Financial Literacy For Kids Can Empower Their Future

Do you want to empower your kids to have a financially secure future? We need to provide financial literacy for kids starting at an early age.

As parents, our kids look to us for guidance to make decisions on various topics, from treating a cold, avoiding hurting themselves, taking care of hygiene, eating, and learning at school. As they age, they grow in independence. They know enough to make their own decisions on many things, even when we want to influence them still.

How can we help our kids make good financial habits to avoid the pitfalls that plague others unable to manage their money properly? We can guide them at an early age. Research from the University of Cambridge suggests that our financial habits are set by age 7.

When kids are younger, they are more malleable about learning from us. We have a relatively short window to give them essential life skills by teaching them about financial literacy. Financial literacy for kids will help them to understand financial concepts and technological tools that are fundamental to being savvy about managing money.

Financial literacy is limited. According to the Milken Institute, only 57% of adults in the United States are financially literate. According to CNBC + Acorns and Momentive surveys, most parents with children under 18 say parents are responsible for teaching children about finances. But 31% of parents say they never talk to their children about household finances.

Those who are financially illiterate are often unable to reach their financial objectives and suffer the harsh consequences of poor money management. They may incur excessive consumer debt with high-interest rates, carry high credit card balances, fall behind on bill payments, overspend their money, and delay saving for retirement and investments.

Giving our kids a solid financial foundation at an early age is essential so that you may ingrain them in good money habits and become financially savvy.

We can teach them why we save money early on with props like a piggy bank and take them grocery shopping to show them how to make purchases. Engaging them about how we make financial decisions when they are young will help them later.

Parents can teach them basic age-appropriate skills, including:

  • Basic math skills, including percentages.
  • Problem-solving for making trade-off choices.
  • Needs versus wants.
  • Budgeting between money sources and uses.
  • Financial goal-setting in the near-term and long term.
  • The power of compounding.
  • Handling responsibilities.
  • Earning an allowance as income
  • Saving money for a rainy day, college, and retirement


My earliest memories are of going with my mother on household errands. She took me grocery shopping and pointed out bargains. I did the same things with my kids by taking them to the bank to make deposits, and how they earned interest on money.

When they were young, they were curious about everything and asked questions. Later, it got more challenging, mainly because they wanted everything in the toy section or the restaurant’s menu. Anyone with kids knows that they grow up quickly and are soon out with their friends, driving cars and going to college. Given their short attention span, you lose their attention by talking to them about anything substantive, especially money.

Parents need to take advantage of their younger years to instill essential financial concepts, so they grow up better prepared to make decisions and be financially independent.


11 Ways Financial Literacy For Kids Can Empower Their Future


1. Saving Money

Don’t wait until your kids are in their teens. Take out some of the mystique about money at an early age. Money doesn’t grow on trees, but it can grow in different ways, starting with saving money. Buy them a piggy bank so they can put physical coins to fill it up. Some piggy banks are transparent, so they can see their money grow. Compare the piggy bank to the one that holds money for people, pays them interest, and explains how it lends money. Make saving money fun and exciting. 

When they are in elementary school, take them to the bank to open up a savings account with you as a joint account owner. You can open up the account online, but the application process may be interesting to them and won’t take long. Later on, you can engage your kids by opening fintech apps online that will introduce them to debit cards and investing. 

2. Understanding Wants versus Needs

As kids age, they ask for and expect everything. Teaching “needs” and “wants” is tough when your 7-year-old says they need a smartphone and all their friends have had one for a long time. Spending money is a neglected topic for many kids. They see us spending money on things for the house ranging from groceries, clothing, and big-ticket items like a 75-inch TV screen. 

We need to help them distinguish between needs and wants using examples like paying rent or buying a giant TV. Share your thoughts on comparing shops and discussing setting money limits, so you spend less than you have.

Teach your children to shop wisely, look for sales, and not be impulsive about buying everything they want. Emphasize need, quality, price, and comparison shopping. Some things take longer to save up for, like a family vacation.

3. Social Media Spurs “Keeping Up With The Jones”

Our kids are growing up in a digital world or know no other kind. They are on social media constantly, interacting with their friends, showcasing new games, shopping for trendy things, and seeing places others have gone. Social media exposes them to many different lifestyles earlier than other generations. 

