{"id":12174,"date":"2021-03-19T07:00:34","date_gmt":"2021-03-19T13:00:34","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=12174"},"modified":"2025-08-25T16:28:00","modified_gmt":"2025-08-25T22:28:00","slug":"financially-literate-kids","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/finance\/financially-literate-kids.html","title":{"rendered":"6 Ways to Teach Your Kids to Be Financially Literate"},"content":{"rendered":"\n
\"teaching<\/a><\/figure><\/div>\n\n\n\n

Financial matters can be difficult to discuss\nwith children, but teaching them about money is a valuable skill. A lack of\nunderstanding can decrease their chances of having a secure fiscal future. That\nis why financial literacy is so important.<\/p>\n\n\n\n

There is a financial literacy problem in the United States at the moment. It was reported that nearly two-thirds of American adults fail<\/a> an exam covering financial literacy. To provide your children with the means of not only passing this test but also becoming responsible with their own finances, invest time in teaching them about money by doing the six things discussed below.<\/p>\n\n\n\n

1. Give Them a Payday <\/strong><\/h2>\n\n\n\n

Many children get a weekly allowance. However,\nif children are simply given the money, the perceived value decreases and so\ndoes their financial literacy. Instead of handing over cash, you can provide a\nway for them to earn the money. <\/p>\n\n\n\n

A simple way of doing this is to give them a\njob with a payday just like an adult. For example, taking out the trash,\nwashing the dishes and filling up the dog\u2019s food and water bowls could all be\nworth $1 per day. If they take out the trash twice a week, wash the dishes\nthree times a week, and refill the dog\u2019s bowls every day, your child would have\na grand total of $12 per week.<\/p>\n\n\n\n

This teaches your child that regular work, such\nas chores, will be rewarded at the end of every week just like payday for an\nadult. You could even discuss it with them by explaining how you are paid for\nthe work you do, just like you pay them. It\u2019s a way to introduce financial literacy<\/a> to your children in a rewarding and meaningful\nmanner.<\/p>\n\n\n\n

2. Introduce Opportunity Cost <\/strong><\/h2>\n\n\n\n
\"father<\/figure>\n\n\n\n

Once your child realizes the money they earn is\ntheirs to keep, they\u2019ll also understand it is theirs to spend. Rather than\nletting them run off and buy something right away, teach them about opportunity\ncost. If they see a toy in the store for $15, make sure they understand that\nonce they spend that money it\u2019s gone.<\/p>\n\n\n\n

One way to do this is to make them physically\nhand cash to the cashier so they realize they aren\u2019t getting it back. If your\nchild has a bank account, allow them to withdraw the money. Or, if they have a\npiggy bank or clear jar at home they put their allowance in, help them take it\nout of the jar. This way, they can visually see the money leaving and will have\nto decide if spending it is worth not having it anymore.<\/p>\n\n\n\n

3. Create Borrowing Terms <\/strong><\/h2>\n\n\n\n

If your child asks for money to buy something,\nyou can create an agreement for borrowing that money. For example, if your\nchild is short $10 for a new Lego set they want, say you will give them the\nmoney but outline terms for when that money must be repaid. <\/p>\n\n\n\n

You can set a repayment date, provide extra\nchores for them to make the money and even create some sort of late fee if they\ndo not pay back the money by the agreed upon date. Then, instead of deducting\nmoney from their weekly payday, make them physically hand you the money so they\nunderstand how borrowing works. You can have a discussion about how credit cards\nand loans are much the same. This also teaches the value of saving up for what\nthey really want and following any financial agreements they sign.<\/p>\n\n\n\n

4. Explain the Budget <\/strong><\/h2>\n\n\n\n

Some parents prefer to keep the family finances\na secret. However, including your child when you discuss the budget can help\nthem understand where money is spent. One way you could do this would be to\ncreate a chart that clearly shows money for necessities such as food,\nelectricity, cars and even the mortgage. Another way to demonstrate how to\nbudget is to make a game of it. <\/p>\n\n\n\n

For example, you could set up a fake bank and\nkeep a wallet of fake money in the amount you make every month. Then, when it\ncomes time to pay bills, you use the fake money and put it in the bank. Your\nchild can help you count the money out and pay it to the bank each month so\nthey understand how you divide your allowance between the necessities and the\nfun things like going to the movies or an amusement park. <\/p>\n\n\n\n

