• Home

  • Meet Stacey

    • Work with Me

  • Decor

  • Family

  • Food

  • Style

  • Travel

  • Shop My Feed

  • PRIVACY POLICY

    • Email
    • Facebook
    • Instagram
    • Pinterest
    • Twitter
    • YouTube

Posh in Progress

7 Tips to Teach Your Young Kids About Financial Literacy

By Stacey Freeman Leave a Comment

This post is sponsored by MEFA and Fidelity. All opinions are my own. 

It’s never too early to talk to your kids about money. Understanding financial literacy is a fundamental skill that all people should have. Getting your kids to understand finances when they are very young will set them up for financial success when they get older.

As a child, my parents did a great job teaching me about money and finances. Early on, I remember I had a piggy bank and saved all my pennies, so I could buy the Barbie I wanted. My dad even talked to us about the stock market and told us about his investments. He drilled into our heads that “a penny saved is a penny earned,” and he always helped us understand the value of a dollar.

I want my kids to have the same (if not better) level of financial literacy than I had. Thus, I’ve already started teaching my preschoolers about money. These 7 tips are great little tricks to starting teaching your young kids about financial literacy.

1. Explain What Money Is

Early on, even as young as 3 years old, kids begin to understand that they need money in order to get things. The reason they understand so early is because they watch everything you do. They see you give people either money or credit cards in order to get things at the store.

What they might not understand is what money is and how they can get some. To start, you can talk to them about forms of money. Show them the different types of coins and bills you have. If you have foreign currency, explain to them that all different places in the world use money. You can also start explaining about credit cards and how those also work as money. With really little kids, it might be too complex to describe the concept of credit, but slightly older kids will understand.

2. Talk About Ways to Earn Money

One of the most important aspects of teaching young children about financial literacy is to teach them that they have to earn money in order to get things. I remember when my son was about 3 and he asked for an expensive toy. I told him it was too much money. His response was that I should just go to the bank and get some. That was a perfect moment for me to explain to him, at a very basic level, that I have to go to work to earn money. Money doesn’t just come from the bank. In order to take money out of the bank, I first have to go to work to earn the money.

It is never too early to let your kids work to earn money. How you want your kids to earn money is completely up to you and your parenting values. Some parents give their children an allowance, if they complete their chores. While other parents give their kids an allowance if they have a good week, month, or semester in school without getting into trouble. Still other parents want their kids to do things that are above and beyond the normal expected chores in order to earn money. Some parents even want their kids to start by being little entrepreneurs with their first lemonade stand.

All of these are great way to get your kids to understand that they have to do a task or work in order to earn money. What is most important here, is that your child sees the connection between work and earning, however you want to make that connection.

When I was a child, I earned an allowance through doing chores. I also earned a financial reward at the end of each semester for each A I brought home on my report card. These were little ways my parents incentivized the work I did, while giving me financial credit for the effort. Once my kids start school, I plan to enact a similar financial reward structure for their help around the house and also for doing well in school.

3. Explain What Things Cost

For my son’s fifth birthday, he received some money from his grandmother. He was very excited to have dollar bills for the first time. Yet, what he didn’t understand was the difference between the denominations of bills. He actually preferred all the coins in his piggy bank, since there were more of them. At that moment, I tried to explain to him the different between the bills and also started a discussion about what he could do with that money. I told him he could pick something out the next time we went to our favorite big box retailer.

A few days later, as we walked down the toy aisle, he pointed out all the different things he wanted. I used that as an opportunity to explain what things cost. We talked about value and I explained he didn’t have enough money to get all of those things. I showed him examples of things he could afford and he ultimately found something he loved!

As another example, my kids have asked us to get a new car; they really want us to get an SUV. We’ve explained to them that cars are very expensive and we try to equate the cost with something they understand. Given that they don’t quite yet understand what large numbers mean – to them 100 is very big, so when we say the car costs 10,000 times, that really doesn’t mean much to them. However, it does help when we put it into kid-friendly terms. For example, I equate it to the number of cars or trucks or dolls they could buy.

4. Talk About the Difference Between Needs and Wants

Of all the financial literacy lessons, for me, this is one of the most important. It is much easier for us to set our kids up for success if they understand that they can’t always have everything. It is especially important for them to realize that there are a lot of times in life that they simply can’t have something because they don’t have the money, or because they need to wait. It’s really essential for kids to learn patience and delayed gratification. Learning to wait and save is a great life lesson. I personally believe life is a lot easier if you don’t always expect you can have everything that you want all the time.

