Financial Literacy: When Should Parents Start to Teach This? 

Financial literacy is the ability to understand and manage money and personal financial matters. It’s an important skill set that can help with making informed decisions about money and achieving specific financial goals. While it’s critical for parents to understand personal finances, what about their children?

When should parents teach their kids about managing money?

Practicing money mindfulness is pivotal for all ages and is preferably taught early on. While some financial literacy is typically taught in schools, it’s sometimes a larger responsibility of parents to teach their children about money management. There will be different skills you teach your children at different times in their life.

Let’s take a look at the approaches you can take for teaching financial literacy to your kids based on their age.

Ages 4–8

Parents should plan to start teaching their children about financial literacy at an early age. As soon as children begin to understand basic concepts — such as earning and spending money — parents can start teaching them about the importance of saving and budgeting. Kids between the ages of four through eight years old usually are able to understand this fundamental knowledge and absorb new information.

For these young children, these teachings can involve simple activities such as setting aside a portion of their allowance for savings. If you implement chores for your children to earn their allowance, they’ll be able to learn the value of not only earning money but the hard work that comes with it. This way you can teach them how to use their money wisely and start creating a budget for their small allowance. 

Children of these ages typically find a traditional piggy bank a helpful way to understand saving money. Teaching them the phrase, “a penny saved is a penny earned,” may increase their desire to save. You can teach them how to count money as they get a bit older and know the basics of counting numbers. This can be done before adding money to their piggy bank so they can get a visual for how much money they have. 

Ages 8–14

As children grow older and start to earn their own money in different ways, parents can help them develop more advanced financial skills. At ages 8–14, your children are usually more aware of the money they get for the holidays, birthdays, allowance, and even the tooth fairy. They may ask where the money is going and if they can spend it. Instead of giving it to them to spend right away, this may be a good time to open a savings account for your child so that when they get older they’ll have most if not all of this money in a safe spot. 

You could take this money-saving lesson to the next level by having them create a goal amount of money to have saved up by a certain time. This could be a random amount of their choosing, or maybe the cost of a specific toy they want to buy for themselves. Help them understand the benefits of saving money instead of spending as they receive it. It’s never too early to start saving for the rest of your life. 

Ages 14–18

Now is the time to get a bit more serious about money with your children. They’re getting to the age where they’re going out on their own to the mall, for dinners with friends, and eventually moving away for college. This may be a good time to teach them how to open and manage a checking account and how to use a credit card responsibly. With savings already on their mind, you can also help your children learn about saving for more long-term goals, such as buying a car or paying for college. 

Making sure your kids are financially prepared before moving out on their own is one of the most important duties of a parent. Of course, at this age, they have their own responsibilities, but passing on as much knowledge as you can to them will set them up for a successful future. Show them how to use a debit/credit card and how to manage it properly, so they don’t overspend. This way they can keep all their money in the bank while also using it wisely when needed. Once they move out of the house, it’s harder for you as a parent to monitor what they are spending their money on. It’s important to teach these basic spending habits early on because it can decrease the number of money issues they could possibly encounter as they grow up. 

Ages 18+

Although your kids may be of the age where they are primarily independent, you may still want to offer them some last financial advice while they are out in the world. Some great money topics to talk about with them are investment opportunities like stocks and real estate. This is another way they can make money that they’ll then be able to save.

Walk through their financials together to educate them on how to determine what makes for an affordable mortgage payment if they are planning to invest in real estate. Whether they decide to use the home as passive income or to live in it themselves, figuring out how they are doing financially in situations like this is better done early, so they know if they need to make any improvements. 

This age may also be a good time to switch your kid from their childhood bank account to a student bank account. Many banks offer college student-friendly bank accounts where there are no annual fees and a lower minimum deposit requirement. With the bank management skills you taught them earlier on, they should be able to handle this financial responsibility on their own.

Teaching a positive money mindset to your kids

In addition to teaching children these practical money skills, parents should also help develop a positive attitude towards money. This can include teaching them the value of hard work and the dangers of excessive spending and debt. By developing a positive attitude towards money, children can learn to make responsible financial decisions and avoid common issues, such as overspending and falling into debt. As parents, leading by example when it comes to financial literacy will hopefully aid in keeping your kids in line with their money as well.

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