Are you looking to give your kids a brighter financial future? Then, it’s time to start learning about financial literacy for kids.

By helping kids and teens understand money in general and make a plan for their money specifically, they can start to understand smarter spending, saving, and investing. Let’s learn more about how we can start to build generational wealth!

What is Financial Literacy for Kids?

Financial literacy means understanding and managing your money effectively. That means that financial literacy for kids is about smart money management at an age-appropriate level. 

To teach financial literacy for kids, it’s important to help them understand:

• Earning money
• Smart spending
• Giving back
• Saving some
• Investing for big moments

Let’s take a closer look at how you can start building a solid financial foundation for your kids today.

Components of Financial Literacy for Kids

While every family is certainly going to put their own spin on teaching financial literacy, there are several key components of financial literacy for kids. Let’s explore how we can teach these puzzle pieces to our kids and help them start building generational wealth. 

Earning Money

One of the biggest reasons that families wait to teach financial literacy to kids is because they don’t think they have enough money for it to make sense. However, between contributions around the house and money made outside the home, kids actually have enough income to start learning about generational wealth. 

Contributions Around the House

Different families have different feelings on allowance. Some kids get a bit of spending money every week or month to learn how to manage money. Other kids earn that money through chores. In other cases, kids might only get money for gifts. However your child or teen earns money around the house, it is important to use that money to teach them financial literacy for kids. 

Making Money Outside the Home

As kids get older, they might come up with different ways to make money outside the house. Whether they are babysitting for a neighbor or punching an actual (part-time) time clock, you can—and should!—help them manage this money. 

Generational Wealth Plan 

As kids and teens earn money, it’s important to help them understand the 60/40 generational wealth plan.

Smart Spending (with 60%)

Most of our money gets spent. That’s just how society works. While we don’t want kids to spend everything, we do need to acknowledge that they will spend quite a bit of money in their lifetimes. That’s why we use 60% as the smart spending amount. 

Needs vs. Wants

One of the most critical lessons for kids is to learn about the difference between needs and wants. To make this clear for kids, you can talk about what we need to have versus what is nice to have. If you have young kids, grocery shopping together makes this really transparent. Kids all know we need to eat to keep ourselves healthy. But we don’t need to have dessert after every meal or even every day. Instead, it’s a nice treat we sometimes get to enjoy. That conversation is perfect for modeling the difference between needs and wants. 

Price Comparisons

Another skill to help build financial literacy for kids is to help them learn how to comparison shop. Does your kid want a new Switch game? Help them do a Google search to see how many different stores sell the game. Once you get your results, look at the different prices. Which is the cheapest? 

Additionally, after you do your comparison shopping research, you can talk to your child about waiting for sales or checking second-hand items, such as eBay or OfferUp. 

Delayed Gratification

A great lesson to start after helping your child make some price comparisons is the idea of delayed gratification. Sometimes, kids need help learning how to save up for a big-ticket item. Other times, kids already have the money saved but haven’t yet learned about sales cycles. 

In some instances, it might make sense to make a purchase once you have your money saved. In other cases, though, you might want to wait a bit longer to see if the item goes on sale. That can lead to extra savings, and it can also help your child see if it’s something they truly want. 

Experiences Over Things 

In many cases, wanting “things” is temporary. If you’ve ever taken a kid or teen to a store, you know all about impulse items. Checkout areas are riddled with trinkets, toys, beverages, snacks, and candies meant to be a last-minute cash grab by the store. You stick to your shopping list in every aisle and then suddenly, it’s one temptation after another. These items weren’t on anyone’s lists of needs or wants until they glanced at that. 

That’s the way it is with most things. A friend will mention a new game. A commercial will introduce a new toy. We don’t actually want or need these things. They are often duplicates of what we already have, fighting for space in our homes and lines in our budget.

Helping kids and teens realize that most of us actually prefer experiences over things is a vital lesson. Unfortunately, it can take time to learn this. Help your child make lists or take photos of things that they think they want to buy. Then, help them add up what they would spend. Would they rather have yet another toy from Target or would it be more fun to play a round of mini golf or see a movie? Most kids would prefer the experience, but they have a hard time making that connection without support. 