Also, you should talk to your kids about the absolute necessities in life (food, water, shelter, clothing). Then, talk about all the additional things that make our lives better. I know it might be a strange concept for us to even think about, because I bet most of us consider our cellphones a need. For some of us they are, but in reality, they are actually a want. If you had to give up your phone, your life would not end, but if you had to give up food or water, it would. That’s the main difference we should try to get across to our kids. We have a lot of conveniences that make life easier. Cars, gym memberships, cell phones, tablets, etc. But in reality, those are not necessary to live. They only make our lives better and easier.

5. Discuss Spending Choices

After discussing necessities, then it is a great time to introduce how you determine your own spending choices. Most of us choose to have cars, cell phones, cable television, dinners out, vacations, more shoes than we need, etc. You can talk to your kids about how you prioritize your spending. You can explain why some things are more important than others. Ultimately, this conversation is about values, so it will depend on what you value individually or as a family. I use this step as a time to talk about why we like to use our extra money to take trips and go out to dinner, for example. I would talk to my kids about how I value experiences over material things, when I can.

6. Open a Savings Account

It is never too early to start a savings account for your children. I actually opened an account for my kids when they were first born. I put some of the gift money I received upon their births and for their showers into the savings accounts. Although I haven’t actually started making them put money into the accounts yet, I plan to do this when they start earning more money.

For example, when I first started working in high school, my parents made me give them half of my money for savings. I remember at the time thinking that was really harsh. In hindsight, it was a great practice in financial savings. I was able to use that money as spending money in college, which was very helpful. It also forced me to learn delayed gratification and to value the money I did have a whole lot more.

7. Save for Short and Long-Term Goals

I bet every single time you go to the store your kids ask for something – be it candy, toys, or clothes. These asks are great opportunities to teach your kids about setting savings goals. You can help them work toward those goals. You might offer them incentives to earn more money to go toward their goal item. Or, you might reward their good behavior with money toward their goal item. Whatever works with your personal values, you can use to help them learn about saving for short and/or long-term goals.

You can also help them understand the significance of finances for their futures by setting up a college savings account when they are young. You can have meaningful conversations with your kids about saving for college and also help them to start to think about their goals for the future when they are young. I already talk to my kids about what they want to be when they grow up, and try to help them dream big and realize they can do and be whatever they want to be if they work hard enough and prioritize their schooling.

You can learn more about MEFA’s U.Fund College Investing Plan by going to their site or for my MA friends you can visit the U.Fund Dreams Tour activation at local event this summer and fall. Visiting the U.Fund Dreams Tour activation will be a great opportunity to talk with knowledgeable staff. They can answer all my questions about college investing. There will also be fun games for kids to enjoy while parents are learning more about college savings. I’m planning to attend the Wachusett Mountain Kids’ Fest the weekend of September 22 – 23 and I can’t wait to bring my kids to the U.Fund Dreams Tour booth. If you’re in the area and plan to attend, let me know, I’d love to meet up!

I hope you find these 7 tips helpful when introducing financial literacy with your young children. It is so important for people to understand their finances. Starting our kids early will set them up for success later on.

Tagged With: family, fidelity, financial literacy, money, parent tips, parenting

About Stacey Freeman

I am a Style Maven, Mommy, Educator, and Traveler.

« These 3 Easy Tips Will Help You Take Care of Yourself
Here’s Your Chance to Win a $1000 Nordstrom Gift Card »

What do you think? Cancel reply

Hi, I’m Stacey!

Popular Posts

  • Starbucks Egg Bites Recipe In the Oven featured by top LA lifestyle blogger, Posh in Progress

    How to Make Starbucks Copycat Egg Bites In the Oven

  • Red White and Blue Trifle Recipe: How to Make This Adorable Dessert

  • Doralto the perfect margarita alternative

    The Doralto: The Little Known Alternative to the Margarita

  • Tips to choose your AirBnb in Italy featured by top lifestyle blogger, Posh in Progress

    6 Truths About Using Airbnb in Italy For The First Time

  • Everything You Need to Know About Ktip Extensions

Disclosure

This site uses selective affiliate links, which means a commission is earned if you make a purchase via the link. The price you pay will be the same whether you use the affiliate link or go directly to the vendor’s website using a non-affiliate link. Our editorial content is not influenced by advertisers or affiliate partnerships. We appreciate, and thank you for, your support!