It is “Keeping Up With The Joneses” on steroids and influences us, let alone our kids, to make impulsive purchases they either don’t need or afford. Try to talk to your kids about making choices or encourage them to help contribute to these purchases. 

4. Earning Allowances

It’s an excellent idea to incentivize your kids to earn money by doing chores. This subject can be controversial for some families who want to avoid paying for their kids to do household chores like making a bed or helping their younger siblings do their rooms.

It is incredible how much more they want to help us when they are younger. A few years later, they needed more incentives to teach responsibility that could expand to rooms like the kitchen, basement, and garage. There are several fintech apps, including Greenlight, that parents can use to motivate their kids to earn money by doing chores, saving money, and learning to invest.

Try Greenlight

5. Encourage Part-Time Gigs

High school can be challenging for adolescents, facing more homework, playing sports, volunteering, doing other extracurricular activities, and having a social life. As they enter high school age, we must encourage our kids to work during these years, either after school or during the summer. Many jobs for 15 years have been available behind the counter, making deliveries, tutoring, and doing tasks online.

For us, the pandemic limited opportunities to work part-time during the school year. Our teens worked long hours during the summer to make and save money for their spending needs. Young adults can find ways to make money through money apps that pay for different activities, such as filling out surveys in their free time. 

6. Budgeting

Budgeting is an essential skill in managing money. Money doesn’t grow on trees. When kids earn money, they tend to save it and spend it more consciously when budgeting. It can help them better balance saving and spending using a piggy bank or a glass jar. Saving money is the first step toward allocating it to higher growth opportunities.

Understanding how to budget your money can help you organize your available income sources compared to your spending for your living needs and discretionary spending.

Please encourage your children’s active participation in family financial matters that concern them. For example, they can make their case about raising their allowance and participating in family budgets that affect them, like school supplies, buying a laptop, a new gaming console, clothes, going out with friends, and vacations.

7. Financial Goal-Setting

At some point, your children, as they approach adulthood, may express an interest in something they want in the future or set some financial goals. It may be about getting a computer, or gaming console, going to college, buying a car, or traveling abroad with friends.   

Help them through the goal-setting decision process by hearing them out to justify the purchase and how they will pay for it. Help kids learn how to save money for these big goals several years away. 

Parents are in the best position to model responsible behavior regarding money. Once kids make money on their own, parents should encourage their kids to save for their car or gaming console. 

8. Access to Credit

Young people should understand why they need access to credit, how to manage credit, and having a desirable credit score. As young adults, people like their landlords, employers, and lenders, will want to know if they are responsible for credit by paying bills on time. 

Having debit cards and credit cards is a big responsibility for everyone. Debit cards are a great place to start, as you can only spend money in the account. Parents should use this opportunity to allow their children to get a debit card. They can get debit cards through the bank or fintech apps like Greenlight and Acorns. Parents can help their kids become responsible about money, set reasonable spending limits, and encourage them to make good purchase choices. A debit card is an excellent way for your kids to acclimate themselves to using a card with care. 

The next step would be to help your kids get a credit card to help build their credit, unlike debit cards that don’t. Kids can get credit cards at an early age as authorized users of their parents’ cards. It is a good move so long as their parents have at least good credit scores. However, they need to learn how to use cards effectively so they can only rely on them for things they can afford. They can get their cards at 18 if they have verifiable income from a job to build their credit.

Credit card debt is toxic to all who carry large card balances. Parents should speak to kids about the difficulty of mounting debt at high-interest rates if they don’t pay their credit card balance entirely each month. 

Discussing student debt is essential, especially if they need a college loan, as they should establish and maintain a good credit score. You can instill in them the knowledge about having money saved to pay off student debt consistently.

Parents should set up 529 college savings accounts for their kids as early as possible. When kids start to make money or get family presents, they can contribute money to their 529 college savings account, lessening the burden they may have paid off later.  

9. Roth IRA For Your Kids

Gen Zers have been saving for retirement earlier than previous generations, with 70% of Generation Z surveyed having already begun saving for retirement in their 401K plan or outside the workplace. 

