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Raising Money Smart Kids

Ages 3-5

Most kids have their first consumer/retail experience within a couple weeks of being born. As kids grow and get older, they start to adopt money habits just by watching how their parents and others in their life use it.

With children this age, it’s important to keep it simple and work on the basics.

You Need Money to Buy Things
  • Help them understand the differences between the different coins and their values. Grab some loose coins and work on sorting them. Talk with your child about the differences between the coins – not just in size, but in value.
  • Talk with your kids about how you use money to buy things. While you are out shopping, have them point out things that cost money. Depending on their age, ask them to identify the cost of the item they have picked.
You Earn Money by Working
  • Discuss your job with your child. Talk about how when you go to work, you are getting paid for the hours you are there and the work you do.
  • Talk about other people in their lives that work to earn money – like a babysitter or someone at a store. Ask them to point out other people they think are working to earn money.
  • Explain how some people choose to start their own business to make money.
  • Ask your child to think of ways they can earn money.
You May Have to Wait to Buy Something You Want
  • Work with your child to set a short term financial goal. Keep the time frame short – within a couple weeks. Ask them what they’d like to accomplish and how they plan to do so. Draw a picture of the goal together and put it somewhere they can see it every day. Work with them to accomplish the goal.
There’s a Difference Between Things You Need and Things You Want
  • Begin talking about needs and wants. Talk about needs as the very basic items you must have to survive, like your house or food and water. Ask them to identify other needs.
  • Have your child help you with the grocery list. Work on the needs first and then put down the wants. Explain to them that the needs are the food items you have to have. Then, explain to them that there is limited money to purchase the wants and that sometimes, you can’t have everything you want.


Based on recommendations from the President’s Advisory Council on Financial Capability. Learn more here.

Ages 6-10

At this age, kids are more aware of money and the role it plays in their lives. It’s important to help them build a saving habit and learn about smart spending.

Another teaching tool to possibly use at this age is an allowance. Giving a child an allowance is a personal family issue. Read more about the pros, cons, and types of allowances here.

Again, it’s important to keep it simple and continue to work on the basics.

You Need to Make Choices about How to Spend Your Money
  • When out shopping, include your child in small money decisions like which kind of cereal to buy or what kind of fruit to buy. Explain to them the differences in cost and quality and how you make your decisions.
  • Give your child a small amount of money ($2-$3) and give them the freedom to purchase something (you can narrow it down to a certain type of item). Explain that they can choose what to buy, but cannot go over the amount you gave them.
  • When shopping with your child, talk about how you make decisions. Ask yourself questions aloud like, “Do I need this?” or “Would it cost less somewhere else?” Explain your answers.
It’s Good to Shop Around and Compare Prices
  • Comparison shop for a particular toy your child wants. Together, look at prices online and in-store. Don’t forget to talk about other costs like shipping and taxes. Ask them which is the best deal and why.
  • Have your child help you find coupons – either in the newspaper or online. When you use the coupons in stores, explain how they help you save money. Use the receipt to show them how much you saved.
    • Bonus: if they help you find coupons, allow them to keep part of the savings.
It Can Be Costly and Dangerous to Share Information Online
  • Always know the websites your child visits and block those you don’t want them on.
  • Talk about the dangers of giving out personal information like their birthdate, address, phone number, email, or school when online. Explain that there are people out there who will use this information to do bad things.
  • Don’t allow them to buy anything online without your permission. Be careful with apps on phones as many of them have in-app purchases that make it easy for kids to buy.
Putting Your Money in a Savings Account will Protect it and Pay You Interest
  • Visit A+ together to open a youth savings account. Have your child go through the account opening process and encourage them to ask questions. Ask the Member Service Officer explain how the savings account works and how interest works.
  • Once you have the savings account, take them to make deposits to their account regularly. Help them track their balance and show them the interest that they earn.


Based on recommendations from the President’s Advisory Council on Financial Capability. Learn more here.

Ages 11-13

As tweens and teens, money represents a lot. It’s the ability to go shopping, go to the movies, grab a bite to eat, and more. Continue to reinforce smart money habits like saving, spending smart, and making good choices.

