Teaching Kids About Money: An Age-by-Age Guide

There is no getting around it, money is going to play a major role in every single person’s life. The earlier a person learns this fact, the better prepared they will be to deal with it.

Having a healthy relationship with money from a young age is a major advantage. Not only will a kid develop useful financial habits early, they will be better prepared for the financial issues we all face at some point in our lives.

For most of us, the first lesson we learn is that “money does not grow on trees.” While this old saying certainly rings true, there are plenty more lessons you can teach a kid as they grow.

Considering money is increasingly being spent digitally, there are plenty of new lessons kids need to learn. Making purchases with a credit card and online can make it seem like money is not real.

Knowing where to start and how young you can teach a kid the value of money can seem like a complicated subject; however, it does not have to be.

To make things easy for you to understand, we have provided an age-by-age guide for when it is appropriate to teach a child particular lessons about money.

Under 5 Years: Introduction to Money 

You can start teaching a kid about money as soon as they learn to count. In fact, teaching a kid to count using toy money is not just a good way to teach them currency denominations; it is a practical teaching tool.

Counting coins is a great place to start. If a kid can identify each coin, they will already start learning value differences. You can always set up a fake store where the child can exchange their toy coins for goods. This will be a basic introduction to both counting and the concept of shopping.

Leaning the concept of exchanging money for goods is something every kid is going to have to learn, so why not teach them young?

Ages 5 to 6 Years: Teaching the Value of Money 

By this age a kid knows how to count and is just starting to wake up to the concept of value and price. If you begin teaching a kid how different toys cost different amounts, that child will start to grasp the concept. You need to teach young kids with examples that are relevant to them.

Not only will you be teaching a kid some important lessons, you will save yourself from some uncomfortable meltdowns in the toy store. This is also an appropriate age to start rewarding a kid with a small allowance. Give them a set of weekly chores in exchange for a set amount of money. Not only will they learn valuable lessons about the cost of goods, they will learn what it means to work for rewards.

Ages 7 to 10 Years: How To Shop 

By now the child will understand quantities of money and have some grasp on value. This is now the time to teach a kid how to spend their money. Take them to a corner store with their allowance and allow them to buy some candy.

They will quickly learn that they cannot just buy everything they want. They will learn what it means to prioritize one purchase over another. You can even start introducing the concept of saving money. Teach them how if they do not spend their money right away, they can put it aside and buy something nicer, such as saving for a toy, rather than spending their allowance on candy.

This can also be an appropriate time to teach them about advertising. Show them how advertisements are not always accurate. Explain how advertisements are designed to trick you into feeling like you need something, when you probably could do without it.

Ages 11 to 14: How to Budget

By this age a kid can start grasping the concept of a budget.  They might be earning larger sums of money in the form of birthday and Christmas gifts, teach them how they can separate that money into different categories.

To make this easier, you can even set up a long-term financial goal they can strive towards. This will really cement the concept of saving. For example, tell a kid that if they save a certain amount of money over a year, they can go to an amusement park or some other big event that would appeal to them.

This is also an appropriate time to open a savings account. This will teach them about banking and what it means to keep money somewhere that you cannot touch and see it.

Ages 15 to 16: Explain How Credit Cards and Debt Works 

By this age, you can start explaining how people borrow money. Explain how it needs to be paid back on time, or you will face financial penalties. Learning about interest at a young age will save them from plunging themselves into debt the second they get their first credit card.

Ages 17 to 19: Saving for College and Independence 

For a teenager to really understand the value of their education, they need to contribute to paying for it. A teen can learn a great deal of important life lessons by saving for college.

Add up how much college will cost. Everything from tuition to housing costs should be accounted for. Once the teen understands how hard they have to work for a paycheck, they will appreciate what that massive number represents.

By this age, they should have their first part time or summer job. Once a teen starts earning a paycheck, they can really apply everything they have learned about saving, spending, and budgeting.

Far to many young adults graduate college with crippling student debts. If there is one lesson everyone should learn before they gain their financial independence, it is how much debt can negatively impact your freedom. If all of your income is going to interest payments on a large student debt, you will have no money leftover to move on with your life.