How to Teach Your Kids Financial Literacy

How to Teach Your Kids Financial Literacy

As a parent, you play a vital role in teaching your kids about personal finance and have a huge impact on their chances of achieving financial success later in life. In fact, a recent survey showed that over 70% of parents teach their children about financial literacy. Unfortunately, that’s the problem.

Most parents teach their kids about spending, saving, and getting a stable job to earn money. However, this method of teaching kids about money is completely outdated. While it’s essential to learn about spending and saving money, children also need to learn more about investing, real estate, and debt.

These topics are the key to making money work for you and not work for money. So, in this post, I came up with my best tips for teaching your kids about financial literacy and the exact topics to discuss for each age group.

When You Should Start Teaching Your Kids About Money

You should start teaching your kids about money as soon as they can understand basic sentences, which is around age three. Kids may not completely understand what you’re talking about. Still, at least you’re setting the example early and not waiting until it’s too late.

Financial Literacy Topics for Children at Every Age

Elementary School (Ages 3-10)


When teaching preschoolers how to save money, give them a visual. The easiest way to do this is by using a clear jar for saving money. As your kids earn money, they can see it growing inside the jar, which resonates with them better.


It’s important to teach preschoolers about spending and how things cost money. For example, make it a point to show your kids that shopping, going out to eat, and paying for gas cost money. Make sure they see the cash or card as you’re paying for things, so they understand the transactional nature of spending.

Middle School (Ages 11-13)

Setting Up a Bank Account

The first thing you should do for your middle schooler is set them up with a bank account with both checking and savings. This way, they are in charge of spending and saving their own money.

Impulse Shopping

Kids are inherently impulsive, especially at the middle school age. For example, if your child tells you that they want something, tell them that they need to use their money to purchase it. I would also suggest making them wait a day or two to see if they really want the item. Making your child wait reduces impulse buying and prevents them from making unnecessary purchases.

Opportunity Cost

Opportunity cost is the cost of choosing one thing over another. For example, your child may want a new video game and a new pair of shoes. Depending on how much money your child has, they will have to decide which thing they want more. Even if they have enough money for both purchases, they need to determine if spending a large amount of money on them is worth it.

High School (Ages 14-18)


The next thing you should teach your high schooler is how to create a budget. Although your child may not have many expenses during high school, it’s important to know exactly where their money is going and how to plan for certain expenses.


Once your child reaches high school, they’ll likely get their first job. Instead of letting them blow their paycheck on unnecessary purchases, teach them about investing. For example, have them set aside a percentage of their paycheck every two weeks to put into a brokerage account.

For example, Fidelity is a brokerage account that offers a Youth Investment Account for children ages 13-17. The account requires the parent to set it up, but the child can put money into the account. After your child reaches 18 years of age, the funds will automatically go into a regular investment account.

Compound Interest

Another investment aspect is compound interest. Depending on the investment, compound interest can be good or bad. For example, compound interest on student loans means your child will pay more than the initial loan amount. On the other hand, compound interest for a retirement account is great because the interest accumulates onto the money your child contributes.

Tip: Showing your kids about compound interest with an online calculator is a fantastic visual for showing them the importance of investing early. 


Teaching your child about good versus bad debt is critical. Good debt consists of debt used to purchase assets such as a mortgage, business loan, or investments. Bad debt consists of debt used to buy liabilities such as car loans, credit card debt, or personal loans.

When teaching your child about debt, don’t demonize debt entirely. If used skillfully, debt can be an excellent tool for building assets and generating wealth.

Real Estate

Although your child may not care or understand real estate, it’s essential to show them how valuable real estate is as an appreciating asset. If your child seems interested, I recommend having them put aside money to purchase their first rental property.


If you truly want to teach your child about the power of making money work for you and not working for money, teach them about entrepreneurship. Entrepreneurship is the only way to avoid the broken system and the corporate world. Teaching your child to learn valuable skills and use them to start a business will help them create success on their own terms rather than getting a “stable” job.

My last piece of advice is to lead by example. None of these tips will work if you do not practice them. Kids are highly observant and notice your actions, even if you don’t think they do. So, it’s important to practice what you preach, and it’ll make teaching your kids about financial literacy a lot easier.

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