Save at Least a Dime for Every Dollar Earned
  • Encourage your child to save at least 10% of everything they earn. Ideally, they’d save more, but 10% is a good habit to start with. Have them write out their savings rule and have it displayed where they can see it regularly.
  • Visit the credit union to make deposits. After their savings accumulates, bring it in to deposit. Show them how their money has grown over time.
  • Have them set a goal for something they want to purchase. Work on a plan together on how they are going to reach their goal. Make sure the goal is SMART: Specific, Measurable, Attainable, Realistic, and Time-Bound.
Entering Personal Information Online can be Risky
  • Reinforce previous lessons on the dangers of entering personal information online. User a personal story about someone who had their information stolen or had a fraudulent purchase made with their information.
  • Talk about the dangers in free offers from the internet and how thieves and fraudsters use these kinds of ploys to get information and scam people into spending money.
Compound Interest Helps Your Money Grow
  • Talk about compound interest and how it helps your money grow. Use examples and calculators to show how it works. Here’s an example:
  Details Time Saving APR Money Saved Interest Earned Total at Age 65
Ted Saves $2,000/year from age 18-27 10 years 7% $20,000 $366,218 $386,718
Mary Saves $2,000/year from age 35-65 30 years 7% $70,000 $225,827 $295,827
APR=Annual Percentage Rate. Investments are assumed to be made annually and at the beginning of the investment period. Balance amounts are rounded to the nearest dollar and are not adjusted for inflation.


Using a Credit Card is Taking Out a Loan
  • Talk about credit cards and the dangers of buying something you cannot afford. Go back to compound interest and explain that while it’s great for saving, it’s not so great when it comes to debt.
  • Use a calculator to show how long it would take to pay a $1,000 credit card balance by only making the minimum payments.
  • Talk about the differences between smart borrowing and dangerous borrowing. Examples of smart borrowing could include getting a mortgage to buy a home or even borrowing money to buy a sensible and affordable car. Examples of dangerous borrowing include store credit cards or maxing out a credit card if you cannot afford to pay it off in full.
  • Discuss the advantages of a credit card, especially for making purchases online, and how when it’s used smartly, a credit card can be a good way to build credit.


Based on recommendations from the President’s Advisory Council on Financial Capability. Learn more here.

Ages 14-18

In high school, teens understand the importance of money not just in the moment, but in the future. Reinforce smart money habits, but begin to talk about money habits beyond high school.

Compare Colleges and Costs
  • Discuss the financial benefits of continuing education after high school. Explain that while college or school might cost money up front, long term earning potential for those with a degree is typically higher than those with a high school diploma.
  • As they begin to research schools to attend, encourage them to look at tuition, fees, room and board, and more in addition to what the school offers. Use tools like the Net Price Calculator to research prices and compare schools.
  • Go through the FAFSA process before your teen is a senior with the FAFSA4Caster. Together, go through the steps and see an estimate of your teen’s financial aid. Use this information and the net price information to get a better idea of what college/school will cost.
  • Research types of financial aid – including loans, grants, work study, and scholarships at studentaid.ed.gov.
Budgeting Can Help Prevent Overspending on Credit
  • Work with your teen to develop a budget. Have them list their income and then their expenses. Have them track their spending for a month. Encourage them to set goals to buy things. Explain how having a budget and setting goals for expenses can keep them from overspending or needing to use a credit card to buy something they cannot afford.
  • Reinforce this rule: Only use credit to buy things you can purchase with cash. Never buy more than you can afford to pay off right away.
Money is Taken out of Your Paycheck for Taxes
  • Use your teen’s first job as an opportunity to discuss the difference between gross income and net income. Go through their first paystub and show them the money that was taken out for Federal income taxes, Social Security, Medicare, and more.
  • Discuss what taxes are used for – things like national defense/security, schools, roads, medical help for the elderly, etc.
  • When it comes time to do taxes, show them their W-2 and go over what each of the numbers mean.
Begin Thinking about Long Term Financial Goals
  • Talk about long term financial goals such as buying a home and retirement. Encourage them to begin saving money for a long term goal.
  • Discuss savings options like a Roth IRA and how it can help them save for long term goals through compounding and investments.
  • Explain that companies sometimes offer other types of retirement accounts like a 401(k) to help employees save for retirement. These tools can help them set money aside in a special account that should only be used for retirement.


Based on recommendations from the President’s Advisory Council on Financial Capability. Learn more here.