10 smart ways to teach kids about money through the years

Many students aren't learning personal finance from their parents: CNBC Survey

Learning about money is the foundation of financial literacy and the key to achieving financial security. Yet financial education isn’t part of the curriculum in most U.S. schools.  

Only eight states have fully implemented a requirement for all high school students to take one semester-long personal finance course before graduation, according to Next Gen Personal Finance’s 2023 State of Financial Education report. Ten other states are in the process of implementing this requirement. 

“When you ask people, very few people will say that financial education is a bad thing,” said Laura Levine, president and CEO of Jumpstart Coalition, a nonprofit financial literacy organization. “But when it comes to implementing it into the school system, it’s a matter of priorities.”

As part of its National Financial Literacy Month efforts, CNBC will be featuring stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously.

That means parents and other adults may need to step in to teach children basic money concepts. 

Here are 10 money lessons that financial experts say may help improve their knowledge from an early age through high school graduation and beyond:  

Ages 5-9

1. Have frequent “money talks.” Start to introduce some basic concepts — such as what money is used for, how we earn it and how much items cost — when children are in kindergarten, or even earlier.

“Money is a practical tool in life, so don’t let it be a mysterious concept,” said Jennifer Seitz, director of education at Greenlight, a banking and investing app for kids and teens. “At an early age, kids are developing their ability to focus and prioritize, as well as understand trade-offs you’re making to choose one thing instead of another.”

Choose a “money word,” like earn, spend, or save, and explain how it works in your daily life as you go to your job, buy groceries or put some money away for a memorable family outing. 

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Our daily lives often consist of “money moments” that we may take for granted but should be talking about out loud with our children. Tell them how you’re picking the best price or why you’re using a coupon at the grocery store. Explain how you’re saving up for a fun treat. 

Making “money talks” part of everyday conversations will help make it easier to talk about finances with your kids, spouse and other adults, too. And, “not shying away from conversations, when they are interested, will help kids establish a positive money mindset,” Seitz said. 

2. Discuss needs versus wants. Ask a child what they need and what they want to help them learn. 

At the supermarket, explain how you should think about using money responsibly by spending money on needs first, then wants. So, for example, you put eggs, milk and bread in your cart before picking up candy, a toy or stickers. Let your child know that there should always be a plan for how money is used. Buying items on a whim is a luxury for when you may have extra money. 

Ages 10-14

3. Discuss ways to earn money. Help your child come up with ways to make money so they can start saving toward their goal.

If you have the ability, give your kid an allowance or pay them for doing certain chores around the house. “Allow them to earn money and pay for extras,” Seitz said. “Chores teach kids life skills.” 

Designate how much a chore is worth so they know how much of your money can be allotted for a goal they’ve chosen. 

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4. Follow a budget for favorite grocery items. Go grocery shopping with a specific budget for the items your household needs — and include some of your child’s favorite or most-used items. 

Send your child or children to a specific aisle to grab a handful of items — including some of their favorites. Tell them to keep the items under the budgeted amount, and look at the “unit price” to make sure you are getting the most cost-effective items to get the best deal. 

Help build their confidence and give them a sense of financial responsibility by having them live within their means.

5. Choose a charity and give.  Once your child starts making a little bit of money, teach them the importance of helping others through charitable giving. Have them choose the charity. Giving can be in the form of money, food, clothes, or spending time with others.

Ages 15-17

6. Help your teen buy stock, not just brands. Teens may be more interested in brands than their parents, so introduce them to the idea of owning stock in a company they love. 

Open an investment account so they can learn the ins and outs of owning stock at an early age. You can give your teen hands-on experience with investing by purchasing a fractional share of a company, a mutual fund or an exchange-traded fund for as little as $1. 

“The secret to building wealth isn’t so secret — it’s investing,” Seitz said. “The longer investments are earning returns, the more money they can earn.” 

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7. Encourage your teen to save and invest. Encourage teens to start flexing their savings muscles by working a summer job and setting up a savings account or a retirement account. 

“Offer to match their savings as a parent or godparent, up to a certain percentage — much like most employers when it comes to defined contribution retirement plans,” said Deri Freeman, a certified financial planner at Prudential Financial in the Washington, D.C., area. “This will incentivize them to save for long-term goals and help them build the habit of saving early on.”

Just make sure they are putting money in cash savings for a “rainy day,” as well as investing their money, too. 

One of the best places for a teen to put their earned income is a Roth individual retirement account, which offers tax-free savings. An adult has to open a custodial account for a minor. The adult controls the account until the child reaches the age of majority, when the young adult takes it over.  

The secret to building wealth isn’t so secret — it’s investing.

Jennifer Seitz

director of education at Greenlight

Adult children (ages 18 and over)

8. Create a budget. Go over their monthly expenses and income. Even if you are paying for most of their expenses, have them set a spending budget for incidentals. 

Ensure they include saving as part of the bills they must cover. Starting the discipline now of saving a little bit of money will help to encourage that “rainy day” fund in the future. 

9. Explain how taxes work. Once your child is old enough to get a job with a paycheck, they need to understand the impact of having taxes withheld from their pay. If you’re single with no dependents making a minimum wage of $15 an hour in New York City, your take-home pay is just about $13.69 an hour. Figure out the tax hit with an online calculator.

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Explain to your older teen or 20-something that they must fill out a W4 form to figure out how much tax to withhold from their paycheck. Also, remind them that if they are freelancing or a contractor and get a 1099 form, they’ll need to pay estimated taxes on their own, so they’ll need to save some of their pay just for that.

10. Help your young adult get a credit card and use it responsibly. In addition to getting a handle on earning, budgeting, spending, saving and investing, young adults need to understand borrowing or using credit and managing debt responsibly.

“Encourage them to open a credit card (maybe with a parent as a joint owner) and work on building their credit by paying off the balance each month,” Freeman said. “This will help them build a strong credit history for future financial endeavors.”

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