If you’re worried about missing an important financial literacy lesson for kids, don’t miss The Centsables. This is an animated superhero series that's on a mission to help kids ages 6-12 develop smart money habits, learn basic economics—and have fun while doing it.

Giving Back (with 10%)

After allocating 60% of their money to spending, they want to think about ways to allocate the other 40%. We are big fans of charitable giving, so we think it’s important to show kids the benefits of sharing their money with others. 

Giving to Family & Friends

An easy way to help kids learn about sharing their money is to allow them to contribute to birthday presents or holiday gifts. They don’t have to purchase the entire present. However, they may want to chip in $5 or $10. Or they could purchase a small item to give with a bigger gift. As they get older, they can purchase their own gifts and experience the pride that comes with giving using their own money.

Another way to help kids see the importance of giving to family and friends is to allow them to contribute to fundraisers. Perhaps they have a cousin or a neighbor who is raising money for their school playground. They can donate a bit of money to help their family or friends move closer to their fundraising goals. 

Charitable Contributions

If you have a favorite charity or give regularly to a religious organization, you can invite your kids and teens to join you. Another option is to give them a chance to do some research to learn more about giving. They could use sites like Donors Choose or Charity Navigator to learn about different people, places, and causes. Then, they can choose to make their own donations. 

To keep things age appropriate, you might also have younger children who aren’t strong readers or digital researchers shop for items for a food pantry or a free little library. 

Random Acts of Kindness

One thing that we participate in is Big Tip Tuesday. That's giving bigger-than-normal tips during the holidays to our hard-working neighbors in the service industry.

There are all sorts of ways that you can create random acts of kindness. They don’t have to cost a lot, but having money set aside to make this happen without causing financial stress is key.

See what you can brainstorm as a family! Maybe you can buy donuts to drop off at your neighborhood fire station or you could grab an afternoon cup of coffee for your kid’s bus driver. There are countless ways you can brighten someone’s day!  

Saving Some (10%)

Now that kids have learned to be generous with their money, they also need to be reminded of the importance of long term savings.

Sinking Funds and Long-Term Goals

Is your kid excited about the next video game console? Does your teen have a favorite singer they would love to see in concert? Helping them identify long-term goals is a key part of financial literacy for kids. 

Once they map out their goals, they can start saving up for them. Some banking partners like Crew allow you to create pockets, which are savings accounts within a savings account. If your bank doesn’t have this capability, you can always track it in a notebook or color it in on a chart. 

Sinking funds can teach so many important lessons, like delayed gratification, experiences over things, and the overall importance of saving. 

Earning Interest

One way for kids to jumpstart their savings is to make sure that their bank account is paying interest. While many adults have high-interest savings accounts, kids’ bank accounts aren’t always so generous. By signing up with Crew or another interest-paying bank, kids can keep their money working for them. Right now, kids and their parents can get 3.7% APY with Crew. This is a lot better than your typical brick-and-mortar bank.

Investing For Big Moments (20%)

Investing can be a tricky concept for kids to understand. Basically, you want to help them realize investing is superpowered savings because your money grows for a very long time. Then, because their money grows for such a long time, they have a bigger amount to put toward college, buying a house, or even retiring. 

As your kids get older, you can introduce them to different stock market simulations or even help them open some of the different generational wealth investing accounts.

Final Thoughts on Financial Literacy for Kids

No two families are the same, so it makes sense that we all teach financial literacy for kids in different ways. However, the 60/40 generational wealth guidelines can make for a solid teaching framework.

To make sure you haven’t missed a step, you can also use a fun educational resource like The Centsables. When you purchase a subscription to The Centsables financial literacy program for your kids and grandkids, you give them unlimited access to an interactive website. Plus, each month they’ll receive a Centsables kit in the mail, with fun and educational materials that will reinforce their growing money-smarts. 

Even if you don't know all the answers, the sooner you start educating and talking about finances with your kids, the stronger their financial literacy becomes.

---

How do you teach financial literacy for kids? What are your favorite resources?

Please let us know in the comments below. 

---