Do you remember when you first learned about saving money or when you applied for your very first credit card? You might even recall when your parents first gave you an allowance. Learning how to manage money is an important childhood milestone, like losing a tooth or riding a bike for the first time.
As a parent, teaching your children about money is imperative for them to have a healthy relationship with finances, both now and in the future.
You might ask: When should I start? It depends on your child, but slowly sprinkling in financial lessons throughout childhood is a good way to ease into the discussion and build good habits.
Our free, online Ms. Money’s Classroom is a great resource for families that helps make learning about finances fun! Join Ms. Money, Nick, and Penny to learn all about saving, spending, and sharing money here.
This age-by-age guide will help you identify financial topics and lessons that are appropriate for each stage of your child’s financial development:
Early childhood - age 5 and younger:
- Children under five may not be able to grasp what money is, let alone how to manage it. Start small by helping them identify nickels and dimes, and make it fun by letting them put your spare change in their piggy bank.
- You can also invent games to help them begin to understand the concept of paying for things. Try playing grocery store checkout or pretending to pay the bill at a restaurant.
- Once they’re old enough to do small chores like picking up their toys, consider giving them a small allowance and teaching them how to save up for something they want. This teaches both responsibility and how to set financial goals. Keep in mind that you may end up paying the difference for whatever they choose to buy since young children often like to pick the most expensive toy regardless of whether they have socked away $1 or $100. Practice goes a long way!
The Psychology of Money: 3 Reasons Why Talking About Money Early and Often is Key
Elementary school age - 6-10 years old:
- This is when children can really start to understand what it means to save money. It’s a great age to take a trip to the bank and open their first savings account. While at the bank, you can explain how their money will add up every time they make a deposit and vice versa when they withdraw money.
- You can also explain what it means for their money to earn interest, although this concept is still a little complicated. You can teach them that basically, the bank rewards them for saving money. Sharing monthly bank statements that highlight interest payments can be a good way to help them understand how it benefits them. The more money they put into the savings account, the more “extra” money they get every month.
- Children are often motivated by rewards — the cost of those Robux can certainly add up fast — so it’s smart to get them thinking about how hard they have to work to save up enough money for one game, toy, pair of sneakers, etc.
- Now is also a good time to consider establishing a regular allowance and how chores may fit into your child’s financial education. What chores are expected as part of a regular allowance? Can they earn extra money by volunteering to do extra tasks around the house to help boost their budget? Once children begin to understand the value of money and how far a dollar goes, it’s easier to begin explaining budgeting to them.
- Another fun way to teach your child about money is to have them set up a lemonade stand (or an apple cider stand in the fall) and encourage them to determine the price of the lemonade. A lemonade stand can even set your little one up for an entrepreneurial future!
- Don’t forget to take advantage of financial education resources from your local bank! For example, our summer Reading Makes Cents program can help bolster your child’s savings for the future while engaging them in a fun, educational, and familiar hobby. Our free Ms. Money’s Classroom also provides opportunities for kids to learn more about finances in a fun, age-appropriate environment.
- Broaden their financial education by introducing them to fun digital activities. Having your child build a money-related playlist or play a game like Animal Crossing that introduces financial concepts can bolster their education without feeling like homework.
Take the Quiz: Finding the Right Type of Savings Accounts!
Middle school years - 11-14 years old:
- Discuss the importance of budgeting. If your tween/teen wants to go to the movies with their friends, they may not have enough money left over to buy a gigantic tub of popcorn and an extra-large slushy.
- Do you have an entrepreneur on your hands who babysits, mows lawns, or has another creative way to earn money? Help them start healthy savings habits by putting some of the money they earn away rather than spending it all on the latest technology or fashion. Explain that skipping a new pair of boots or video game right now could result in the funds for larger rewards, such as a car, when they reach their late teens.
- Teach them how to comparison-shop for the items they want in order to find the best prices. Better yet, show them how to use coupons to save even more!
