envelopes: Help your child visualize that money has different purposes by providing different jars or envelopes.  Your child can draw pictures to remind him or her what each jar is for.  A picture of a college or a car can help your child visualize long-term savings.  A picture of a church or a charity-related picture for the donation jar is helpful, as is a picture of a desired toy for the short-term or spending money jar.

 As your child gets older, reaching the age of eight or nine, you can start adding lessons about debit and credit cards, and how banks keep your money for you, and how debit cards work.

Throughout, though, your best bet is to teach by example.

From the time your children are young, have discussions about money at home, and include them in age-appropriate councils about finances.

Make decisions about money as a family so that your child can see how to talk about money, and see your example of good financial habits.

Janet writes for Credit, Eh a blog about personal finance and responsible credit use.

About Glen

Glen is married and the father to four children that he spends the day chasing as a stay-at-home-dad. He took an interest in personal finance when he realized most of his paycheck was going toward credit card bills. Since then he's eliminated his credit card debt and started on a journey towards financial freedom.

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  1. Always looking for new ways to teach kids about money management. I always try to think of it in the way that kids are like adults that they learn things differently and some approaches are better than others so not every budgeting strategy works.