Parents can set up a Roth IRA for their kids until they are 18, requiring an adult to serve as custodian. The custodian maintains control of the child’s Roth IRA, including decisions about contributions, investments, and distributions.

Contributions to Roth IRA for kids are limited to the minor’s annual earned income. For example, Tyler made $2,000 as a camp counselor when he was a minor. He could invest all or part of the $2,000 into the Roth IRA. If he only contributed $1,000, we may contribute another $1,000 to his Roth IRA in 2022. We cannot contribute more because of the $2,000 limit set by his earnings in 2022.  

At age 18, they can set up their own Roth IRA account and contribute up to $6,500 for 2022. A Roth IRA is preferable to a traditional IRA with after-tax contributions, tax-free growth, and withdrawals. Early savings allow compound growth over decades, an excellent way to have a healthy retirement.

While it would be great for your teenager to contribute to a retirement savings account as much as possible, even a portion of their earnings would be a great start. When they start to work, they will have the opportunity to contribute to an employer-sponsored 401(k) plan, with the potential for matching contributions from the company. 

10. Encourage Investing At A Young Age

Investing is the best path to achieving a financially secure future. Parents should encourage their children to learn how to invest their money into stocks early for higher growth potential and wealth building. They can start with small increments of $100 by investing in fractional shares or index funds.

Parents can open fintech accounts, notably Acorns, with their kids, giving them experience by investing their spare change, saving money, getting rewards, a debit card, and a financial education. Parents can help them pick individual stocks of familiar names they know, such as Nike or Apple. As they get older, they can add money to their savings.

Try Acorns 

Another way for kids to get exposure to investing is to sign up for a virtual stock market game with friends or family. My kids played stock market games in school and with us. As a professor, I use the same stock market game for finance students who quickly learn how to invest their money, build a portfolio, diversify their holdings, and experience market volatility. They know about investing without the risk of losing money and essential concepts like compounding.

11. Charitable Giving

“To whom much is given, much shall be required.” KJV

It is always early enough to involve your kids in giving to important causes. It is a way to talk to your kids and discover their interests. They can put aside some money in an envelope to drop in a box at a local shopping center or send a check. The point is to have them recognize they have social responsibilities that are larger than themselves.

Final Thoughts

Communicating openly and clearly with your children about money will help them grow more financially confident. It will strengthen their bond with you and earn their trust in managing their money and investing. High schools and colleges should teach financial literacy, but parents can bridge the gap in their financial education when they are young. Their increased comfort with you will help them with critical financial decisions they will need to make, such as college, career, and buying an apartment or home.

We would like to hear from you! What is your experience in speaking to your children about money? What works and doesn’t work?

Thank you for reading this article! Please visit us at The Cents of Money for more articles of interest.



2 thoughts on “Financial Literacy For Kids Can Empower Their Future”

  1. Very wise advice. As I look back on a very financially successful life I have to credit most of it to great parental advice. My parents had my brother and I get paying jobs outside of the house from an early age, 10 years old in my case, and there were zero allowances once we had jobs. So every summer and after school we had jobs at tire stores, throwing newspapers, grocery stores, you name it. When the only money you can spend is what you earn you quickly understand what money is worth in terms of the time you traded to get it. I know that isn’t the same now, nobody enforced child labor laws back then. Plus later my dad showed us his investing spreadsheets and how he had become a millionaire on a very modest middle class income while still living a rich life. They taught my brother and me, both brainiacs, to look for a useful education in something that paid well, chemistry for him and chemical engineering for me. They taught us to never borrow except for a house and to pay that off early. They taught us to never run a balance on a credit card, ever. They taught us to buy cars with cash. They taught us to tithe and to give above that to help others. And we both retired at 60 as multimillionaires who are actively involved helping the less fortunate around us. There is no greater blessing in this life than having good parents who see teaching their kids how to live as good adults. We tried the same with our kids and they are all frugal and responsible adults.

    • Steveark,
      You and your brother had a priceless education from
      your parents. My mom was investing even as their hardware
      store was barely breaking even. Parents can be so influential
      by acting as role models.
      Thank you for your comments, always!


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