- Talk to your kids about their financial goals. For example, are they hoping to go to the arcade with their friends or buy a more expensive item? Introducing a visual savings tracker may help them stay motivated to save up for something they really want.
High school age - 15-18 years old:
- As scary as it may seem, this is the age when your child will be getting their license. Explain the difference between the cost and value of a new vs. a used car, as well as insurance and gas. Be prepared that your child may experience sticker shock from insurance premiums for new drivers, which can help open the door for discussions about other big-ticket items on the horizon, like college tuition.
- This is the perfect age for a first job. Help your teen figure out how to earn their first paycheck and the responsibility that comes with making money. And when they get their first check, you can explain the cold, hard reality of paying taxes on their income.
- Encourage your child to open a student checking account. Many banks, like Rockland Trust, offer free student checking accounts with no minimum required.
- Prepare your child for life after high school by discussing the bills they can anticipate in their adult life, from rent and utilities to the cost of their favorite streaming platforms and apps. You may discuss a savings strategy to help them prepare for their first apartment or other financial milestones that matter to them.
- Discuss the importance and benefits of a rainy day or emergency fund for things like car repairs or even medical emergency co-payments.
Additional advice for parents of college-bound teens and young adults:
- Start conversations early about a plan to pay for college and how costs may factor into deciding where to apply or enroll. Scholarships are a great option that can help ease the financial burden – help your child research their options. You’d be amazed at how many scholarships or grants may be available to your child!
- Fill out the Free Application for Federal Student Aid (FAFSA) together and discuss what it is and how it impacts the financial aid package your student may be offered by colleges and universities. We answer six common FAFSA questions on our Learning Center.
- It’s also a good time to talk about student loans, including the difference between subsidized loans, which are available to those with a qualified financial need, and unsubsidized loans, which are available to a wider audience. Include considerations about how much they will need in loans to cover college tuition costs and what monthly payments look like when student loan repayment kicks in. You may even have personal experience to share about how student loan payments impacted your life and financial goals.
- Encourage your child to consider costs beyond just tuition payments, including how much money they will need to live on campus and whether they will have to get a part-time job to help cover room and board, books, and entertainment (and maybe pay for spring break).
Tips for How to Start Saving for College Today
Early adulthood and beyond - 19 years old and older:
- Discuss what a credit score is, when to start building it, and how to increase it — or how to avoid tarnishing it. Having a solid budget in place will help them avoid late payments and dents in their credit as they build it, and introducing the concept as they enter adulthood can better prepare them to build credit for a later auto loan or apartment lease. Also, make sure they know how to check their credit report for mistakes.
- Help them determine whether it’s the right time to apply for a credit card and the financial consequences of making only the minimum payment every month.
- It’s also a great time to help them set up an intentional spending plan or budget that balances their rent, bills, or other necessary expenses with money for the fun stuff, like late-night pizza deliveries or date nights.
- Once they’ve graduated from college or landed their first adult job, instill in them the importance of saving early and often for retirement. Even setting aside the cost of a cup of coffee a day can set up long-term financial stability. This is also a great time to reiterate the importance of compounding interest within a retirement plan and how factors like employer match contributions to their 401(k) can impact their retirement savings strategy — starting early can help set them up for the future.
- Your young adult may need refreshers, support, and advice for budgeting, saving, and retirement planning. Be their support system as they figure out the financial reality of adulthood!
- Help them plan for life events, like buying a house, planning a wedding, or having a child of their own (which may include paying for private school).
- Help them consider other ways to save for retirement outside of a 401(k). For example, would a Roth IRA or a traditional IRA make sense for their finances? Help them explore to find the option or options that work best for them.
Teaching your child about money now sets them up for a successful, stable future. Although it may sound intimidating, starting now can help make a huge difference later on!
Our financial education expert, Julie Beckham, encourages open, honest conversations as a family to create an environment that fosters a lifelong, healthy relationship with finances and money. You might even find that your children’s generation can teach you a thing or two about finances.
To find even more resources you and your kids can use for their financial education at any age, check out our Learning Center.
