Financial LIteracy For Beginners

Updated April 4, 2023

What if we told you that you could raise financially fit kids with good money habits in just five easy steps?  For those of you who are looking to begin teaching your kids about money and finance, we’ve rounded up our best advice into five digestible tidbits.  Read ahead for everything you need to know to teach your kids about money.

1. Make money talk part of the family conversation. 

The facts don’t lie.  Most of us don’t like to talk to our kids about money.  We dutifully teach them how to tie their shoes, we remind them to wear their bike helmets, and many of us even tackle the birds and the bees with our littles.  When it comes to money, however, we often stay mum. 

Some of us find it rude to talk about money.  Others don’t feel armed with the right resources to answer our children’s money questions.  So when it comes to starting the money conversation, where do we even begin? We start teaching financial literacy to kids simply: begin to narrate the countless spending, saving and giving decisions we make on a daily basis to bring our kids into the fold.  Whether it’s a tiny choice (comparing two cereal brands at the grocery store), or a significant one (buying a new car), include your kids in the conversation about money.  Let them be privy to the inner dialogue that grown-ups have when making everyday financial decisions...because a little money talk each day can go a long way in teaching your kids about money. 

2. Give allowance.

As children grow up in an increasingly digital age, it is essential that they get back to basics when it comes to money and teaching financial literacy to kids. 

Kids need to physically handle bills and coins, exchange their cash for items they buy and count the change.  They need to learn through experience that once cash is spent, it is quite literally gone forever.  They need to sort, count and differentiate the money in their banks and wallets.  Before our kids become wizzes at everything Apple Pay to Zelle, we believe cash must be king for our mini money mavens. 

The easiest way to get kids on the spending, saving and giving bandwagon?  One word: Allowance. 

When used wisely, allowance may be the most powerful financial literacy teaching tool for making kids, both young and old, financially fit. 

In making decisions on how to spend, carefully tracking weekly savings, or taking ownership of opportunities to give, children are quietly building the money-smart habits that will endure far into their futures. 

As team players pitching in around the house and reaping the rewards of their hard work, kids also gain independence, confidence and competence.

Most importantly, by making allowance a regular part of the family routine, parents are sparking a daily dialogue around money that is quite literally, priceless. 

3. Teach basic budgeting.

Budgeting.  A word that conjures up the same mild displeasure as a routine dental appointment or an excess of unwashed laundry. But budgeting is an essential component to building financial fitness.  It is an actionable, living plan for how to spend, save and give your money.  A budget helps people keep track of their income (money in) and expenses (money out) to make sure they are spending wisely.  While adult budgets may involve complicated spreadsheets that make us cross-eyed, it’s best to start small when it comes to budgeting with our babes.

Budgeting takes practice, and it’s our job as parents to offer kids the opportunity to hone this important skill.  With an allowance in place, ask your child what is something she’d really like to save for.  Then, make an actionable plan to set aside a specific dollar amount, each week, towards this saving goal until it is achieved. 

Even the smallest forays into budgeting allow children to build the skills to spend, save and give wisely as they grow. 

Budgeting helps kids build their willpower, resist instant gratification, learn to set goals and follow through. More importantly, budgets give us power over our money and help us prepare for whatever the future has in store.  

4. Practice delayed gratification.

Kids these days...they aren’t used to waiting.  Patience, as a virtue, is barely practiced as devices distract, Amazon same-day delivers and Disney+ offers a telescopic library of animated history (commercial free!) at the tip of little fingertips.  But patience, it turns out, is hugely important.  Specifically, children’s ability to delay gratification is highly predictive of future success. Kids who learn how to forgo an immediate reward for the possibility of a more valuable reward in the future are practicing a skill that has life-long benefits. 

 How do we get our impatient littles to practice some delayed gratification?  We praise self-control in our household.  “I’m so proud that you decided not to use your spending dollars on the candy bar - I think you’ll be grateful you saved them when there is something you really want.”  We also model patience for our kids. (We know, easier said than done!).  “I’d really love these new shoes, but I’m going to hold off since Dad and I are saving our dollars for a new washing machine.”  We teach kids how to use positive distractions to overcome impulsive actions.  “Let’s start a puzzle together and we can have another cookie after dinner.”  Finally, we practice making a long-term plan and executing it. “I know you really want a new scooter.  Let’s decide how much money you should add to your “saving” dollars each week and we can make a plan to buy it.”  In a few nearly effortless steps, we can help kids build their willpower from even the youngest age.

5. Encourage mindful spending.

Raise your hand if your kid has ever watched a commercial and immediately demanded a unicorn Huggle Pet.  Have they walked through a grocery aisle and suddenly can’t live without trolls-themed jelly beans?  Or, has your child ever gone on a playdate and left asking for the Hot Wheels racetrack they never knew they needed?  Our kids are simply reacting to spending triggers that they must learn to navigate as they get older.  Even adults have impulses to spend. We all fall prey to those targeted Instagram ads and one-click purchases.  Sometimes it’s almost too easy to give our dollars away. 

 How can we be more mindful about our spending? And how can we teach our kids to do the same?  We help them understand why they want to buy the item:  “Do you just want this LOL doll because Sofia has the same one? If that’s the case, you can share hers on your next playdate and save your $11 dollars.”  We tell them to take a pause before purchasing: “That sure is a cool Beyblade.  Let’s take a photo of it, and if you still want it tomorrow, we can come back with our spending dollars and buy it.”  We make a list with them before they even enter a store:  “We need to buy three birthday gifts in this toy store.  Let’s write them down and only purchase the items on our list. Can you help me cross the gifts off as we find them?” In short, mindful spending teaches kids not only to buy fewer things, but more importantly, to buy what really matters to them. 

These five simple steps can set kids up with a strong financial foundation for life.  Even the smallest forays by parents to talk about money, practice budgeting through allowance, delay gratification and make spending mindful, can pay off big as kids grow up.