How to Teach Your Kids Financial Literacy and Smart Money Skills

What were you taught about money growing up? What lessons did your parents, grandparents, aunts, and uncles teach you about finances? Did you learn practical money lessons at home, or did you learn them through trial and error as you got older?

Can you imagine how much further ahead you might be if you knew what you know now? This is why it is so important we pass down a financial education to our children. I am all about building generational wealth! However, it is all for nothing if it will be lost due to poor financial management skills.

As parents, we want what is best for our children. We want to set them up for as much success as possible. Think about it, money is involved in almost every aspect of our lives. Shouldn’t we be teaching our kids how to win with money?

There are many ways to teach your children financial literacy. Here are a few ideas to get you started!

Talk About Money - Don’t Make it Taboo

The first step of teaching good money habits is simply to talk about finances. Many people grow up in homes where talking about money is taboo. This can be detrimental to a person's relationship with money in the future.

Having everyday conversations about money and finances can help your kids get comfortable with the concept, which is essential to building a healthy relationship with money.

Some ideas include:

  • Including your child in everyday financial decisions

  • Discussing the cost of items at a supermarket

  • Talking about why you chose one item over another, if cost is involved

  • Looking at the circulars or for coupons together before going shopping

  • Having your child help you create and stick to a shopping list

Give Your Kids a Chance to Handle Money

Giving your child an allowance is a great way to give them a chance to handle money. By giving your child an allowance, you teach that money is tied to behaviors. You reinforce that money is, generally, earned (as opposed to always gifted, like on birthdays.) Although you can teach your child that money is earned, you can also teach them that there are ways to passively make money (investments), we will discuss this later.

Once your child earns their allowance, or “wages,” you can then reinforce that money should be allocated to specific purposes: spending, saving, investing, and giving back.

Teach Them to Spend, Save, Invest, and Give Back

Once you begin giving your child an allowance or wages, it’s important for them to learn how to allocate their money. It’s all too easy to pay your child, then let them do whatever they want with the money they earned. However, this is not teaching your children the fundamentals of responsible money management.

Once your child is paid their allowance (or wages if your teen is working), you can sit together and create a “budget.” Talk to your child about the various things you do with your money (bills you pay, how much you save, how much you invest - and why.) Then help them create a plan for their money. Discuss their savings goals (do they want to save up for a specific toy...or even a car if they are older), how much of their pay should they dedicate to savings each month?

Discuss how investing works and the importance of saving and investing early, then help your child get into the habit of allocating money for investments. You can even try some online compound interest calculators to really drive the point home.

Don’t forget to teach your child the importance of giving back! Help your child choose a cause or charity they want to support and show them how to donate. Talk to your child about how their donations help their chosen cause and how good it feels to support something bigger than ourselves.

Teaching these fundamentals early will get them into the habit of giving every dollar a job long before they get their first “real” paycheck. This will put them years ahead of their peers.

Invest Early and Often

Depending on your child’s age, you can introduce the idea of investing and the wonder of compound interest. Discuss with your child how it’s not always important how much you invest, rather that you simply get started as early as possible (time in the market.) Use tools like to show your child just how much their money can grow by investing in the market.

You can begin getting your children and teens familiar with the stock market in several ways. First, try pretend investing! You can pick investments together, set a price of how much you would buy, write them down, and track them over time. Then discuss why it was or wasn’t a good investment. Try this with individual stocks (be sure to have your kids do some research!), ETFs, index funds, etc.

You can also utilize apps like BusyKid to pay your child an allowance and have them invest (in real stocks) and give back directly through the app! You can check out the app here:

Remember, that your actions have a huge impact on your child. Model the behaviors you want them to mimic. Want your children to invest as they get older? Show them the ropes and talk them through how and why you’re investing. The same goes for real estate. Start introducing them to the concept young. This way, it isn’t a foreign language when it is time for them to make their own investments.

Plan for the Long Term

Help reinforce the concept of delayed gratification by helping them plan for the long term. The next time your child wants the coolest new toy, use this as a time to learn long-term planning. You can go to the store (or pull up an online store) and help your child find out how much the item costs. Then, help them make a savings plan to reach their goal. If this is a high-ticket item (like a PS5), you can consider creating a “savings match” program for your child. This can really help incentivize saving!

Bonus: Teach Your Kids About Credit

If you have children in middle and high school, it might be a good a time to teach them about credit and responsible credit use. Older kids should know how credit works, what goes into a credit score and how it relates to their ability to leverage money (like, getting a loan for a mortgage.)

The key, again, is to not make this a taboo subject. Like anything else, if you make something “taboo” or “evil,” this increases the likelihood that your kids will run to it with open (and ill-informed) arms.

Rather, talk about how credit is a part of everyday life and model responsible credit use. It might be a good idea to allow your kids to use a credit card for minor, planned purchases (such as gas, or food) within a certain limit, then have them pay the full balance at the end of each month. This can be useful in giving your kids a head start on building an excellent credit score and healthy credit history.

Final Thoughts

Remember, each family is different. Everyone's needs and capabilities are different. Not all strategies will work for every family. Simply find what works for you! The ages of your children will also affect what they should be learning. Remember to scaffold lessons appropriately (maybe your 3 year old should handle play money, but your 5 year old can handle a few dollars.)

Most importantly, have fun! Teach money lessons in a way that fits for your family. The most important thing is that you start!

Disclosure: All opinions expressed on this site are my own and I only recommend products I would use. This post may contain affiliate links from which I may earn a small commission, at no additional cost to you.

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