This helps your child understand that there is a set amount of money each month. It can also be a great way for you to have a conversation about responsible spending and begin teaching your children financial literacy<\/a>.<\/p>\n\n\n\n

5. Differentiate Between Want and Need<\/strong><\/h2>\n\n\n\n

As your child grows older, it\u2019s important to\nexplain the difference between wanting and needing. Your child may need a new\npair of shoes but not a designer pair that costs $100. <\/p>\n\n\n\n

Of course, if it\u2019s something your kids\nabsolutely want, you can explain how they can save up the money to buy it at a\nlater date. You can help them create a savings plan and budget to help them\nreach their goal. For example, if they earn $20 a week from chores and spend $5\na week on ice cream at school, help them determine how long would it take to\nsave up for that $100-dollar item. When they understand that money is a finite\nresource, you can teach them to decide between what they really need and things\nthey want.<\/p>\n\n\n\n

6. Play Money Games<\/strong><\/h2>\n\n\n\n
\"financial<\/figure>\n\n\n\n

One of the best ways to help children become\naccustomed to money matters and to understand fiscal responsibility is to let\nthem play games that involve money. This can include Monopoly or online games<\/a>\nfor children to play where they can earn money to then invest, save or use to\npurchase items. These games help children understand the basics of money and\nprepare them for a financially sound future. <\/p>\n\n\n\n

Financial Literacy Begins with You<\/strong><\/h2>\n\n\n\n

As a parent, you strive to teach your children how to take care of themselves. Part of that includes teaching your children the importance of financial literacy and managing your credit. <\/p>\n\n\n\nCarry on the conversation on our social media platforms. Like and follow us on Facebook<\/a> and leave us a tweet on Twitter<\/a>.\n\n\n\n

Sources: CreditRepair.com<\/a> | UsNews<\/a> | BusyKid<\/a> | Investopedia<\/a>| Forbes<\/a>| Forbes<\/a>| Fortune<\/a>| WashingtonStateDepartmentofFinancialInstitutions<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

To help your children become responsible with their finances, invest time in teaching them about money by doing these six things.<\/p>\n","protected":false},"author":63,"featured_media":12177,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[534],"tags":[65],"yoast_head":"\n6 Ways to Teach Your Kids to Be Financially Literate - Lexington Law<\/title>\n<meta name=\"description\" content=\"To help your children become responsible with their finances, invest time in teaching them about money by doing these six things.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lexingtonlaw.com\/blog\/finance\/financially-literate-kids.html\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"6 Ways to Teach Your Kids to Be Financially Literate\" \/>\n<meta property=\"og:description\" content=\"To help your children become responsible with their finances, invest time in teaching them about money by doing these six things.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.lexingtonlaw.com\/blog\/finance\/financially-literate-kids.html\" \/>\n<meta property=\"og:site_name\" content=\"Lexington Law\" \/>\n<meta property=\"article:published_time\" content=\"2021-03-19T13:00:34+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-08-25T22:28:00+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2019\/04\/Kids-and-Financial-Literacy.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1510\" \/>\n\t<meta property=\"og:image:height\" content=\"500\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Lexington Law\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.lexingtonlaw.com\/blog\/#website\",\"url\":\"https:\/\/www.lexingtonlaw.com\/blog\/\",\"name\":\"Lexington Law\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.lexingtonlaw.com\/blog\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"ImageObject\",\"@id\":\"https:\/\/www.lexingtonlaw.com\/blog\/finance\/financially-literate-kids.html#primaryimage\",\"inLanguage\":\"en-US\",\"url\":\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2019\/04\/Kids-and-Financial-Literacy.jpg\",\"contentUrl\":\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2019\/04\/Kids-and-Financial-Literacy.jpg\",\"width\":1510,\"height\":500,\"caption\":\"teaching financial literacy\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.lexingtonlaw.com\/blog\/finance\/financially-literate-kids.html#webpage\",\"url\":\"https:\/\/www.lexingtonlaw.com\/blog\/finance\/financially-literate-kids.html\",\"name\":\"6 Ways to Teach Your Kids to Be Financially Literate - 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