Financial Literacy for Children

A lifetime of skillful financial decisions starts with experiential learning at a young age. To increase financial literacy for the next generation, consider these actions:

• Give children a payday. Instead of a weekly allowance with simply giving money, create a system of earning these funds. Connect their household chores to earned amounts with a weekly payday. This practice can teach a child that people are paid for work to earn money for their living expenses.
• Create awareness of opportunity cost. Every financial decision has trade-offs. Once money is spent, that money is not available for other uses. Keeping money in a clear jar allows the young person to visually see what funds are available, and when the money is gone.
• Allow children to experience borrowing. If a child wants to buy something but does not have the money, set up a signed loan agreement with repayment terms. Also create a plan for the amount owed to be taken from future household earnings. Have the young person physically pay the money to better understand how credit works.
• Connect them in the budgeting process. Include children in the discussion of family finances and the household budget to help them understand where money is spent. Consider creating a chart with spending amounts, or use slips of paper representing money that are used to pay the bills each month.
• Teach wants vs. needs. Shoes or a clothing item may be a need but not a high-fashion version. To cover the cost of the higher-priced item, young people should be required to earn the amount for the additional expense.
• Use money games. These activities can help children understand earning, saving, wise spending and other basics of money management for a financially sound future.

For additional information on financial literacy for children, click here.

Teaching Suggestions

• Have students conduct online research to locate other actions used by parents to teach their children smart spending and wise money management.
• Have students talk to parents to obtain suggestions that might be used to teach wise money management to children.

 Discussion Questions 

1. What are the financial, social, and relational benefits of children learning smart spending and wise money management early in life?
2. Describe possible money management learning activities for children that involve creative use of technology.