Parents’ Guide: Teaching Kids About Money

When I was young, I watched my parents go through a monthly ritual of balancing their checkbook. With a stack of canceled checks on the kitchen table, they would painstakingly work to reconcile the numbers in the check register against the bank statement. If my parents’ calculations were more than a few pennies off, they would keep at it until the numbers aligned. 

The days of balancing a physical checkbook may be over for many of us, but the need for financial education remains critical. I didn’t realize it at the time — and I bet they didn’t either — but they were teaching me important lessons about money management. Their habits became my own when I began balancing my own checkbook. Little wonder: wealth management experts recommend teaching children about money early on.¹

Teaching kids good money habits like how to save money and pay their bills on time, for example, are ways to help guide them toward a healthy financial future. But financial education involves more than teaching them about “money in” and “money out.” It’s also about teaching them skills related to earning, budgeting, saving, investing, borrowing, planning, and even entrepreneurship.

You may wonder, if teaching children about money is so important, why aren’t they learning about it in school? In most states, kids get at least some personal finance education, but at the high school level, the topic may be integrated into another class. Only 20 states require a stand-alone class.² The onus, then, falls on parents or main caregivers to lead the way in teaching their kids about money and money management, especially for younger children. The good news is that doing so may be as simple as modeling good financial behaviors and as enjoyable as playing a rousing game of Monopoly.

Here are some ideas from experts for creating an engaging, kid-friendly environment that fosters their financial education.

• Involve children in family conversations about money: It’s beneficial for children to be involved in conversations about budgeting, saving, and careful spending.³ Hearing you problem-solve in a positive and productive way can better equip them to handle issues they may face when they’re older.
• Give your kids an allowance: Children may benefit from the financial lessons learned by receiving an allowance. Those lessons include a better sense of the value of money, what goes into earning it, and how to balance their saving and spending.
• Open up their own kids’ savings account: Set up a savings account for your children and work together to determine how much money will be deposited from, say, an allowance or birthday gifts. Teach your child to set savings goals, whether it be for a special toy, the latest digital device — or, one day, a car.
• Use money — real money: When was the last time you used physical money for a purchase? At some point, we may be a truly cashless society, but witnessing real cash transactions may help teach kids the value of different denominations of bills and coins, as well as the importance of ensuring they have enough money to pay for the intended purchase.
• Involve children in day-to-day money math: Every day brings opportunities to involve children in the math of money. For example, work with children to set — and stick to — a realistic shopping budget. When eating out, show kids the check and how to calculate the server’s tip.
• Make learning a game — literally: Iconic board games like Monopoly and Life teach skills such as investing, saving, and planning. Games geared toward older kids, such as Payback and Spent, teach skills related to paying for college and the importance of maintaining a good credit history.
• Make the stock market a reality: No matter how directly involved you are or aren’t in buying and selling stocks, the ups and down of the stock market typically affect most people’s lifestyles. Games such as The Stock Market Game teach the fundamentals of personal finance and investing by enabling children and their parents to build and manage an investment portfolio.