Reading, writing, arithmetic … and finance? Teaching kids about financial concepts and prudent decision-making can help them become financially proficient adults and deserves a spot alongside early learning basics. Here are four tips to help build a foundation for financial fluency.

1. Talk About Money

Beginning discussions about money, budgeting and saving when kids are young helps to normalize the conversation.

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• Preschool: Kids can start comprehending basic money concepts, such as buying and selling, as young as 3 years old. This is also a great time to introduce an important aspect of money management: delayed gratification. As kids develop their ability to wait for something they want — like a new toy or special activity — they build a core skill to help them save money in the future.
• Elementary School: Start including them in discussions about budgeting and financial priorities. Go over your household’s monthly bills, and show them how your family manages money and separates needs and wants.
• Middle/High School: Help middle and high schoolers track their expenses and set their own budgets, skills that will serve them well as the things they want become more expensive.

By talking about the ways in which you save money and set limits, you can serve as a role model for their future financial choices.

2. Make Financial Education Part of Daily Activities

Kids learn through play and observation, and financial education is no exception. Involve them in activities that show money’s value in action, and use everyday activities, like a trip to the grocery store, to provide learning opportunities.

• Preschool: Begin teaching about money by tracing coins, coloring pictures of different currencies or playing matching games. Set up a pretend store or restaurant where you exchange play money for goods or services. And when shopping at actual stores, explain that you’re using money you’ve earned to buy things your family needs.
• Elementary School: Junior or regular editions of games like Monopoly, Pay Day or the Game of Life can help kids practice applying financial skills like budgeting. Also involve them in your shopping process, showing them how to look for items on sale and compare prices for different products. Emphasize that saving small amounts can make a difference over time.
• Middle/High School: Kids this age can take an active role in helping to develop a grocery list and seeing how much of that list they can purchase with a set budget.

You can likely find many natural teachable moments, such as when buying something used instead of new, or making dinner instead of ordering it. These are real-life opportunities to show kids how much things cost and that spending money on one thing means you chose not to spend it somewhere else.

3. Enable and Encourage Saving

Along with teaching kids the basics about saving, help them put structures in place to make it a reality.

• Preschool: Start preschoolers off with a piggy bank where they can keep money received as birthday or holiday gifts.
• Elementary School: You might give kids an allowance or money for doing chores around the house. Talk to them about setting financial goals, what they want to use their money for and how much they need to accumulate to reach their goal. Consider creating a savings chart so they can visually track their progress.
• Middle/High School: Help kids open their own savings accounts and see the value of earning interest. If they begin to work part time, encourage them to put a set amount of money aside regularly. Teach kids the Rule of 72, which can help them estimate how long it will take to double their money. The formula is simple: Divide 72 by the interest rate received on savings or investments. For example, money in a savings account yielding 4 percent interest will double in 18 years.

  Discuss the benefits of planning for the long term and consider introducing the concept of investing through vehicles like educational savings and retirement accounts. Explain that the sooner they begin saving, the more money they potentially could accumulate through the power of compound interest.

4. Advise Acquiring Debt Responsibly

It’s also important to teach kids how to manage expenses and debt.

• Elementary School: At this age, kids can understand the basic concept: Borrowed money can offer flexibility for expensive purchases, but it needs to be repaid, often with interest or fees.
• Middle School: Middle schoolers can learn by example if they ask for your help buying something they can’t afford on their own. Develop a repayment plan and discuss whether it includes reasonable interest or consequences if they can’t make the payments.
• High School: Discuss with teenagers how various types of debt, such as credit cards, car loans and “pay over time” plans, can impact their finances — both positively, by helping them make major purchases and build a positive credit history, and negatively, by reducing their disposable income and lowering their credit score if it isn’t used responsibly.

  Explain that every debt payment needs to be planned for when budgeting the month’s expenses. Make sure they understand that paying only the minimum due will magnify their debt because the unpaid balances begin accumulating compound interest. Emphasize that the Rule of 72 also works for debt: An unpaid balance on a credit card that charges 18 percent interest will double in four years. And even loans that might not carry interest at first, like some payment plans or promotional offers, will usually charge interest if balances aren’t paid by the end of the agreed term. Missed loan payments are also usually charged a late fee.

Beyond simply gaining an understanding of money, learning how to prioritize their spending and make informed financial choices can help kids build their confidence — and their wealth — and grow into financially fluent adults.

Find additional free resources to help teach kids about financial topics at Thinking Money for Kids and from the Jump$tart Coalition.

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