How Can We Teach Children about the Importance of Money?

Financial education for youth is one of the most important lessons we can give our children to help smooth the way for a successful adulthood. Understanding how money works, how to budget, save, and invest appropriately, and what financial decisions will set them up for success later has a huge impact on their adult lives.

At Indiana Members Credit Union (IMCU), we know how valuable financial education for kids is, and we’ve created youth programs to help make it easier to get started.

SmartStart - Online budgeting and financial education tool to help kids and young adults learn good financial habits.
Jumpstart Credit Cards - Low limit credit cards give youth and teens a real chance to learn about financial responsibility and build credit in a safe way.
Minor’s Savings Accounts - Youth banking accounts give minors the experience of saving, budgeting, and watching their money grow with some extra guidance.

What Is a Good Age to Teach Kids about Money?

It’s never too early to start teaching kids about money. In fact, children pick up so much from observing the world around them, that preschoolers will already have some ideas about what money is all about. With very young children, the best kind of teaching comes from modeling the behaviors and attitudes about money you want them to have.

As kids hit elementary school, parents or other trusted grown-ups can have more direct conversations about how much things cost, how much jobs pay, and how your household finances work. Helping them set up a bank account, giving them allowance, and showing them how rewarding it can be to save up for big purchases are all good practices for financial literacy.

Once a child enters middle or high school, they might be thinking about buying their first car, saving for college, or even moving out on their own and paying for a first apartment. This is a great time to have more advanced budgeting conversations with them.

Let’s look at some specific examples of age appropriate money talk for different age groups in the next sections.

How Do You Teach Preschoolers about Money?

Young kids are naturally curious about their world, and love to mimic adult behavior, so teaching preschoolers about money can be one of the easiest ways to introduce these concepts. Keep talks fun and follow the lead of the child about how interested they are. Here’s some specific activities to consider:

At a store, let the preschooler hand the money to a cashier to pay for an item. The cashier can hand them the change and you can even talk about the names for different coins and practice counting them.
Bring young children to the bank when you go. Explain what you’re doing in simple ways, like saying “I’m putting my money here to keep it safe for later”. Hold them up so they can see the bank teller counting money or the machines at the drive thru that send money and documents through tubes.
Explain that money is earned by going to a job or running the household. Introduce the concept that earning money takes time, and that’s why grown-ups need to go to work or do things around the house.

How Can I Improve my Child's Financial Literacy in Elementary School?

For elementary school ages, money management for kids will get more hands-on. Here are some activities that might make sense for 5-10 year olds:

Help them open a bank account, like IMCU’s minor account, or SmartStart. Talk about what money they might have coming in, maybe through allowance, birthday gifts, or chores. Discuss how much of your paycheck you put in savings versus spending right away, and encourage them to come up with a plan for how to save also.
Talk about needs versus wants and how to save for big purchases. Let them make decisions about how to spend their own money, and talk about the results. Share their excitement when they buy something they love and let them experience disappointment if their plans didn’t work out.
Introduce the idea of money as time, and how many hours of work it takes to earn enough to buy big items. Talk about it when you are making a big purchase for the household—something like buying this new TV costs $400, which means working for 20 hours if you earn $20/hour.

How to Go About Teaching Teens about Money

Teenagers are getting much closer to living on their own, and truly needing to be able to manage their own finances. Unfortunately, teaching money management in schools isn’t widely practiced, so it is extra important that parents offer strong guidance. Here’s some specific activities you might consider doing with your pre-teen or teen:

Go through your family budget. Show your teenager:

How much money comes into your household from paychecks or other sources.
How much you spend on necessities like housing and food.
What your savings looks like—how much you put in and how much you have saved total.

Help your teen create their own budget along the same lines as yours. Have them write down their incomes, outgoings, and savings. Talk about the costs of things like buying their first car and renting their first apartment.
Support them in getting a low-limit credit card, like IMCU’s JumpStart credit card, so they can start building credit responsibly. Encourage them to explore online banking by checking their balance and paying their bills on time through IMCU’s online banking portal.
Introduce the idea of investing and saving for big ticket items, like buying a home. Talk about compound interest—the idea of how money grows over time. Even go through a few real estate listings for houses they might like and talk about how much they would need to save for a down payment and monthly mortgage payments.

IMCU: Raising Financial Literacy, One Child at a Time

Finances affect every element of our lives, and teaching our children how to manage money matters. That’s why IMCU has developed our youth savings programs, and other resources for helping kids and their parents learn together. Visit our website or a branch near you for more information today.