Photo of parents talking with their child about money.

How to help your kids learn about money

When you have kids, you have to talk to them about all sorts of things—some comfortable, and some that might make you (or them) squirm. There are friends and dating and religion … and then there’s money. That may be the hardest thing of them all. But starting those conversations early and building as your kids grow can help them navigate the world (and their finances) successfully.

“There are a lot of ways to talk to kids about money but the first one is simply to start,” says Heather Winston, assistant director of financial advice and planning at Principal®. “It doesn’t have to be deep, complicated, or drawn out. Instead, think small, short learning moments.”

A lot of what kids can absorb depends on how old they are, too. Here are some ways to begin the conversations and teach your kids about money.

Age 3 to early elementary school

Like learning to walk, personal finance skills are something you build on over time. Recognizing a dollar bill (crawling) starts well before kids can open a savings account (taking those first steps!).

As they walk everywhere and leave toddlerdom behind, your children are probably learning how to count and distinguish shapes and numbers. Physical change and cash bills are perfect play tools to use for both skills. They’ll be able to see for themselves that not all physical money looks the same or has the same value (or size).

Teach your kids about money: Create an at-home game with real money, allowing kids to “buy” everyday things like a granola bar or stuffed animal. (Remember, it’s just for fun.) This can also help them associate receiving something of value in exchange for giving up money.

Elementary school

Saving and “extra” spending are often the focus for financial lessons in elementary school-age kids. They may receive monetary gifts for holidays or birthdays. And they’re probably also interested in buying things that aren’t necessarily on anyone’s “need” list.

There are a couple of ways to help kids of this age continue to build their financial know-how. First, help them set up a savings account; it instills the idea of putting money away for the future. Some parents or caregivers also begin giving allowances or may tie chores to certain dollar amounts.

“If you provide an allowance or pay your child a small sum for work outside the norms of what you expect, this helps to instill the idea that money comes from taking responsibility,” Winston says.

And if there are any family money “rules” that you have, now’s a good time to discuss those, too. For example, some families follow a “save one-third, spend one-third, and give away one-third” rule of thumb.

Teach your kids about money: Make regular trips with your kids to your financial institution for savings deposits. Those are good learning opportunities to talk about a growing balance (and maybe the basics of interest rates, too). If you decide to trade chores for dollars, brainstorm unusual ways to make those tasks more fun—set a grocery store budget, let kids help shop, and give them any leftover cash to put in savings.

Middle school to early teen years

Early teen years are also an opportunity to start outlining the broad strokes of your family’s finances, and how you use what you earn and save to set and achieve your own money goals.

Kids at this age may have an allowance, but also have jobs such as babysitting or mowing lawn. They also may have bigger dollar goals, such as saving for a new laptop. Here’s where you can talk about the habits of good savers, as well as discuss delayed gratification.

For example, you may save every year for a big vacation. Or you might put away money for college education. “Teaching your children about the value of money is a skill they will have for their entire lives, so make it a priority and have the conversations often,” Winston says.

Teach your kids about money: “You can agree to match what they save, or assign them a percentage of the cost of an expensive item,” Winston says. “The key is that it’s a process that requires some planning and patience. It’s a great opportunity to support them as they learn.”

Later teen years and beyond

As kids age, they learn ever more complex skills: learning to drive, managing school schedules, working, and more. If you’ve provided those building blocks of financial literacy, the teen years are a chance to kick that education into overdrive. “There are lots of opportunities to talk about the benefits of compounding interest, diversification, and risk as your children are growing up,” Winston says. (Learn more about reasons to start investing young.)

That may mean sharing more details of your family’s budget—and helping them learn how to set up their own budget (PDF), too. It probably also includes a deep dive into funding a college education, or even helping teens understand (and set up) a first investment or retirement account.

Teach your kids about money: Consider sharing what works, but also what hasn’t. You might talk about how accumulating and paying off credit card debt (or other debt) impacted your ability to save and invest. “The adage that knowledge is power is certainly true. Talking regularly about money helps to remove the mistaken belief that how much you have or don’t have reflects your worth and value,” Winston says. “Ultimately, teaching your kids about money is teaching them to invest in themselves.”

Next steps

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment or tax advice. You should consult with appropriate counsel, financial professionals or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

Asset allocation and diversification do not ensure a profit or protect against a loss.

Insurance products and plan administrative services provided through Principal Life Insurance Co. Securities offered through Principal Securities, Inc., 800-547-7754, member SIPC and/or independent broker-dealers. Investment advisory products offered through Principal Advised Services, LLC. Principal Life, Principal Securities, and Principal Advised Services are members of the Principal Financial Group®, Des Moines, Iowa 50392.