Building Smart Money Habits in Children

Talking to kids about money can be challenging, but it’s one of the most important lessons you can impart. A recent T. Rowe Price survey revealed that many parents find topics like death and politics easier to discuss with their children than saving for a goal. In fact, 85% of parents expressed a desire to enroll their kids in a personal finance course to avoid the discussion altogether.

While a finance class can be beneficial, it’s crucial to remember that children primarily learn about money from their parents. As Beth Kobliner, author of Make Your Kid a Money Genius, points out, “Parents are the number one influence on their children’s financial behaviors. It’s up to us to raise a generation of mindful consumers, investors, savers, and givers.”

With this in mind, here are some essential financial lessons to teach your kids at each stage of their development.

Even at a young age, children can start to grasp basic financial concepts. By age three, they can begin to understand that money is earned through work and used to pay for what we need and want. By age seven, most kids have already formed many of their money habits, according to a study by Cambridge University.

To help young children differentiate between wants and needs, try creating a wants vs. needs collage using pictures from magazines. This simple activity can help them understand the difference between the two. As they grow, you can introduce them to the concept of financial tradeoffs, such as choosing between different toys or treats at the store.

By age five, it’s beneficial to give kids a small allowance so they can start managing their own money. A three-part piggy bank—divided into sections for saving, spending, and sharing—can help them understand the different purposes money can serve. By age six, most children can handle small chores in exchange for money and should be able to recognize and count coins and bills.

As children grow, it’s essential to help them develop values like empathy and gratitude, which are integral to financial literacy. Discussing the concept of poverty and the importance of helping others can be a valuable lesson. Websites like Dollar Street, which shows photos of families living on various incomes worldwide, can be an excellent tool for teaching this.

These years are also an excellent time to introduce your child to the concept of saving in a more formal way. Opening a bank account in their name can help them identify as a “saver” and associate positive emotions with saving money. Watching their account grow, even if it’s just a few cents in interest, can be a powerful motivator.

As your child enters their teenage years, it’s time to tackle more complex financial topics such as credit, investing, and taxes. You can help them get started with tools like the SIFMA Foundation’s Stock Market Game, which simulates stock trading, or by letting them budget for their school supplies.

Consider adding your teen as an authorized user on your credit card to teach them about credit management. This allows them to see firsthand how interest accrues if balances aren’t paid off and how late payments can impact credit scores.

Additionally, encourage your teen to gain work experience. A part-time job can teach them invaluable lessons about taxes, teamwork, and managing time—all critical skills for their future financial independence.

Finally, work with your teen to set up a savings plan for larger goals like buying a car or saving for college. Budgeting apps like Goalsetter or Mint can help them visualize their progress and take ownership of their financial goals.

Whether your child is just starting to learn about money or is preparing to manage their finances independently, instilling smart money habits early on is crucial. By teaching your children about money at every stage of their development, you’re not just helping them understand dollars and cents—you’re empowering them to make informed, confident decisions that will shape their future.

If you have questions about teaching financial literacy to your children or want personalized advice on managing your family’s financial future, contact Jeff Blum at J. Blum & Associates Wealth Management. We’re here to help you guide your children toward financial success.

The foregoing material is for information purposes only and does not purport to be a complete description of the material referenced herein, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but there is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Any opinions are those of J. Blum & Associates Wealth Management and not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. There is no assurance that any investment strategy will be successful. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Raymond James is not affiliated with nor endorses any of the aforementioned individuals, publications or apps.

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