Like most parents, we want our kids to be responsible with money and finances, but when should we begin teaching them? What concepts are appropriate for what ages? In my family, we decided that 2019, when the kids were 8 and 11, was the right time.

A University of Cambridge study showed that kids begin to form their money habits as early as age 7. Children watch every time we spend money, and if we don’t teach them about finances now, someone else will, which could be risky.
From introducing the concept of money to helping them make their first investment, here are some of the ways we began our kids’ financial education. Follow these four steps in ways that work for your family to raise children who are conscious about finances.

1. The Basics: Explain Where Money Comes From

Previous generations were taught that money doesn’t grow on trees. Now that physical cash is less popular, kids must understand that a credit or debit card doesn’t have endless funds attached to it. We explained that money is either earned, received as a gift, or comes as a form of charity. It’s important for them to understand where the money they have comes from and how they can acquire it.

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2. Money Managing: Wants vs. Needs

Teaching kids to be smart about spending and saving — in particular a “want” versus a “need” — can be tough. It’s not easy to explain to a young child that the doll or toy truck they feel they need isn’t as important as the electricity and food we actually need to keep the house running.

Saying no can be important when teaching children they can’t have everything they want, even if it’s affordable. Kids need to know that as parents, we will provide everything they need and they may have to wait for the things they want, or not get them at all. Teaching them the difference between wants and needs will provide a base discussion and help set them up to budget by priority as they get older.

3. You Can Buy That By Yourself: Allowance

Good money management skills are not something we are born with; rather, they are acquired over time through our successes and failures. Giving your children a weekly or biweekly allowance is a great way to give them experience with money management that will benefit them as adults.

Whether you decide to tie the allowance to household chores or just give it to your kids strictly for money management skills, they will get something out of it for their future. We decided to give the allowance without the requirement of chores. Our rationale was that we all have tasks to complete around the house: mom and dad don’t get paid for cooking, cleaning, or clearing snow, and kids shouldn’t either. We also give our kids their allowance in cash as opposed to adding money to a debit card so they can visually see how much they have.

Then, on nights out to dinner, if they want to play video games or get candy from the machine at the restaurant, it is their responsibility to bring their own money. And if they don’t have any money, then, unfortunately, they are not playing any games that night. By having your child pay for their wants, they’re more likely to learn to budget their allowance and grow into adults who provide for their own needs.

4. Self-Transparency: Saving in Jars

Because visuals can be a helpful learning tool for children, we don’t use a piggy bank. Instead, we use three glass jars labeled spend, save for a goal, and give to charity. This way, they can see the money they collect.

All the money our kids receive, including birthday money, other gifts, and their allowance, are divided among these three jars. How the money is divided is up to them. There is only one rule: Once they put money in the savings or charity jar, they cannot take it out until they have saved enough for a desired item or to give to charity.

Teaching your children to save up money for an item that may be more expensive but is of higher value to them will make them appreciate the dollar more. It will help them understand that impulse buys are not worth it compared to waiting for the feeling when they finally save up enough money to buy those new skis or their first cell phone.

When our kids’ charity jars are full, we have them pick a local charity, nonprofit, or someone they know who needs a little help. We hope this process will help them see that giving doesn’t affect merely the people they give to, but the giver as well. These acts of kindness will not only benefit their financial skills but also build character.