Pinterest

Join Stacey on Instagram

poshinprogress

Writer - Educator - Entrepreneur
Mom Life • Fashion • Travel • Recipes
My new children’s book ➡️https://amzn.to/3rjsXKE

Stacey Freeman, Ph.D.
When’s the last time you accomplished something When’s the last time you accomplished something you never thought you would? 

I still can hardly believe I’m a published children’s book author. This isn’t my first time being published; I’ve written many academic papers and even a book chapter with a colleague about museum activism. But a children’s book? I never imagined or dreamed I could.

Now it’s only 5 more days until my first children’s book hits stores! You can preorder now on Amazon. I appreciate your love and support. Link in stories! 

#newauthor #newbook #childrensbooks #childrensbookillustration #childrenbook #kidsbooks #kidsbook #newrelease #newreleasetuesday
I can't believe summer break is almost here! Are y I can't believe summer break is almost here! Are you still looking for summer options for your kids? 

My kids will be attending @galileocamps this summer, and they are so excited! Camp Galileo is an award-winning summer day camp that uses project-based learning and STEM principles to help develop innovators. They have over 65 summer camp locations across Northern and Southern California, Chicagoland, Denver, and Seattle. They offer innovative camp experiences for kids as young as pre-K up to 10th grade. Plus, they also offer flexible scheduling to help working families. If you're interested in learning more, visit poshinprogress.com to read about my kids' experience last summer and why they are so excited to go back this year. Also, you can save 15% with code POSH15 when you register at galileo-camps.com #ad @galileocamps #summercamp #lamoms #lamom #lasummercamp
Jacaranda season in my new babydoll dress 💜💜 Jacaranda season in my new babydoll dress 💜💜

Not pictured, me trying to walk casually on the sea of jacaranda flowers as my heels continually sink into the grass 🤦🏼‍♀️🤣💜.

New on poshinprogress.com, I’m sharing the cutest long sleeve baby doll dresses for spring. Link in profile or stories! You can shop my favorites here: https://liketk.it/3Frgk

Follow my shop @poshinprogress on the @shop.LTK app to shop this post and get my exclusive app-only content!

#babydolldress #springfashion #springdress #springstyle #curvyfashion #lavenderdress #ltkcurves #ltkunder50 #ltkunder100
#ad My Gigi is fierce and confident. I'm constantl #ad My Gigi is fierce and confident. I'm constantly amazed by her tenacity and spunk. These are qualities I admire so much in her, and I'm so glad I'm raising a strong girl. It's not that often I see role models on TV for Gigi, but when Nickelodeon sent me the new Walmart That Girl Lay Lay merch, Gigi was so excited because she thinks That Girl Lay Lay is as cool as I think G is. If you haven’t checked out @ThatGirlLayLay yet, head over to Walmart.com/laylay to find all the cute swag so your girl can embody all of the confidence of That Girl Lay Lay too. #ThatGirlLayLay #LayLayAtWalmart @walmart
CA friends, have you been to the @the_flower_field CA friends, have you been to the @the_flower_fields yet? This week is your last chance to see all the stunning ranunculus flowers. If you’re looking for other fun thing to do in Carlsbad, head over to poshinprogress.com or link in stories! 

#flowerfieldscarlsbad #carlsbadflowerfields  #carlsbad #travelblogger #travelblog #flowerfields #flowers #ranunculus
Happy Mother’s Day to all the moms in all of the Happy Mother’s Day to all the moms in all of the forms ❤️. I appreciate you and all of the selfless and unseen things you do. 

R & G, you’ve changed my world so completely. You’ve taught me unconditional love, patience, and cherishing the moment. I am the luckiest. 

And a very Happy Mother’s Day to my mom and gram @debvicario2 - we miss your weekly visits, come back! 

Lastly, motherhood is a choice which requires great effort and sacrifice. A woman’s reproductive health is for her to decide.

#mothersday #happymothersday #momlife
Load More... Follow Stacey on Instagram

© 2022 Posh in Progress. All rights are reserved.

Copyright © 2022 · Glam Theme on Genesis Framework · WordPress · Log in