Teaching Children about Money & Financial Responsibility

Kid's fingers on a cash register

Why Financial Literacy Matters

According to Forbes, financial literacy education, or an understanding of financial principles, such as savings, investments, mortgages, interest rates, and financial planning, is essential to improve Americans’ standard of living and to reduce income inequality. Even young children can learn the basics of money management, including how to earn money and make small decisions about how to manage it.

Importance of Financial Literacy for Kids

Teaching kids about money early on instills good financial habits that will follow them into adulthood. It’s important to have these types of conversations and allow children to ask questions, so that eventually they can begin to contribute to their own financial success.

Financial Literacy Activities for Kids

Kids need real-life, hands-on experiences to gain financial literacy. Below are a few activities to help your children learn about money in fun, engaging, and age appropriate ways.

  • For children as young as 4 or 5, teach them the numerical value of coins (e.g. a nickel equals five cents and a quarter is 25 cents). Have them hold the coins, and observe the different sizes, colors, and weights. From there, have kids engage in an activity that allows them to combine currencies to reach specific amounts (e.g. five nickels make one quarter).
  • Ask your local bank for coin wrappers and have your child roll the family’s loose change. This is a great way to practice counting and learning how many “X” make a dollar. As a reward for helping, your child can take a percentage of the total.
  • Engage in dramatic play. Set up a pretend farmer’s market or pizza shop and have children practice purchasing items and working different jobs.
  • Teach children about “needs” vs. “wants.” Have your child create a list of things they need and a list of things they want. Younger children may enjoy cutting pictures from magazines to create their lists. Make a game of it! Then, use practical examples to discuss the difference between the two concepts. Make lists of those very basic things they must have to survive (food, water, shelter, and clothing) versus those things they want to have (toys, candy, or video games).
  • Read age appropriate books. Here are some to get you started:

Kids’ Money Making Ideas

When children earn money themselves (and get some say in how to spend it), they gain so many valuable life skills, such as communication, organization, and work ethic. Below are just a few ways for children to earn money:

  • Have children help with jobs that you or a neighbor might pay someone else to do, like feeding/walking pets, pulling weeds, or watering plants.
  • Encourage family and friends to give your children money instead of toys for birthdays and milestones. They can keep this money in a physical piggy bank or savings account.
  • Open a lemonade stand. This is a great way to teach kids about creating a budget (to get supplies), supply and demand, work ethic (sticking with the stand when there are no customers in sight) and goal setting (how will the money earned be used)?
  • Organize a yard sale. Go through old toys with your children and decide what you might be able to sell.

Giving Back

Just as it’s essential to teach children about the value of earning and managing money, it’s also important to discuss ways that your children can give back to others. Donating a portion of lemonade stand sales or yard sale proceeds to a special cause gives children a feeling of purpose, community, and autonomy – and instills an attitude of gratitude as they continue to grow.

 If you don’t have a favorite charitable organization, consider The Bright Horizons Foundation for Children. The Bright Spaces program creates play spaces for children who live in homeless shelters.

“My two sons (currently ages 5 & 6, but they’ve done this for a couple of years) save up to adopt an animal through World Wildlife Fund, though lots of other environmental groups, zoos, and farms do the same thing. Getting to pick out their favorite animal to adopt makes the act of giving fun for them, which I think is key for young kids.”

– Shannon, Director of College Finance, Bright Horizons College Coach

Raising Finance-Wise Kids

Breaking the ice with your children early on will help ensure financially literate adults, who feel empowered to ask questions and make smart decisions when it comes to managing their money.

Bright Horizons
About the Author
Bright Horizons
Bright Horizons
In 1986, our founders saw that child care was an enormous obstacle for working parents. On-site centers became one way we responded to help employees – and organizations -- work better. Today we offer child care, elder care, and help for education and careers -- tools used by more than 1,000 of the world’s top employers and that power many of the world's best brands
Kid's fingers on a cash register